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Featured Post | Innovation | Revenue

Why everyone’s getting into streaming and how they plan to compete for eyeballs

Want to keep up with the latest plays in the streaming game? You practically need a scorecard and the guidance of a fast-talking play-by-play announcer to keep up. For proof, consider just some of the latest streaming service bombshells to hit the news in the past few weeks:

All of these moves speak, of course, to a larger and evolving trend: Anybody and everybody in the media business seems to be getting in on the OTT act. The idea is to take their product direct to the consumer via an AVOD or SVOD (subscription-supported video on demand) model. And that’s creating an increasingly crowded field of competitors.

It will be fascinating to see who else enters the fray and who will survive and thrive in a crowded OTT world where consumers only have so much viewing time. To help make better sense of all the market chaos—and understand what streaming services will need to do to stand out from the crowd—I spoke with several industry experts.

Why more media players want in on streaming

It’s no big surprise why news and entertainment companies are jumping in and jostling for position in an already congested OTT pool: Consumers crave streaming content.

“They don’t want the same bundle of channels they receive today. And they don’t want the same, scheduled experience they’ve had for decades,” according to Peter Naylor, senior vice president/head of advertising sales for Santa Monica-based Hulu, which now has 25 million subscribers. “Consumers want choice and control in their TV experience. In order to continue to reach consumers, TV must move from a business ruled by cable and satellite gatekeepers and by a traditional schedule to a model where the consumer truly gets to choose.”

Billy Nayden, research analyst for Parks Associates in Dallas, agrees. “Younger consumers are watching traditional television at decreasing rates. In order to reach them with video content, internet video is a necessity. A dedicated streaming service helps facilitate delivery of that video and gives consumers a centralized place to access content,” Nayden says.

Offering a direct-to-consumer streaming service also provides some unique benefits.

“Broadcasters and content companies are able to collect data on consumption and their audience, which is often not available through over-the-air broadcasts or pay-TV providers. Direct offerings also provide a hedge in pay-TV licensing negotiations, allowing networks to reach consumers even when blackouts occur on pay TV,” adds Nayden.

Overcoming multiple challenges

However, experts caution that fragmentation of content sources, changing viewer habits, multiple direct competitors, and rising content costs make competition in streaming extremely difficult.

“The number of streaming services available globally has exploded in the past few years, and they are now competing not just with other streaming services but also pay TV, user-generated content like YouTube, and digital entertainment options like video games for consumer time and eyeballs. Standing out and innovating in a crowded ecosystem is a major challenge,” says Nayden.

Laura Martin, senior media analyst for New York City-headquartered Needham and Company, says discovery and clutter are huge problems. “Roku has nearly 4,000 video apps of free TV and about 1,000 apps of SVOD that the 28 million connected TVs in their network can choose from,” she says. “That’s many more choices than the 200 channels you typically have in a linear pay TV bundle.”

Additionally, to succeed long-term in the streaming space you need deep pockets, says Dan Rayburn, principal analyst at Frost & Sullivan in New York City. “Think about who’s behind the big services today—Sling TV is owned by Dish, Direct Now is owned by AT&T, and Hulu is co-owned by Disney and Comcast” (as well as Fox and AT&T), Rayburn points out. “A lot of these services can’t stand on their own as a profitable platform because the costs to license and create all their content is too high.”

You also need a deep library of content to compete effectively, per Alan Breznick, cable/video practice leader for Light Reading in Toronto. “Although, if you’re a niche player going after a specialized market, like wrestling fans or hobbyists, and no one else has such a channel yet, then you don’t necessarily need a huge library of old content,” says Breznick.

Another huge hurdle? Retention. “You’ve got to worry about churn rates and how to keep your customers as well as keeping the cost of acquiring customers down,” Breznick adds.

Plus, “it’s going to get harder for the smaller companies because so many of the big competitors entering this space—like Sinclair, NBC and Disney—have free marketing opportunities. They have other media outlets with unsold ad inventory they can use to promote their streaming services,” says Martin.

A myriad of models

In the OTT space, there is no such thing as one size fits all. A variety of service models and pricing tiers exist that often make it difficult for analysts and consumers alike to compare apples to apples (see Sidebar for an overview of the major services). Some brands strictly follow a direct-to-consumer formula while others also partner with a pay-TV service (by, for example, offering authenticated streaming apps). And some services run ads while others don’t.

“Ads have always been in the mix for many of these subscription channels because the cost to make and license the content is still too high—you can’t make enough money on subscription alone,” says Rayburn. He notes that ad-free Netflix—despite its 139 million paying subscribers—still expects a negative cash flow of $3 billion in 2019. This is likely a big reason why it recently raised (and will continue to raise) its subscription fee.

“It’s tricky. We’ve had this mentality as consumers that content should be free for a long time, thanks to YouTube and others. Now, we’ve got several channels charging up to $15 or more per month and live services like YouTube TV charging $40 and up monthly,” Rayburn says. “The question is, how much higher can streaming services push their prices before consumers say no?”

Strategies for success

Ian Wishingrad, creative director/founder of BigEyedWish in New York City, says the formula for sustainability and profitability in the streaming market is simple. “Have award-winning content. ‘The Handmaid’s Tale’ legitimized Hulu and ‘House of Cards’ legitimized Netflix. You also need the right price. If you’re good and your price is right, you’ll get hits,” says Wishingrad.

Nayden seconds that sentiment. “To maintain subscribers, services must offer a variety of compelling content exclusive to their particular service,” says Nayden.

That’s why, according to Naylor, “over the last year, we’ve focused a lot on adding more content to the service, including full series runs of shows like ‘ER’ and ‘Lost,’ and new originals like ‘Castle Rock.’”

Content may be king, but so are customers, insists Breznick.“You really have to know your customers and the market you’re going after.”.

Offering your patrons more choices—in programming as well as pricing—can go a long way, too. “Convenience to the consumer is the new service. Giving options makes you flexible and cool, versus ‘this is the rule, take it or leave it,’ Wishingrad adds.

Ask Martin and she’ll tell you that the best way forward for OTT services is to “have at least two revenue streams, such as subscription-supported, ad-supported, eCommerce, micro-payments, etcetera.”

And, as mentioned, partnering with pay-TV providers could bring increased visibility and exposure to your service, “especially among consumers who otherwise would not have known about the service,” suggests Nayden. “Until recently, the operator set-top box has remained one of the few in-home connected devices that OTT video services were unable to penetrate. The pay-TV set-top box is often used daily. Being available on that box is a big boost to user convenience.”

A booming market

Virtually all of the media giants have launched or announced an impending standalone streaming service by now. But there are others poised to make a splash, and legacy video brands are far from the only players looking at the streaming opportunity.

Nayden foresees major print media brands entering the fray eventually, too. “While print media has found it financially difficult to transition to the new digital marketplace, I think the space for news-based OTT services represents a significant opportunity for content creators,” Nayden explains. “Cheddar and Newsy give us an example of what is possible. If a traditional newspaper like The New York Times or Wall Street Journal could partner with a video content creator and build a service that combined access to premium print and video content, I think it would attract a significant amount of paying news junkies.”

Breznick also envisions a day coming soon when college sporting programs—like Notre Dame football—roll out their own streaming service. “And at some point, every single broadcast channel out there is going to have to think about it,” adds Rayburn.

Major Streaming Services and Monthly Costs*

Live services

SVOD (subscription video on demand) services

(*rounded to the nearest dollar)

Featured Post | Perspectives | Policy

Fines are fine. But they’re not enough to shake the duopoly’s dominance

Armed with consent decrees, new laws and new hooks into old laws, regulators around the world appear to be fed up with Google and Facebook. With good reason. The Google Facebook duopoly continues to maintain an unhealthy dominance of the digital marketplace. Nearly all of the growth in digital advertising continues to go to these two companies.

The impact is significant. Revenue that might otherwise flow into a healthy marketplace of known and emerging competitors instead is flowing directly to only two uber-dominant companies. As a result, a well-known strategy for startups was to simply position themselves for acquisition by the duopoly but over time and big tech scrutiny those opportunities have even evaporated resulting now in a “kill zone” where no venture capital will even invest. For more mature businesses, the counteracting strategy has been to merge and, thereby, try to achieve competing scale. So, it’s either get big or get bought—if you can.

Meanwhile, devoid of any real competition, Facebook and Google find themselves increasingly at odds with consumers. A new unappealing revelation seems to hit every few weeks. This is not a healthy environment that fosters growth and stability, much less any sort of ethical data framework that matches consumer expectations.

Here come the Regulators

Recently, the French data protection authority fined Google $50 million euro for violations of the General Data Protection Authority. In its ruling, they took issue with the unlawful way in which Google asked consumers for consent. Essentially, Google appears to offer a take-it-or-leave consent to consumers with pre-checked boxes and little transparency. Particularly from such a dominant company, the regulators said this approach is a no no.

Google’s tech lobbyists will say this ruling is bad for all of industry. But really…it’s just bad for Google. The French specifically noted that Google’s dominant market position played a big part in the ruling. The reality is that there are not very many companies whose business model (or at least the anti-competitive dominance of it) is so utterly dependent on tracking and targeting consumers everywhere they go. Not all of industry wants to be lumped in with the toxic duopoly. Nor should they. Many companies offer a value proposition to consumers (and advertisers) that doesn’t hinge on web-wide tracking.

Then, there is news that the Federal Trade Commission (FTC) is close to issuing a record-setting fine on Facebook for violating a consent decree. The FTC’s previous record fine for a consumer privacy case was in 2012 levied at (you guessed it!) Google for $22.5 million.

At this point, even the state regulators are getting involved. The DC Attorney General recently sued Facebook for failing to protect consumers’ data in their Cambridge Analytica scandal.  It’s a simple approach that many other attorneys general may follow. 

More than Money is at Stake

All that said, the headlines seem to focus on the amount of the fines. However, what I’m watching most closely are the behavioral or structural changes that come as a result. For instance, will the FTC require tighter oversight by Facebook of their third party partners? Will the FTC recommend that Facebook divest itself of Instagram and WhatsApp, thereby creating instant competition in the social media space? And, how will the EU’s enforcement of GDPR impact Google’s ability to track consumers’ every move?

As the French ruling seems to insist, Google may have to unbundle its requests for consent which would surely lead to fewer consumers agreeing to be tracked by Google. It’s subtler – but if EU regulators are successful in ensuring that companies are plainly and transparently asking for consent for secondary uses of data, will that improve the prospects of companies which have trusted relationships with consumers?

At the end of the day, a $50 million euro fine probably feels like an annoying mosquito bite for a company with over $100 billion in annual revenue. The biggest benefits for consumers and the marketplace will only come if there are changes in how the duopoly operates.

Featured Post | Innovation

How publishers can win the voice war between Amazon and Google

“Alexa: What’s the news today?” That depends. If a consumer wants to get news from a voice assistant such as Amazon Echo or Google Home (or the hundreds of devices that support them), the process isn’t always easy and the results are inconsistent. People have complained that the news reports on voice assistants are too long, or don’t answer questions accurately, according to a recent Reuters Institute report.

But the devices aren’t going away. In fact, they are multiplying like rabbits, if last week’s Consumer Electronics Show (CES) was any indication, with more voice assistants in U.S. households and more of them built into other “smart home” devices such as refrigerators, mirrors, home security and yes, “Intelligent Toilets” (“Alexa, flush!”). So: What should publishers do? Experiments so far have been mixed, but that doesn’t mean giving up is an option. Instead, publishers need to fight to get better deals for content. They also need consider new types of business models such as product placement, as Meredith is doing.

Amazon Alexa vs. Google Assistant, Part 2

If you want to understand how big the voice wars have become between Amazon and Google, you just need to go to Las Vegas for the Consumer Electronics Show. Last year, Google was the upstart taking on the incumbent at Amazon. This year’s battle was more evenly matched. Google plastered ads all over town and even had an “It’s a Small World” Disney-style ride as part of its booth. Amazon opted for a lower key approach with “Works with Alexa” tags on all the associated products.

Amazon touted selling more than 100 million Alexa devices. But Google shot back by saying it had 1 billion devices with Google Assistant – though that includes all Android phones sold with it built-in. While CNET had its writers decide who won the Amazon vs. Google voice war at CES (Google got the nod), the real question is how can publishers use this battle to their advantage? Will the tech companies ever give more credence to news and information on voice assistants, and what will that value be in the long run?

What People Want

Before we answer, we first need to understand how people are using voice assistants in their everyday life. People typically use these omnipresent devices in the morning and evening. And people mostly want them to play music, answer general questions and get weather updates. In an analysis of the Reuters Institute report, Nieman Lab’s Laura Hazard Owen noted that people love using smart speakers, but not really for news. Even though 42% said they used smart speakers for news, only 1% said news was the most important feature for them.

Users also have a lot of complaints about news on voice assistants: The updates were too long, they aren’t updated enough, many use synthesized voices to read the news, and there’s no way to skip or select stories. Even worse, when people asked specific questions related to news stories, the answers were inaccurate and inconsistent.

While people do use the devices to stream live radio (19% of all NPR online listening happens on smart speakers), they aren’t keen to listen to longer form audio or podcasts. Maybe that’s just a factor of podcasts being an on-the-go commuting format, while smart speakers are in the home.

What Publishers Can Do

In the wake of Reuters Institute study and many experiments by publishers, how can they better reach consumers via voice assistants? As with all new formats, publishers must understand how people use the devices and tailor their content appropriately. The New York Times announced a new briefing for Alexa-enabled devices based on “The Daily” podcast. It is in a much shorter format for smart speakers and they are promoting it through the print edition of the paper. The Times has developed a weekly News Quiz taking into account the popularity of trivia quizzes on the devices.

As The Verge’s James Vincent pointed out: “Audio content won’t necessarily drive subscriptions, but it could be a relatively easy way for the paper to reach millions of new listeners before — maybe — turning them into readers.”

Meanwhile, Meredith announced its new Innovation Group at CES. The new division includes a Voice Network that brings together all of the company’s audio, voice, and podcast products under one umbrella.

Meredith has experimented with “content-to-audio” where someone reads story content. However, what’s most interesting is their initiative to create skills or actions for smart speakers. One example would be using Alexa to open an AllRecipes skill with an option to order ingredients for a recipe. “The skills are actually the best place to do the product placement and direct links to commerce,” Meredith’s head of innovation Corbin de Rubertis told Folio.

Publishers are still feeling their way to what works best on voice assistants. (And the payoff is difficult to envision right now.) However, growing use of these proliferating devices means that publishers can’t dismiss them. Instead, they need to start with shorter briefings, try out some new interactive skills, and as the platforms become more mature. And perhaps they can even get compensation for offering the most up-to-date relevant answers for users.

Featured Post | Revenue

Subscriptions make sense. But how many will consumers pay for?

It’s no secret: In the coming year, readers will run up against more memberships, more pleas for donations, and more paywalls. In short, more opportunities for money to escape their wallets to bolster media outlets they have previously accessed free of charge.

Companies like Buzzfeed and Quartz have recently embraced direct-to-consumer business models, joining traditional subscription outlets in a rush away from digital advertising reliant models. Beset by multipronged threats like the internet giants Facebook and Google sucking up all traces of revenue growth, declining consumer trust, and an alarming trend of fraud cases, it’s not hard to see why digital media companies are looking for alternatives.

But this shift comes at a cost. While ad based revenue models optimized for reach, the new normal will be the tailoring of niche content to attract a reliable paying clientele. The Atlantic’s Derek Thompson recently predicted that the entire industry will return to the early days of journalism where a “party press” would stoke the partisan emotions of their readers.

“News media of the future could be as messy, diverse, and riotously disputatious as their audiences, because directly monetizing them is the new central challenge of the news business,” wrote Thompson.

That means that digital publishers will need to navigate the real risk of subscription fatigue. How much are consumers willing (and able) to pay for?

What it will take to survive in this new DTC world?

“As loose paywalls tighten and everyone seeks reader revenue, I imagine audiences will be forced to make choices, especially in what is looking like a dramatically slowing US economy,” said former GIzmodo Media Group CEO and Columbia University professor Raju Narisetti.

He expects that people will begin to add it all up and realize that  — given other recurring payments like internet service, mobile, and subscription-based everything from meal services to shaving supplies  — their content selection might need to be more discriminating.

Needless to say, publishers need to figure out how to compete for limited discretional dollars. One approach that many are trying is aggregate services like Flipboard, Texture, and Blendle.

Adding Texture

An obvious option could be an even more widespread integration into an app like Texture, purchased by Apple last year. Texture offers a service similar to Netflix wherein a group of publishers bands together to offer a wide range of branded content for a single rate. While currently available to use, there are persistent rumors of a spring relaunch of the service included in a future Apple News update, foreseeably offering an increased amount of content above and beyond the current free selection. It’s hoped that the move would have the same omph Apple brought to its Apple Music platform. At least that’s the pitch.

Publishers remain skeptical, though. “Some executives fear Texture could end up doing more harm than good. Their concern is that Apple could steal their current subscribers, who would save money by reading articles on Texture instead,” reported Bloomberg.

One thing that could change that calculus is the confidence boost of a New York Times-shaped news outlet taking the plunge, according to Narisetti. While he admits it’s natural for the larger players to be cautious, there’s a vector for profit in the service.

“That’s because they are currently giving away up to 20 stories entirely for free on Apple News. So, in my mind, they are actually likely to incrementally gain by monetizing that via Texture, than lose any significant, core loyal direct subscribers to lower-priced subs,” he said.

Once that’s overcome, “the US news floodgates will open up on Texture, much like how NYT paywall given the confidence to the American general news industry,” he added.

But there are always more than one way to approach the problem.

Infinite Scroll

Focusing on user experience, the creators of Scroll.com want to offer a direct to customer alternative which side-steps competing with a publishers revenue models by offering to remove the ads from a collection of publishers for a monthly fee. Sites load faster, users can opt out of advertising, and publishers get a new revenue stream.

“We avoid the problem of cannibalization and instead get to complement rather than compete with them. Most publishers see us as a middle of the funnel service, creating more engaged users who can then be converted into their own plans,” said Scroll founder Tony Haile.

But perhaps the industry needs to learn from the experience of the wider technology industry. Subscriptions are an increasingly popular way of packaging any digital-adjacent service (often dubbed Anything as a Service, or XaaS), whether it be a ride sharing plan, in-app purchases, or even the meals you make for dinner. But they’ve even suffered through the same issues as facing the digital publishing industry.

Value for Life

“As a media company looking at some of the struggles of consumer XaaS companies like Blue Apron last year, I would make sure to focus relentlessly on reducing my churn rate, and increasing the Customer Lifetime Value (CLV) of my paid subscriber base,” said Gabe Weisert managing editor at Zuora, a subscription management platform provider.

He explained that the way towards healthy CLV is to drive usage at every opportunity. Keeping people engaged keeps them paying customers. Strategies which achieve that include cross-selling and upselling. For example, the New York Times saw solid growth of new subscribers from their crossword and cooking app offerings.

To entice their audience, Buzzfeed is offering tote bags for new subscribers, but Amazon is taking those subscriber-enticements to a new level. The Seattle-based retail giant has started offering free sample of items of products based on users’ shopping habits data—with the only goal to getting us to buy more.

“CLV should be the gold standard metric of every media company. That’s all Netflix cares about. It’s all Amazon cares about. That’s why [subscription services] keep giving us “free” stuff — they know exactly how much those investments materially affect the value of their subscriber base,” he said.

Featured Post | Perspectives

Top 7 media trends in 2019

As the year comes to a close, we always get the reflexive compulsion to look back and take stock of what happened and consider what’s to come. And this year truly brought a sea change on a number of fronts in digital publishing. Facebook and other tech giants stumbled mightily from one PR disaster to the next, culminating in top executives literally telling Congress that they expect to be regulated. Who would have imagined that?

And the old, sad chase for eyeballs might finally be laid to rest, as digital pubs pivoted away from video, away from chasing mass audiences via social media, and toward reader revenues and putting the audience first. And while the digital ad duopoly of Facebook and Google face headwinds of regulation and a public backlash, Amazon is expected to make it a “triopoly” as their ad growth is skyrocketing.

Here are the media trends that made the biggest difference in 2018 and what to watch out for in 2019:

1. Facebook and Tech Giants Lose the Plot

It’s a lot easier to talk about what’s wrong at Facebook than what’s going right, and that goes doubly for its relationship with publishers. At the beginning of the year, Facebook changed its News Feed algorithm to downplay news pages and then saw its own usage flatten over the year. Things got worse when Facebook forced publishers to go through a verification process just to boost posts with political stories. Even at South by Southwest, a techie’s fevered dream, the “techlash” was in full effect with entire panels devoted to attacking Facebook.

Even worse for the technology behemoths was the continued pushback from regulators in the EU and U.S., including a rare bipartisan rebuke against executives. While Republicans and Trump have alleged anti-conservative bias at Facebook and Google, many others believe they need stronger regulation around privacy, especially after so many scandals related to politics (see Cambridge Analytica) and data leaks (see Facebook’s not-so-private photos). Expect more backlash and more regulation to come.

2. Amazon Joins the ‘Triopoly’

And if you’ve grown tired of the exploits of the digital ad duopoly, rest assured you have a new tech giant to worry about: Amazon. The Seattle behemoth has quietly slid into third place among digital ad purveyors and is set to grow a whopping 400%+ per year to grab 15% of U.S. market share by 2020, according to eMarketer. And the signs have been growing about Amazon’s dominance all year, from the time they beefed up agency and marketer support to the point where they had a scandal over sponsored wedding registry listings. Let’s celebrate another player to give Facebook and Google a run for their money – as long as they play fair.

3. Media Mergers Trump Trump

He tried so hard to penalize CNN. But in the end President Trump failed to block the AT&T purchase of Time Warner, or force a spin-off of CNN (which has been on a money-making tear). Instead, the mega-merger was approved by the courts, and we also saw Fox offload most of its assets, including the 21st Century Fox studio, to Disney, while Comcast skulked away in defeat.

And T-Mobile and Sprint passed their final hurdles to merge in 2019, leading to only three major mobile services in the U.S. They promise to cut prices for consumers, but less competition usually results in higher prices overall. How will all these huge mergers play out in 2019? For the media companies, it’s all about taking on the disruptive tech giants moving into entertainment and streaming. For the wireless carriers, it’s about moving toward speedier 5G to give us faster streaming (at higher prices). All those trends will come together as Disney unleashes its new streaming service next year.

4. The Digital Media Reckoning Continues

This year just reinforced growing trends in 2017, that will likely continue into 2019: Digital-only publishers cannot rely heavily on advertising or even sponsored content. Without diversified revenue streams, and especially reader revenues (subscriptions, memberships, etc.), most of these former darlings will end up hallowed out, like what happened to Mashable before and Mic recently. Even BuzzFeed had to move toward an NPR model, asking for $5-a-month memberships to support its news operation – complete with the cliché tote bag reward.

BuzzFeed CEO Jonah Peretti is calling for more consolidation. But most importantly, publishers need to put the audience first and take a user-centric view of sustainability. As Politico’s Tyler Fisher wrote in Nieman Lab:

“With a business model focused on reader revenue, the entire company can set its sights on making the best journalism product possible for the reader … The smartest of smart newsrooms will take one more step in their path to sustainability: They will become a trusted institution in their communities by respecting their users’ time, intelligence, and privacy.”

5. Snapchat, Flipboard, Pinterest Rise as Facebook Falls

As Facebook took a tumble this year, others stepped into the void and took advantage of the social giant’s missteps. The most ironic beneficiary was Snapchat, which had taken a beating from Facebook with copied features (ahem: Stories). The company stepped up its game by letting marketers target publishers in Discover and letting publishers use non-exclusive content in Discover. Even old stalwarts like Flipboard and Pinterest saw their stock rise as Facebook fell to earth. Why? As Facebook dealt with misinformation and algorithm angst, Flipboard focused on human curation and Pinterest on lifestyle. Of course, Facebook does own Instagram and WhatsApp, which continue to grow and thrive outside of the parent company’s shadow.

6. Linear TV Under More Pressure from Streaming

As noted above under the “Digital Media Reckoning,” the move toward reader revenues means more ad-free environments, and streaming giants like Netflix and HBO are leading the way. Even Facebook did some research on whether a subscriber-supported ad-free social network would pay off. Meanwhile, cable nets such as AMC Network saw their advertising revenues drop, while distribution revenues soared as they sold content to streaming networks and diversified.

Where does that leave our old friends, the purveyors of linear TV? They’ve had to up their game and innovate with “addressable TV ads” that target people better than mass market TV ads, which are on the wane. And AT&T’s purchase of Time Warner has given the telecom giant a chance to broaden its offerings with more content and data. Linear TV will continue to find ways to battle – and emulate – the streaming upstarts.

7. Podcasts Remain Strong After Some Contraction

Podcasts continue to mature and large publishers such as New York Times and Washington Post are pushing deeper into the audio-on-demand medium. There were some hiccups in 2018, with Panoply dropping its podcasts to focus on being a platform and infrastructure for podcasts. And BuzzFeed also closed its in-house podcast production outfit to focus on long-form video. But there were also signs of continued expansion, as Malcolm Gladwell and Slate’s Jacob Weisberg launched a new podcast company called Pushkin Industries, and iHeartRadio bought podcast producer Stuff Media (which makes “How Stuff Works” and more).

The reality is that as metrics improve, including the NPR-led open source RAD technology, more marketers will jump in and find that podcast listeners can be a very loyal bunch.

Conclusion

With the tech platforms hitting rough spots, this has been a year of retrenchment for publishers, who are taking stock of what’s really working and what’s leading them astray. The days of shiny new objects like VR and blockchain seem to be on the wane, and a laser focus on the user and serving the public are front and center. As VC funding becomes scarce, media startups need to be more practical and strategic. The chase for eyeballs is coming to a close, and now we can think about what’s real for our businesses – and for our communities.

Featured Post | Revenue

Why publishers see a future in a DTC/advertising hybrid model

After a brief hibernation, the era of direct to consumer revenue (DTC) is back and booming. Over the past six months, paywalls have sprung up around areas that used to be free and become smarter about who they let through. Paid newsletters are booming, even emerging around topics like cryptocurrency. Podcasts have gone members-only, membership models have undergone a Cambrian explosion and emerged vastly more disparate, and new funding methods for “slow journalism” outlets have come into being.

It’s a far cry from the distant days of 2016, when nearly every news publisher was rushing headlong into distributed publishing on social channels, relying primarily on the reach of the platforms and their ad networks to deliver significant revenue. Now, following some high-profile casualties of that publishing model and the “Trump bump” reviving interest in subscriptions, direct to consumer revenue is the name of the game for many publishers.

The value of a subscriber

The benefits of regular revenue straight from audiences are obvious and mutually reinforcing: Compared with other sources of digital revenue, the number of players is small, so less gets taken out of the value chain between consumer and publisher. At a time in which the digital advertising space is overcrowded (and dominated by two or three players), it’s no surprise that publishers would prefer to earn revenue directly from one consumer over sharing a tiny piece of the ad pie.

Consequently, one paying subscriber is worth many times that of a consumer monetized through advertisers. According to Jasper Jackson, digital editor of the New Statesman, which went behind a paywall in March of 2018: “One subscriber is worth many thousands of digital readers that you’re only monetizing through advertising. I’m pretty certain that subscription revenue is a better funding mechanism for good journalism, and particularly for the kind of journalism we do.”

Are subscriptions the right move?

That is also the contention of News UK around its subscription-based news products. Alan Hunter, head of digital for The Times and Sunday Times, said that while the industry has been in the grip of the chase for advertising revenue through scale, the pendulum is now swinging back the other way:

“When we first introduced subscriptions, people thought we were crazy. For a long time we’d go to conferences and people would pat you on the back and say ‘Oh I’m really sorry about this’, but if you look back on it it seemed very logical that journalism costs money and you have to pay for it one way or another.”

Subscription history

Similarly, many of the larger English-language newsbrands have a history of DTC revenue from their time as physical newspapers, when a significant proportion of their revenue came from subscriptions. Many of those organizations were in the early stages of figuring out how to convert digital readers to a similar system years ago, before they were seduced by the appeal of digital ad revenue through platforms.

Small wonder then that as the promise of digital advertising revenue failed to materialize for quality content producers, they have transitioned back to subscriptions and memberships to sustain them. It does mean trading a large proportion of the scale that comes from existing as a ‘“free” ad-supported publication. Jackson says that “pure reach is a wonderful drug.” However, for publications that have the requisite reputation and audience to make it work, the trade-off is worth making.

The New York Times, for example, reported 2017 subscription revenues of $1 billion early in the year. It also reported annual average growth of almost 50% for its digital subscriptions since the paywall was introduced in 2011. Based in the UK, The Financial Times is close to having 1 million subscribers, almost 80% of them digital.

The Guardian, too, has made direct-from-consumer revenue a core tenet of its plans for the next few years. And a strong showing from its membership scheme to date suggests that engaged audiences might be willing to pay for content that is nominally free from a brand that they feel an affinity with.

Subscriptions: not just newsworthy

Nor is the drive to direct monetization of users limited to newsbrands. Consumer-facing titles are introducing new membership tiers to generate more revenue from core audiences. And, while it’s now reportedly struggling to make it work effectively, even Google’s YouTube is feeling the pressure from OTT services like Netflix to introduce its own subscription-based premium video packages.

While these brands have a strong legacy to lean on, some digital pureplay brands are transitioning to hybrid advertising-membership models. Quartz, for example, has launched a membership model based around a partial paywall and the ability for its members to talk directly to editors and journalists, a perk that is also in effect to a greater or lesser degree at the Guardian, The Times and The Atlantic. Meanwhile, BuzzFeed, which was the poster child for scale, social distribution, and branded content revenue for years, has also launched a membership scheme … with mixed response.

DTC takes work

However, these shiny new opportunities for DTC revenue come with new considerations for publishers. Outlets like The Times are investing more in tech to reduce churn, since research from The Financial Times demonstrates that it costs four to fives times more to attract new subscribers than to retain existing ones.

The propensity to pay for online news is still relatively low outside the Nordic countries. according to the latest Reuters Institute Digital News Report, only 16% of people in the US currently pay for news online, and mainly to liberal leaning newspapers (though the proportion is increasing). That suggests that there is currently not enough digital subscription revenue going around to support all the outlets that are transitioning to direct reader revenue.

Risky business

Despite these new challenges, publishers have taken note of the fate of outlets like Mic and Mashable, whose strong valuations in earlier years belied an over-reliance on social distribution to achieve scale and indiscriminate digital advertising revenue. Subsequently, their respective collapses have galvanized other publishers to seek to transition to direct to consumer revenue.

Despite that, most digital publishers are not seeking to abandon other sources of revenue entirely. Many media businesses recognize that advertising can still provide a significant source of revenue. Jackson from the New Statesman explains: “Digital advertising, if you do it well, cleverly, can bring in significant revenue. There’s also an argument that pure reach is a very good marketing tool for print sales.”

In the future, then, it’s unlikely that direct-to-consumer revenue will entirely supplant advertising revenue as the primary means of monetisation for digital publishers. Instead, both will continue to play a role in publisher business models based around a wider variety of revenue streams.

Advertising | Featured Post | Perspectives

With ad dominance comes great responsibility for Amazon

Move over duopoly because the time has come to furrow your brow about the “triopoly.” Many marketers and publishers have grown tired of the dominance of Google and Facebook in the digital advertising space. Now they can add Amazon to the list of dominant tech rivals. eMarketer now predicts that Amazon will hit $4.6 billion in U.S. ad revenues for a 4.15% share of the digital ad pie this year. And its growth rate of 400%+ per year will get it to a 15% share by 2020.

You’ve probably notices that Amazon has sponsored search ads all over its e-commerce pages, enticing consumers to buy relevant products. However, it’s offering much more than that, from video ads to traditional TV ads to ads on its cardboard delivery boxes. The only problem is that it competes with its own advertisers by selling Amazon brand products alongside merchant listings. And more recently it went too far by promoting sponsored items in baby registries.

In short, if Amazon is going to be the third wheel on the triopoly tricycle, it can expect withering scrutiny from the media, marketers and eventually regulators if it doesn’t play fair.

So many ways to dominate

How did Amazon sneak up on us to become such a dominant ad player? By boring us to death. Those little sponsored links on product pages? How quaint. A sponsored related product, or a banner ad on a Kindle? Yawn. This is the same way that Amazon itself has dominated the world thanks to… cloud servers for your website or business. The engine for Amazon’s profits has long been Amazon Web Services, not its e-commerce business.

This sleight of hand works just as well in the ad business. While you were considering how they would deliver your packages via drones, Amazon was bulking up on advertising through its self-service system, placing sponsored items all over its pages. And then finally, in the sleepy days after Thanksgiving, while the country still was drowsy from tryptophan, the Wall Street Journal trumpeted that Amazon had arrived, “with little fanfare” as a new advertising behemoth.

Helpfully, the WSJ pointed out all the ways that Amazon was going to dominate in advertising. According to a Cowen & Co. survey of ad buyers, 29% buy sponsored product ads, 21% buy video ads on IMDB and Amazon.com, and 13% buy good old display ads. But there’s been more, with “The Minions” movie buying ads on delivery boxes, and a yogurt company paying to include instructions in Amazon Pantry boxes on how kids could build rockets and airplanes out of those boxes. Cute.

And the content play too

While those sponsored links followed the time-honored tradition of Google becoming a dominant ad player with its own AdWords offering way back when, Amazon is ready to spread its wings too. The video ads referenced above could explode if and when Amazon launches a rumored free ad-supproted Free Dive video service for users of its Fire TV devices.

While there is no advertising on its Prime Video service, Amazon has become a major player in content by spending $5 billion this year, according to a JPMorgan analyst. That’s less than the $8 billion that Netflix shelled out, but more than typical TV broadcast networks. And Amazon does serve TV-style ads into its streams of NFL Thursday Night Football games – as well as Premier League soccer games.

And that might grow as well if Amazon is successful in its bid for the 22 regional sports networks that Disney is selling as part of its buyout of 21st Century Fox properties. That type of marquee purchase (which includes the New York Yankees’ YES Network) might finally open the floodgates for tech giants to get into sports programming and break the final blockade for cord-cutters.

Missteps and conflicts

But what might stall Amazon in that pursuit is what might stall the company in its overall ad ambitions: creating too many conflicts of interest. Would Disney really want to sell the regional sports networks to Amazon, a company that is trying to eat its lunch in streaming content? And how many retailers will continue to feature their content on Amazon, and pay Amazon for sponsored slots, when they are being squeezed out by Amazon’s own retail brands?

You can hear the frustration in the story of Jason Boyce, CEO of Dazadi, a home recreation retailer that has to pay for placement on Amazon. “They get all the prime real estate [for their brands]. It’s unfair,” Boyce told the Journal, but “we have to be on Amazon.”

Even more unfair are the sponsored links Amazon runs in private baby registries, with a tiny gray “sponsored” tag. The sponsored items were not chosen by the parents-to-be and led some confused friends and family to buy those items, upsetting everyone involved. After a Wall Street Journal story about the practice, Amazon said it was phasing them out.

And that’s where the rubber meets the road for Amazon as it moves stronger into the digital ad business, with one of its HQ2 offices right outside Manhattan, the epicenter of advertising. If it wants the power of being a digital content and ad player, it will have to come clean on its ambitions and compete fairly or users will tune out. And let’s face it: If the U.S. Congress, FTC and other regulators won’t do their job to keep the tech giant in line, we can expect the EU to come down harder.

Featured Post | Innovation | Perspectives | Revenue

In 2019, these 4 shifts offer opportunities for trusted media brands

 

Successful media companies have always relied upon having a direct, trusted relationship with consumers and advertisers. Consumers want to know the brand and the experiences they’ll get from them. And advertisers that want to build this same level of customer relationship directly seek out these trusted media brands or tune advertising algorithms their way.  

The teams at trusted content brands wake up every day and create content people love, products that serve them well, and safe and valuable advertising environments—all while maintaining the high level of ethics and professional standards that benefit viewers, readers, listeners, and a healthy marketplace. And we’re here to support you.  

What makes our members unique is also what makes DCN unique. By focusing at the brand level across the entire media strategy, we’re able to advocate and work to advance the future of trusted news and entertainment and partner to develop all sources of revenues. We can also do it without needing to curry favor or meet the needs of a few large tech platforms with out-sized influence who are required partners for any modern publisher. 

As we turn toward 2019, it is a good time to reflect on the top-of-mind trends for media companies. Here are four important shifts happening in digital media right now—all of which play into the strengths of trusted media brands:  

1. Revenue, direct from audience.

With our quarterly and annual members-only benchmark report, DCN has unique access to market research specific to premium publishers. Importantly, our research isn’t skewed with numbers from Google and Facebook. (This is a very common issue in industry research. Always look “under the hood.”) Our research is based solely upon our members. One of the things our benchmarks tell us is that approximately 80% of members’ digital revenue comes from advertising. However, we’re finally seeing growth in direct revenue from audiences whether it comes in the form of membership, subscription, or donation.  

Trusted publishers are uniquely positioned for this shift because they offer exactly what people want: high quality news and entertainment – that’s worth paying for. It remains to be seen how the market evolves in order for this revenue segment to grow as it must, but we’re thrilled to see our members playing a proactive role in shaping the opportunities.  

2. Distributed platforms, going over the top

The list of platforms is endless and evolving: YouTube, Facebook, Snap, Twitter, Apple News, Flipboard. While publisher revenues on these distributed platforms have been promising at times (YouTube), they’ve often been disappointing (Apple News, Facebook Watch). But right now, quality content creators are seeing the fastest movement in the video space, particularly long-form and over the top (OTT).

Our best practice research on OTT earlier this year showed how our members are taking aim at these opportunities. However, new gatekeepers are surfacing in the OTT space like Amazon and Roku. And while Google and Facebook don’t like being called “walled gardens,” every new platform will no doubt be planting their own seeds to maximize their profits off your content. Experimentation is essential. But protecting your IP and deal terms early on is critical.  

3. Ad targeting, rebirth of context 

In the EU, the impact of GDPR has just started. There are new claims calling into question the entire way Google has collected consent for its ad supply, how real-time bidding operates, not to mention endless class-action suits mostly focused on Google and Facebook. DCN has distributed research on Google’s unique and unavoidable ability to mine behavioral and location data significantly beyond user expectations as you browse the web and walk the streets . We’ve argued towards raising the bar on companies who collect data across most of the web while recognizing the inherent trust in choosing to visit your environments, brands and context.  

Global leaders are asking more questions than ever. Looming large over the discussion is a new law in California which will impact the very companies that are now (albeit, ironically) advocating for federal laws to save them through preemption. It’s been a wild year when Google, Facebook and its trade group, IAB, are now finally pushing for a federal privacy law thereby admitting their existing frameworks may be failing consumers. Quality publishers have a unique role in shaping any solutions as consumers seek more controls and alignment with their expectations. Consumers don’t know the hundreds of ad tech companies mucking up their web experiences, but they do know you and your brands. And, of course, this value then transfers to ads in this environment.  

4. Advertising, direct to consumer

Research from the IAB, as well as industry discussions, has driven a DTC (“direct to consumer”) movement as the next big thing. Here is the great news about this conversation: It’s no longer focused on the plumbing, data, ad tech, and vendors. It’s focused on how brands have value and can connect directly with audiences and consumers, bypassing gatekeepers and intermediaries. This is the sweet spot for quality content companies. In fact, I’d say if anyone wants to better understand how to go direct to consumers, they should start with the members of DCN.

But here’s the rub: Many players in the market won’t ever really be able to go “direct to consumer” without relying on the brand equity of trusted media. In order to find scale, they’ll first need to build demand, be willing to bundle, and find quality brands to associate with and carry their flag. They’ll want to be near those with purpose and value recognized by the public.  

I’m sure each of these movements will surprise us in ways we can’t predict. They may develop more slowly than anticipated or accelerate at light speed like the privacy regulation has with GDPR and Facebook’s mishaps hitting in the same quarter. But either way, premium publishers should be ready as, with the right proactive strategy, there are opportunities in all. 

Featured Post | Perspectives

Recklessness, a reckoning, and the road forward

Two cars travel down a two lane road approaching one another from opposite directions. A solid white line sits painted in-between them as they approach each other. One car swerves, crossing the line, then cuts back. 65 MPH and climbing, and the only thing preventing the car from crossing into the other’s lane again is a theoretical barrier painted on pavement. These guiding lines are not a guarantee. They’re more of a social contract, a legal rule that we abide by because it is for the betterment of ourselves, others, and the rest of society. However, this driver chose not to follow the rule and crossed into the wrong lane. What happened? Recklessness.

The media and information industry is in an age of recklessness. Fueled by misinformation, lines are being crossed. And this reckless behavior is taking a serious toll on the trust in and value of the media.

We want to believe in societal norms that govern the free flow of trustworthy information. There are standards that should apply across platforms, publishers, and consumer domains. There is an assumed integrity that applies not only to the words we write, but the videos we produce, and how they are spread throughout the web. But this recklessness has led to a reckoning; and now we must forge a new path forward.

Post-Truth, True Story

Unfortunately, this is clearly no longer the case (‘That’s not altered. That’s sped up. They do it all the time in sports.’). There are now separate narratives, cultures, and communities built around the rhetorics of truth, information and more dangerously, misinformation. Reputation is no longer a default to “trusted” media brands at the domain level. It needs to be re-focused, re-earned, and re-defined.

The role of media institutions today is more important than ever. In the age of recklessness, we need to continue to provide our communities and readers with the knowledge they need to inform their lives, societies, and governments. And it’s the responsibility of the rest of society to process this information and re-paint those lines that define to bring awareness to what is real and what is not. Today it’s more important than ever to understand the information that is being put in front of you. And that understanding runs deeper than images and text, to the source, the context, the delivery channel, and much more.

The revolution will not be qualified; it will be quantified. The media business is positioned better than ever to expose the value of their work and drive their business forward. Putting an emphasis on trust, the value of a media brand is in its operation and its reputation.

Media business leaders need to keep their eye on the road. How can they secure and deliver information that is validated, honest and objective? And through that, expose that their organizations differentiate from other less reputable players in the space.

To emphasize this value, media must prove its worth. That seems frustrating, especially because many of these institutions have been in business for decades, even centuries. However, when you ask someone to pay for something, you must give them a reason why. In order to be successful, the media business must be subscribed to, not just supported. That means creating a product market fit that is both helpful and necessary. To do this, we must expose our practices, and how we seek provenance, validation, truth and every other value that’s standard to the media industry.

Proof of Effort

Building value means exposing the underlying components for all to see. To severely oversimplify: The greatest value of the media industry is in its effort. The practices behind media, and the process by which information is researched, created, edited, and published is what drives its purpose and differentiation from imitators.

However currently, the only way to quantify media’s value is in generalities. How many page views, referrals, visits, and shares does a piece of information garner? This is the opposite of what drives reputation and an institutions’ value, which has everything to do with the actions before a piece of information is published. Because of this, and how information is distributed (social platforms, search, applications), information has become commoditized. The value of a viral video is measured the same as an investigative expose, even though the investment in each is severely different. And gaming that system is how we continue to not just commoditize our worth, but blur the value between information and misinformation.

Media’s recklessness is fueled by misinformation. And because of this, not all media can be valued equally. But how did we get here? The value attributed to media-at-large is dictated by the returns of where it is being distributed. Facebook, Google, and other major platforms have rewarded content based on output mechanics. This has little to do with how the information is created, edited, and published prior to distribution. Because of this, everything appears to be created equal; even though the efforts behind different types of media work and the investments tied to them are all different. We need to refactor the economics of the web and better reward and expose the value in the efforts of creating the good, while in parallel demoting the bad. This starts with quantifying elements of effort as it relates to truth.

A Valuable Proposition

Quantifying the next era of media can be  associated in a few sets: attribution, provenance and the effort behind the work. What’s clear is that we know that there is value in a creator’s work. And we, as an industry,  recognize what it is but do a terrible job conveying it to our audience and consumers. Building a way to expose the efforts in media and put the value on that input instead of the output will get us there. This is the key differentiation between what can and cannot be trusted; is the way that we got to this information accurate? If so, show it.

This information exposure is the first step towards a path away from misdirection and recklessness. In today’s society, the lines in the road are meant to be abided by because there an understanding how they got there and why they exist. As long as that narrative continues, they will continue to do their job governing the way we as a society move around. The same goes for media. We must remind the world why these practices and principals exist, and how they came to be in the first place. They are the lines that govern information and most importantly, democracy. This must be exposed for the betterment of our world.

All of this adds up to a world in which quality media, information exposure, and great creative translate into good business. It’s the key component to wresting control over news from misinformers, manipulators, “clickbaiters,” and social media hubs and placing it back into the hands of media organizations that want to produce quality information about issues that really matter. We must put value on our effort to build a transparent and healthy newfound ecosystem.

Media is undervalued. It’s undervalued financially but especially undervalued in its role in maintaining a free and open society. Acknowledging and emphasizing its purpose through ubiquitous effort points solves for both. It will enable us to build new platforms, value systems and economies based on our true value and starve misinformers in its wake.

We know why the work that we do is so important. Now it’s time for us to let the world know exactly what goes into it.

Featured Post | Perspectives | Policy

The Midterms are over: Sizing up what it means for big tech

For the last two years, Congress has increasingly focused on big tech platforms. Lawmakers have summoned executives, consumer advocates, and academics for hearings on consumer privacy, market dominance, data breach scandals and perceived political bias. However, with the exception of a bill to amend Section 230 of the Communications Decency Act to clarify  companies’ liability for facilitating  sex trafficking on their sites, Congress has not yet moved significant legislation to regulate the tech industry.

Some are wondering whether a new Democratic majority in the House means Congress will start legislating, particularly with the President saying that he is interested in discussing with Democrats whether or how to regulate the technology industry. Let’s take a look at how the 2018 midterm election results might impact a few high-profile tech issues.

Market Dominance of Big Platforms

Even before the elections, Democrats and Republicans raised concerns about the outsized influence of Google, Facebook, and Amazon – albeit for different reasons. Many Democrats are concerned about the data surveillance business models of big tech companies. Republicans, on the other hand, distrust social media algorithms, which they believe favor liberal points of view over conservative voices.

I expect both parties’ concerns will only grow, especially as we get closer to the 2020 Presidential election. And those concerns might fuel action on other issues. Congress is not likely to do anything to directly address the dominance of the big technology platforms. The expectation is that the Department of Justice and the Federal Trade Commission will work with Congress to provide guidance on what, if anything, lawmakers should do. Thus far, discussions have focused on how various digital business models function and what remedies or regulations would be needed to enhance consumer experiences.

Net Neutrality

Over the past decade, Congress and the Federal Communications Commission (FCC) have been bickering about net neutrality without final resolution. Most recently, the Republican-controlled FCC rolled back net neutrality regulations promulgated by President Obama’s FCC.

With Democrats set to take the reins in the House, they are more likely to move a bill to reinstate those Obama-era net neutrality rules. But the Republican-controlled Senate is likely to completely ignore any bill sent over by the House. That dynamic could change if the courts rule on the pending challenges to the FCC’s rollback. Until the incessant shouting stops, this is likely an insular technology discussion and fodder for future campaigns.

Consumer Privacy

Congress has held dozens of hearings on consumer privacy over the years. This year was no different. However, the tone of the conversation has changed dramatically just in the past few months. As mentioned before, many Democrats have long advocated for a consumer privacy bill of rights, saying that Congress needs to step in to protect consumers. Now, a few key Republicans agree. Many in the industry are calling for the same as the California Consumer Privacy Act and the EU’s General Data Protection Regulation go into effect.

Just last month, Senate Commerce Committee Chairman John Thune (R-SD) stated, “It is increasingly clear that industry self regulation in this area is not sufficient.” Clearly momentum was building on this issue before the midterm elections and there is reason to believe it will continue. Senator Thune is likely to move into a leadership position in the Senate, thus relinquishing his position as Chairman of the Senate Commerce Committee.

However, the next likely chairman is Senator Roger Wicker (R-MS), who signed a bipartisan letter with three other key senators in September saying they want to work with the Administration to “provide consumers with more transparency and control over the collection and use of (consumers’) personal data while preserving the innovation at the heart of the internet.” The House Energy and Commerce Committee is likely to be chaired by Representative Frank Pallone (D-NJ), who included consumer privacy legislation on his agenda for 2019. On top of that, a host of other policymakers, including Senators Wyden (D-OR), Blumenthal (D-CT), and Markey (D-MA), have recently introduced their own legislative proposals. Comprehensive consumer privacy legislation appears to have early bipartisan and bicameral support.

All that said, our nations’ founders intentionally made it difficult to pass legislation. And, 2019 will be no different. For any meaningful legislation to advance through both chambers of Congress, Democrats and Republicans will have to put aside partisan differences long enough to find middle ground. That will be hard for elected officials to do in the current highly polarized political environment. Odds-makers would say the chances are slim that Congress can enact comprehensive consumer privacy legislation, but it’s got a better chance than most.

Featured Post | Perspectives

Why the time is right to shine a light on ‘dark social’

One of the least understood portions of the web is becoming one of the most important: dark social. And as the calendar turns from Halloween to the Day of the Dead, it’s time to shine a light into the darkest corner of the web to understand how people are sharing content via messaging services, email, texting, and other platforms that don’t show up easily on analytics programs.

For a long time, referrals that showed up on Google Analytics as “direct” were a mystery. Could that many people really be typing in long URLs into their browsers? No. Instead, they were cutting and pasting URLs into an email to friends, or WhatsApp or Facebook Messenger. Those referrals became known as “dark social” because of our ignorance about their true source. And with public sharing on Facebook and other platforms down, dark social is only growing more important, with an estimated 84% of all sharing, according to RadiumOne.

But there are ways to better gauge where those dark social referrals are coming from. There are also ways to reach people on messaging apps, through chatbots and targeted promotions. Even more important, reaching people on dark social requires a new way of thinking of them in their “tribes” or personal space where gauging sentiment might be more important than marketing a product directly.

The Rise of Dark Social

They are like two ships passing in the night: the rise of messaging apps and the decline of public social sharing. Just looking at Facebook user statistics gives us a stark picture:

  • From November 2014 to September 2017, Facebook Messenger users went from 500 million to 1.3 billion.
  • From December 2013 to December 2017, WhatsApp users went from 400 million to 1.5 billion.
  • From Q1 2017 to Q2 2018, Facebook interactions went from 29.1 billion to 12.8 billion.

Yes, 12.8 billion is still a lot of interactions, but you the trend is clear. People are losing trust in social networks and flocking to private messenging services.

As Arik Hanson at Business2Community noted, even Facebook’s Instagram is thinking beyond the public feed. “Let’s look at the direction they’re going: Investing heavily in Stories and direct messaging (both “private” for the most part, when it comes to engagement). Many of the new features added recently revolve around these two areas: poll sticker, slider stickers, polling via DM. These are the areas Instagram is focused on – not the public-facing feed as much.”

How to Get a Handle on Dark Social

There are ways to bring dark social into the light. While vanilla Google Analytics shows dark social traffic, there are ways to segment pages to see which ones are getting the most action from dark social. (99Signals has a good primer on that here.)

And there are always advanced tools like GetSocial and AddThis that can help identify which pages are getting hit the most from dark social. They also show where some of those sources are.

However, tracking down dark social the same as regular social referrals might not be the point. As Alpha Group’s David Cohn points out on MediaPost, “part of dark social’s appeal is its ‘off the grid’ nature, [so] we wouldn’t want to throw the baby out with the bathwater by looking for too much data and meaning among the noise.”

Taking Action to Reach Users

So how does a marketer or publisher get a return on investment by reaching folks on messaging apps, texting or emails? Cohn says the key is to figure out basic demographics on the platforms and the groups who congregate there. He uses the example of a foodie group in New York that could start to send more traffic to food publications and restaurants. “A marketer or publisher wouldn’t know exactly whom to target, but they would have a place,” he wrote. “And they would recognize this community as a gathering place for worthy targets.”

One example from India shows how ROI can grow when targeting dark social. When streaming service iflix wanted to increase its users, it found that its most loyal customers had one important thing in common: They liked sharing viral content and celebrity gossip on messaging apps. According to Business Today’s Sonal Khetarpal, iflx targeted messaging apps users. They converted 1 million more paid subscribers in six months. And the cost of acquisition dropped from $25 to $3 per person.

While it’s true marketers are tiring of social media planning that moves from one platform to the next each season, they’re going to have to get serious about messaging apps and dark social. More folks will have to take chatbots seriously, or just better targeting to users of messaging apps. Otherwise, they will miss a massive, growing opportunity as more people become disaffected with public social media spaces.

Featured Post | Revenue

Moving readers from free to fee: An inside look at successful premium publishing strategies

In a world where consumers are accustomed to getting many digital goods for free—from apps to podcasts to instant facts online—convincing them to fork over funds for content remains a tough sell. And hanging on to those hard won customers is a challenge unto itself. For proof, consider the subscriber churn rate among publishers, estimated at 30% last year.

Yet many publishers today are tackling this problem with a variety of successful tactics designed to convert more freeloaders into subscribers. And recent data suggest that publishers are learning from past mistakes and become better attuned to what attracts and retains paying patrons.

By the numbers

Per The Lenfest Institute for Journalism, fewer newspapers are giving away the store than they used to. They have found that 78% of American newspapers charge for digital access. Eighty percent of these use a metered model while 4% employ a hard paywall.

“Publishers are becoming more successful at moving folks from free to paid than just a few years ago,” says Matt Skibinski, reader revenue specialist at the Philadelphia-based Lenfest Institute. “In the past several years, we’ve seen publishers achieving better results by engaging in more sophisticated marketing tactics and centering their newsroom around producing content that their readers are willing to pay for. As a result, the number of current users who are turning into paid subscribers every month as a percentage of total audience has gone up, while the number of free articles allowed under a metered model has gone down.”

The American Press Institute recently found that around 73% of news organizations polled provided free trial subscription offers for digital content, with less than one quarter of free trial readers converting to full-price subscriptions. Discounted trial subscription offers fared better, with nearly 72% of polled organizations reporting a greater than 76% conversion to full-price subscriptions via this method.

A separate API study of 4,100 newspaper subscribers revealed that several factors motivate people to pay for content: access to local news (chosen by 30% of respondents); convenience of print/home delivery (15%); a discount or promotion/discount (12%); a topical focus (12%); and trust/quality (9%). Additionally, 45% eventually subscribed because of a free trial or promotion, and a paywall meter triggered around 50% of digital subscribers to subscribe.

Metered might

The metered model has been especially valuable because it allows publishers to monetize engagement, rather than page views. The most important metric for publishers that want to grow digital subscriptions is engagement Skibinski says.

“Engagement means encouraging the user to build a relationship with a publication and develop a habit of reading it every day,” says Skibinski. “Engagement is best measured in terms of people—the folks who are actually likely to subscribe. Publishers can measure the number of users or visitors, for example, who view one piece of content in a given month versus those who view five or more articles.”

The key here is “segmenting your audience into groups of people based on their behavior,” Skibinski adds. “Page views may drive advertising revenue, but engagement helps you better measure digital subscription success so that you can make the right decisions about what kind of content to invest in and what kind of promotions and marketing to pursue.”

Data collected by the Lenfest Institute show that most successful metered publishers stop 5 to 10% of their digital audience with a payment gateway.

“In order to get your readers to pay for your digital content, you have to actually ask them to pay. In the past, many publishers were too conservative with their meter rules, and as a result, they would only ever ‘stop’ a small percentage of readers with a subscription ask. We’re now seeing publishers become more confident in saying to readers, ‘we have content that is high quality, valuable, and worth paying for,’” says Skibinski.

A metered paywall isn’t for everyone, of course. The Financial Times gravitated from the latter to a four-week trial for $1 model in recent years and hasn’t looked back (its annual premium content subscription is $559).

“Years ago, our challenge was to make people understand why valuable content and great journalism is worth paying for. Today, our challenge is more around ensuring that we remain their go-to content provider and reminding them of the value they’re getting,” says Fiona Spooner, global marketing director, B2C, for The Financial Times, based in London. “The four-week trial gives us an opportunity to engage them and communicate this value without the threat of any metered limitations.”

Spooner’s motto? “If you want people to buy something from your shop, you have to welcome them in but not let them walk out with your merchandise without paying for it,” she says.

Membership has its privileges

One of the first brands to launch a subscription paywall—back in 1997—was Consumer Reports. It shifted from a subscriptions to a membership model earlier this year, offering four tiers: from free to all-access content (at $55 annually). Since then, the average order value is up 20%, the take rate for its all-access tier is twice what was anticipated, and new membership benefits and features have garnered half a million interactions.

“Our research shows that consumers want relationships with brands they can trust. And people are more open to the idea of paying for convenience and unique value that extends to content that’s curated and personalized,” says Kim Stehle, vice president/CMO for Consumer Reports, headquartered in Yonkers, New York.

“I like to think of the mix of free and paid content we offer as akin to relationships. You start with a chat and then maybe move to a first date. You’re still testing the waters. That’s where free content comes in,” says Stehle. “As in any relationship, you get more comfortable with each other over time. The commitment deepens, and eventually you get married. That’s where paid content comes in.”

A tiered membership model doesn’t necessarily have to focus on value or prestigious journalism as a main driver. Spirited Media, which manages Denverite in Denver, Billy Penn in Philadelphia, and Pittsburgh’s The Incline, asks its readers for monetary support at any level, although three higher levels of membership (starting with a “supporter” membership, at $35-99) are encouraged and come with extra perks.

“We’re not forcing people to pay for content. We are asking people to pay because they love us. To succeed at membership, our readers have to believe, in their hearts, that we’re an essential part of their community. And to get there, to believe in our ‘essentialness,’ they must identify with our point of view, which is, ‘We love this city and the people who live here, so we want it to be better,’” says Brian Boyer, vice president of product and people at Great Falls, Virginia-based Spirited Media.

Boyer believes that quality journalism, while important, “isn’t sufficient to convert readers into members. You can’t count on the work to speak for itself. You have to know your point of view and express it.”

Best practices from the pros

If you want to improve your paid conversion rates, be prepared to do your homework and try a little tinkering. Your first task: Look closely at your data and segment it by user behavior.

“Their behavioral data tells you how much value they’re getting out of your product. For instance, a user who views five articles per month is far more likely to become a subscriber than if they are reading only one a month. And that reader is up to 15 times more likely to pay for content if he or she is also subscribing to your e-newsletter,” says Skibinski.

Next, make smart decisions based on that data you parse.

“When you’re sitting in a product meeting or talking to your staff about how to measure success with content, review how many engaged readers looked at a given article as opposed to total page views,” Skibinski notes.

Experiment to create the optimum mix of free and paid content, too.

“Don’t be afraid to change or tighten up the number of free articles you offer. Ask people to pay after you’ve made them aware of the value your brand offers,” says Skibinski.

Consumer Reports’ Stehle recommends trying more personalized content. “We now offer a premium paid service called ‘Ask CR,’ where paying members can receive personalized buying advice from our specialists,” says Stehle.

Mighty messaging maneuvers

Using the right messaging language that moves users from free to fee is equally crucial.

“A lot of publishers have had to test different messages, but they typically employ the voice of the brand and target those most engaged,” Skibinski says. “The Seattle Times did a successful campaign that spoke about its quality, integrity journalism. Others have great success offering something like a Snow Day sale—‘get 50% off for the first three months if you subscribe today.’ A paper like the Dallas Morning News may do better with a message crafted around football, which is a huge sport in that city.”

The secret to successful messaging is acknowledging the relationship you already have with the consumer and the moment they are in.

“Even if their current relationship is ‘free,’ you can convey how much more they could be getting from your brand if they were willing to pay. We’ve found that using language around ‘upgrade’ or ‘gaining access’ works, because they intuitively connote additional value,” Stehle says.

About the Author

Erik J. Martin is a Chicago area-based freelance writer and public relations expert whose articles have been featured in AARP The Magazine, Reader’s Digest, The Costco Connection, EContent Magazine, The Chicago Tribune, and other publications. He often writes on topics related to digital media, technology, real estate, and business. Read his blog at martinspiration.blogspot.com.

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