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InContext / An inside look at the business of digital content

Back in black: The rise of revenue diversification

April 26, 2019 | By Rachel Williams, Product Marketing Manager—Outbrain @outbrain

The publishing industry is going through a transformation due to continued shifts in reader habits. As readers spend more time within social platforms, publishers are exploring new opportunities both on and off their sites to reengage users and grow their bottom line. Revenue diversification has become a priority in the media business.

With a large number of readers congregating on social platforms, advertisers and publishers followed them there. All types of content that ranges from personal posts to advertisements to videos have made their way into people’s feeds. But akin to display ads in the early stages of internet advertising, the feed has driven a need to break through the clutter. In today’s media environment “normal” coverage doesn’t always make it through – surprising events do, particularly when main metric that news outlets are judged are through ratings and page views. 

The changing social relationship

Social platforms are characterized constant changes to algorithms, the latest of which prioritizes posts of friends and family members over publishers. At the same time, Facebook regularly tries to entice publishers to try new products and features.  

Earlier this year, the social media giant also informed its production partners for news shows on Facebook Watch that it won’t renew two-thirds of its existing news shows. At this point, publishers aren’t likely to put too much faith into these so-called partnerships. As a result, they have to seek out new revenue approaches that rely less on social platforms.

Even web natives like Buzzfeed have recently struggled with layoffs, reinforcing the view that diversified revenue streams outside of platforms are imperative for survival. These venture-backed sites have seen issues surrounding the need to prove profitability faster than they can grow organically, causing a focus on sheer traffic and get-rich-quick strategies.

A healthier approach

Then there are niche players, like wellness publication Well+Good, which have done the exact opposite. They focus on growth by creating content and real-life experiences for their core audiences in order to connect with their readership in new ways and create additional streams of revenue.  As they understand the lifetime value of their readers and cater to their wants and needs, they’ve created a loyal following that transcends from online to real life.

By noticing a trend for “one-stop wellness” among its readers, Well + Good created experiential events through teaming with other wellness brands and expanded their offering. Readers can now experience the brand through wellness retreats, in-person monthly talks, and the potential for health & wellness pop-up shops.

Flowing with the revenue streams

However, it is important to recognize that new revenue opportunities need to be a natural extension of the brand. At the 2019 American Magazine Media Conference in New York City, Troy Young, president of Hearst Magazines, mentioned how media brands need to be more “thoughtful, research-oriented and data-driven.” At the same conference, CEO of Bonnier Corporation stated “…it’s dangerous for us in media to think we should stay in our swim lane. We are not going to get out of media, but we’re attached to it,” when commenting on how he would “future-proof” Bonnier by proposing one-third of his revenue comes outside of publishing.

Revenue streams outside of ads are not a one-size-fits-all. And figuring out how they fit within existing infrastructure can be difficult. But publishers that get it right have new ideas that focus audience attention and command bigger media budgets from brands. “There is going to be a new crop of players like us that accelerate because they understand how to connect content, commerce, and conversation,” Erika Nardini, CEO of Barstool Sports said. “Companies that do that are going to be in a good spot.”

Experience and growth

Leading local news organizations like Gannett are diversifying their revenue through subscriptions, though they are still focused on ad yield and engagement. To help with this, publishers are starting to personalize the onsite reader experiences with unique and proprietary formats to prove engagement with audiences for a higher price from advertisers. This is revealing to be a viable strategy for revenue over struggling standardized banner units. As people continue to shift toward mobile where there’s less real estate for ads, it has led to the rise of publishers embracing native, according to Digiday.

A recent eMarketer report forecasts that the spend for native display ads from US advertisers will be $43.90 billion in 2019, a $24.6 year-over-year growth. They also anticipate native display ad spend to grow over 20% to $52.75 billion in 2020. Principal Analyst for eMarketer, Nicole Perrin said “Native formats have made significant inroads in channels like mobile apps, but there are still a lot of traditional display units being traded programmatically, especially on desktop and the mobile web.”

It’s interesting to note that when it comes to the share of native from social, eMarketer sees a slight decline from 76.6% in 2018 to 73.5% in 2020. Yet this may be a silver lining for publishers. As Facebook finds itself embroiled with data concerns with its ad-targeting tools and constant change of its ad policies, it may become less appealing to brand marketers. It may also give publishers pause in how they include social as a part of their online strategy.

If today’s publishers want to explore new opportunities to diversify their revenue streams while making meaningful connections, a native feed experience is a viable strategy. It can help improve reader engagement by personalizing content experience and shift share from the social media giants and bring publications back into the spotlight. 

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