The demise of identifiers such as third-party cookies or Apple’s IDFA presents both challenges and opportunities for publishers. Some complain performance marketing will take a hit. This would force marketing teams to refocus on delivering product excellence and ditch bait-and-switch schemes that promised audiences better experiences than they delivered.
Others praise the advance of a more privacy-oriented approach to targeting that will finally prioritize consumer preference. They point to a “golden opportunity for a re-imagining of digital advertising.” Companies would reap the benefits of an ecosystem that isn’t tied to tracking a user’s every move, nor beholden to GAFA. Publishers who wisely embrace this worldview are also taking impressive steps to leverage their valuable direct relationships with audiences.
For some, including Vox Media, Condé Nast and, most recently, Penske Media, this means offering up their own first-party data directly to advertisers. For others, it means leaning further into digital subscriptions. Subscriptions offer publishers a proven monetization model in a post-pandemic environment that has seen digital advertising collapse and revenues driven by paid content rise through the roof.
But winning with a subscription model is hardly a walk in the park. This is more keenly felt at at time when marketing departments may need to spend more resources to collect and leverage customer data to clinch the sale
Driving conversions and convincing consumers to commit to a recurring cost for content demands publishers do their homework and innovate. They must build the capabilities to understand their audience, identify valuable users likely to take the plunge and define clear pricing (at the level subscribers are willing to pay). What’s more, they should muster the resources and resolve to develop, deliver and continually improve a great product that meets customer expectations.
Continuing with our series of video interviews, I talk to Sheri Bachstein, global head of IBM Watson Advertising and GM of The Weather Company. Bachstein has overseen a wildly successful pivot to paid as part of a larger move to diversify revenue at the IBM-owned property. Since launching a premium subscription offering just 18 months ago, The Weather Company counts nearly one million paid subscribers, a figure Bachstein says is seeing double-digit growth every quarter.
Bachstein shares her step-by-step journey to subscription success, including insights on tailoring the product to the consumer, targeting potential subscribers and building a winning customer service team. She also reveals her take on the future of advertising and a call to action for the media industry at large.
WATCH OR LISTEN TO THE FULL INTERVIEW
Peggy Anne Salz, Founder and Lead Analyst of Mobile Groove interviews Sheri Bachstein, global head of IBM Watson Advertising and GM of The Weather Company:
Peggy Anne Salz: Does it pay to pivot from an ad-supported model to subscriptions? Well, my guest gives us the inside track on the strategy that has allowed subscriptions to become the fastest growing line of revenue in the company. It’s impressive. And we’re going to spotlight some of the step’s publishers can follow to diversify their revenue streams. But first, of course, a bit about us. I’m Peggy Anne Salz, mobile analyst, tech consultant, frequent contributor to Digital Content Next, which as you know is a trade association serving the diverse needs of high-quality digital companies globally.
And now to my guest, she is the Global Head of IBM Watson Advertising and The Weather Company. And The Weather Company is an IBM Business. It offers the most accurate actionable weather data insights to millions of consumers via digital products that we’ll be hearing more about from The Weather Channel, weather.com, as well as Weather Underground. And previously, she was the global head of the consumer business there and was responsible for product management and design, content development, and global expansion across the organization on the weather’s owned and operated properties. So Sheri Bachstein, welcome to Digital Content Next. It’s great to have you here.
Sheri Bachstein: Hi, Peggy. How are you?
Salz: Good. And even better because we’re going to zero in on, I think the question of the hour, the pivot. It’s a time of transition, accelerated change, and you’ve made a move. And I think a lot of publishers are thinking about this move, which is diversifying your business model, specifically ad-supported to subscription, as I said. In a nutshell, why the pivot, Sheri?
Bachstein: So we just found that we want to continue diversifying revenue, it’s really just that simple. You know, to have a business and if you have a bulk of your revenue coming from one stream, that’s dangerous, especially in changing times. And so we started on a diversification path, actually several years ago. And really subscriptions was the next thing in that funnel of what we’re trying to do to diversify.
Salz: I said at the top, it has paid off. I know the numbers. Our viewers don’t. So why don’t you share some of those numbers that show just how subscriptions are evolving?
Bachstein: Yeah, so our subscription business launched about 18 months ago. So I think we’re still just starting, I like to say, because I think that’s a short period of time, and we’ve rolled it out on our apps. And actually, just next week, we’ll be rolling it out on our web platform as well. But in a very short time, we are approaching a major milestone with a million users that are subscribers to our business, and you know, it’s taken other publishers twice as long to reach that volume. So we’re really pleased with the number of subscribers that we’re getting. And then if you look like our quarter-to-quarter growth of subscribers, it continues to be in the double digits. So every quarter bringing on more subscribers.
Salz: That is amazing because this is a time where you’re asking someone to commit to a recurring cost. But it must be that way because they’ve gotten the value proposition or rather, they grasp your value proposition. How important is the product in this mix?
Bachstein: It’s extremely important. It’s the foundation of a subscription business, you know, the value exchange you have with the consumer, very important. With subscriptions, I feel that value strengthens. You actually have higher expectations as a subscriber. I know I do in my own personal apps that I subscribe to. You have a higher expectation. So it’s really important that the product live up to that expectation and that your customer service, very important as well, that you’re able to connect with those consumers if they do have a problem and resolve that very quickly. So the value exchange is very important, whether you’re doing a subscription business or you’re actually doing an ad-supported business.
Salz: I do want to get to those steps, step by step so that publishers can benefit or at least think of a roadmap that they can be following as they make this shift from ad-supported to subscription. But let’s take just a step at a different perspective, just zoom out a little bit because another big question is not just how do I get more value out of my customers, my users, my readers, my audience, but also, what are we doing right now? Because pretty soon the way we do this marketing is going to change very drastically. So from your perspective, what are some of the ways that this shift from cookies and identifiers and toward privacy-first might actually represent an opportunity for publishers because you have certainly grasped that?
Bachstein: So I do agree Google does plan to deprecate the cookie, and so that will go away. But really, I think as it relates to identifiers, identifiers is a really broad word because there’s a lot of ways to identify someone. It could be an email, a lot of different data points. I don’t necessarily see identifiers going away. What I do see is how we use those identifiers is what’s changing. So what’s happening is we’re moving from a society where we had consumers opt-out to a society where we’re having them now opt-in. So that gives them more choice, more transparency upfront, and really the decision of how they want to share their data.
Consumers should have control of their data. So again, we’re really moving into an opt-out society as it relates to advertising and targeting and giving consumers that choice.
Salz: What can you share about what has worked for you and what maybe other publishers need to get right? Because one thing you’ve done is, for example, really focused on getting the product, right, as you said, but there are other aspects of it.
Bachstein: So first, we did exhaustive customer research and listening. We asked our customers, one, “Would you pay for a weather app?” That’s first and foremost and what percentage would. And then secondly, “Okay, if you paid for it, what are the features that you would pay for? What is it that you want?” So we really listened to our customers. And that’s the part of the plan, the product plan came from that. Then we did testing, we did learning, and we kept improving. So a lot of testing went into what’s the right price, you know, to charge for a subscription app?
Again, asking the consumers, “How much would you pay for this feature? So when I think about what are three tips I could give to fellow publishers because I think us helping each other is really important to protect the open web. First takeaway for me is get rid of those perceived inconveniences for your customers.
So for my customers, those that start their day with us, end their day with us looking for weather, some of those customers, they just want to get into the app, find out what their weather is and move on to plan their day, mornings are very busy for a lot of people. And so they felt that ads clutter their experience that it was in their way, so we removed them in the premium experience. So that’s one tip.
The second tip, trusted human expertise is highly valuable. So how can you humanize the information that you’re giving? So for us, you see all this weather data, but how do you give context to that? How do you humanize that weather data for those that want more in-depth coverage?
And so we’re working on that, how to humanize that. And really the third thing is really around what you said before, the product.
Salz: That is really interesting, Sheri. I mean, I know it makes sense to ask the users. I wouldn’t say I would ask the user about the price, but that is surprising because I’ve also read a lot of research that we are actually more willing to pay a price that is higher than even, in many cases, the app developers, the companies themselves would charge. So it does make sense.
The humanizing of the information, now that is intriguing. Is that saying that you tap a team of writers, of journalists, of experts and trying to get that into the app? Because I think our publishers would be really interested in this at a time when, yes, we can automate a lot. And we’ll get to that in a moment. But this human part doesn’t seem to be something that you can automate or in any way streamline. This is roll up your sleeves, get down to work. How are you doing it?
Bachstein: Yeah. So for us, obviously, we’re unique in the weather space. But we do have some consumers that they want more information. So they want a meteorologist to explain, why is an outbreak of tornadoes actually happening? We actually are doing a test right now and we’re using Twitter to do the test where we had a meteorologist create a very short video that really explained how we forecast a tornado, what are the three elements that we look for in forecasting a tornado and describe it so people could see better like on a radar map those areas that may be under a tornado threat. And the response has been great. For those people who like to geek out on weather, they love having that extra information.
And news organizations could do it as well because you have journalists like yourself that have amazing expertise. And how do you take that story, just one level deeper, to really dig in with your consumers around more information that they might want? So almost, probably, getting into some debate, I would imagine, in the news world. So I think there’s ways to do that. But I think, for some, it might be easier than others. But you’re right, it’s something that’s unique. It’s not something I would say that can scale to millions. But if it’s a unique offering, someone’s really willing to pay for it, you could probably get a premium for that.
Salz: Exactly. And that’s the point because subscribers are the valuable users. They’re willing to pay. They’re worth customizing to. Interestingly enough, they also leave a very interesting data trail. They’re frequently engaging with the app or service. They show behavior patterns like no other. That’s why they are the valuable users. What are some early signs for you of a high-value user so that we can also help other publishers focus their efforts and investments?
Bachstein: So we are doing a couple things to really help target who are those consumers that want to be subscribers? One of the things that we’re doing is around propensity modeling. So who are those subscribers that really have an interest in a more premium experience? And so we’re looking at that, we’re using machine learning to do that. We didn’t do it in the early days. We kind of had this one blanket promotion that we did. And we learned a lot from it. Again, it’s that test and learn. And then we learned, “Well, we really need to just focus on these consumers that would be interested in this.”
Same thing that you do in advertising, right? The whole premise around understanding the consumer by the data that they share is so a brand can connect with the consumer. And that’s what publishers do, they bring the two together. So that same type of targeting information is important as you do a subscription business.
Salz: And you’ve leveraged AI to create a more compelling product as I understand it. What has actually worked for you? I mean, you’re lucky, you’re sitting on the source with your AI abilities within Watson, but what has worked for you?
Bachstein: So the propensity modeling I just spoke of, we’re just rolling that out so we can better target the right consumers so we’re not burdening people seeing our promotions who aren’t interested. So that improves the experience. But the other thing that we did is on the IBM Watson advertising side, which is the other part of my business, we’ve created ad-tech solutions rooted in Watson AI.
One of those solutions is a predictive real-time dynamic, creative solution. So I actually took that tech and used it on the publishing side, I’ve got to use my own products, to drive subscriptions. So what that really did was it enables you to create a lot of variations of an ad. So you put in a few images, call to action, and then using AI, it’ll target consumers differently based on what we can learn about them with the information that they share or their behaviors.
And it’s been an amazing tool for us. We actually did a test by using that ad tech. We got three times the number of subscribers than when we just did a normal promo doing it manually on our own.
And so it’s really been beneficial to use AI because you can put all of this data in there. It does the work for you and delivers amazing results. And frankly, we offer that ad-tech to everyone. Any publisher can use it, any DSP, SSP. So we are creating open ad-tech solutions that can drive business for a marketer or brand or it can help a publisher increase their subscription business or even their loyalty programs.
Salz: That is really interesting because dynamic. That’s the key here. It needs to adapt to the users. And actually, publishers need to adapt to this as well. So you’ve also called for industry-wide collaboration on privacy initiatives as we move into our cookieless future. Why is it important for publishers to be a part of those conversations?
Bachstein: It’s extremely important for actually everyone in the ad ecosystem, publishers and ad-tech providers, to be part of that conversation. What’s happening right now is you have about…we have two states. We have Virginia, we have California that have come up with their own privacy laws. There’s another 12 that are thinking about doing that by the end of the year. What happens is we get a patchwork of laws, really challenging for publishers. It’s not scalable to have different laws for different states. It’s really, really hard to be able to scale that and to do that.
And so, me along with many other publishers and leaders within this space, including the IAB, DCN, we are pushing for federal legislation so we can all be working from the same laws, the same rules. And then we have to clear up some of those rules as well. There’s a lot of gray areas when it comes to this. So let’s all be working on the same definitions of words. Very important that we’re all working together so we can become our consumer privacy focus. None of us are saying that we shouldn’t do that. We all think it’s a good idea. Let’s do it together in the right way, and let’s build some consistency across publishers so consumers know exactly what to expect.
Salz: Good point. I’m based in Europe where we’re still figuring out.
Bachstein: Yeah. But at least all of your countries got together and put it together, GDPR. There are still some gray areas, no doubt. But at least you guys took that step to do that, which is important.
Salz: What can help publishers better understand and even stop churn before it starts? So it’s about understanding subscriber behavior and reducing churn.
Bachstein: Yeah, so definitely two parts to any subscription business. There’s acquisition. I think consumers will say, “Well, I’ll try something once,” or, “I’m up to try something.” And certainly, you can give free trials. That’s been a technique that’s worked really well for us. But then the retention side, a really big part of the business. We’ve been fortunate to have retention as high as 75%, which is much higher than the industry. But it all comes down to the product. If you are delivering on the expectations that a subscriber has for your product, you will retain them.
And so, again, it’s really having a great strong product. We’re choosing to enhance the features and give them more as subscribers. So are we improving their experience? And so we found that to be really successful with retention. So we definitely pay attention to that. But I also feel customer service is important. When your subscribers have an issue, you have to respond to them. They are paying money out of their pocket and so they deserve to be listened to and to have their problems troubleshooted as quickly as you can. And so we definitely have made a big investment to focus on our subscribers to make sure that if they have issues that we are solving them for them very quickly.
Salz: You really do love a challenge in your job. What’s the hardest part of your job?
Bachstein: Oh, well, how much time do you have, Peggy? No. It’s funny, I think for every leader, you have to have a strong strategy. And it’s got to be a focused strategy. And then you have to stay focused on that strategy. That can be challenging sometimes because the world around you is changing. But if you really believe in that strategy, only working on that. Stop working on things that just don’t align to that. It’s very important, not only my business but all of IBM is doing that as well.
Salz: What do you see overall as the biggest opportunity on the horizon for publishers?
Bachstein: I absolutely think the biggest opportunity is the use of AI, especially in the ad-tech space. Using AI to really bring together the brands and the marketers with the consumers in a way that uses all different types of signals that doesn’t rely on the cookie is just a really big step forward. And one of the reasons I think so is because AI has the ability to predict. So the cookie only tells us what happens in the past. With AI, we can actually go forward, and we can predict, and we can forecast. And so being able to do that with AI is just, I think, a really great tool and it really has a bright future. I really feel it’s a transformational part of the industry. And really is a new tech that we need to embrace.
Salz: And to your point, I mean, advertising…which works, I’m not saying it’s broken, but through using cookies, identifiers, IDFA, we’re looking backward. And with AI, we’re going to be looking more forward, more predictive. So it does make a lot of sense to say that the opportunity is to understand what I may be doing, what I may be wanting, and to target that rather than maybe my past behavior.
Bachstein: That’s right. It’s all about a new technology, a new foundation or backbone to the ad industry, having it be AI instead of what we’ve been using in the past with cookies. It’s a way forward. I mean, advertising is not going away, but it is evolving. And we can be smarter, and we can use better technologies to connect consumers with our brands and marketers.
Salz: And speaking of connecting, Sheri, it was great to connect with you today. Thank you so much for sharing. How can people stay in touch with you if they want to maybe continue the conversation or understand a little bit more about tips, they can follow to move their app from ad-support to subscription?
Bachstein: Yes, reach out to me on LinkedIn. You can find me on LinkedIn. I’m happy to have a chat. And I’d love to just know what other companies are doing as well and how can we collaborate and work together?
Salz: Absolutely. Well, thank you. And thank you for tuning in. More to come of course in the series. And in the meantime, be sure to check out all the great content, including a companion post to this interview at digitalcontentnext.org and join the lively conversation on Twitter at DCNOrg. Until next time, this is Peggy Anne Salz for Digital Content Next.