If someone asked you five years ago which type of digital media would be seeing its renewed heyday, the podcast might not have been on the top of your list. But indeed, the format – still firmly connected to its broadcast radio roots – is in the midst of a renaissance.
Achieving new heights of popularity means that publishers of the audio-only medium have started to experiment with new business strategies to find a path to monetization.
We’ve seen some innovative approaches in the podcast sector like digital ad insertion, or having ad slots be dynamically filled by more up -o-date or geolocated content. But analyzing the recent business moves gives us an idea of what’s coming next in podcasting revenue.
Will Revenue Follow Audience?
In early February, Spotify purchased podcast publisher Gimlet Media for a cool $230 million. In a conversation with Recode’s Peter Kafka, Gimlet co-founder and president Matt Lieber explained that Spotify wasn’t just its second largest partner but also its fastest growing partner. He went on to say the reasons why the acquisition made sense was a “disconnect between the number of people who are listening and the amount of shows they’re listening to, and the amount of money coming into podcasting.”
With the size and scope of Spotify, Gimlet saw opportunity to overcome one of the fundamental challenges of podcasting: discovery. The competitive landscape means that to have your podcast’s needle found in the metaphorical hay stack, you either need to be lucky or know how to appeal to the right audience.
Lieber told Recode that the data found at the Swedish streaming platform (and its 96 million subscribers) would help with that process. The lack of relevant listener and audience data has held back the podcast industry in the past. Platform controllers like Apple weren’t releasing detailed enough listening data. This made it it difficult to fine tune advertising budgets and understanding your audience.
Value Proposition
That’s not to say this new found access to audiences will change the fundamentally open nature of podcasting at the publisher. While there will be most certainly exclusive productions on the streaming platform, Gimlet’s most popular offerings won’t disappear from other podcast platforms. At the time of the announcement, Spotify said they had no plans on putting the content behind paywalls.
Similar to this approach, there are efforts like the premium Stitcher service which removes ads from their free shows and offers bonuses to subscribers.
Subscription Business
So what about the companies who do want to publish content behind a subscription fee? Podcast publisher Luminary has set its sights on being the Netflix of podcasts. With a planned launch date of June, the service will charge $8 a month to get access to podcasts from the likes of Trevor Noah, Conan O’Brien, and Malcolm Gladwell. The media start up hopes the draw of big names will have people opening up their wallets.
Although, there are those who are a skeptical of the reach of direct to consumer efforts.
“Well everybody wants scale and they want people talking about [their show] and to engage with it,” said NPR’s senior vice-president of programming and audience development Anya Grundmann. “So you haven’t seen a lot of subscription [offerings] from the very beginning when trying to build audience.”
Grundmann pointed out that podcasts often end up being the “carrot” that drives consumer purchasing of subscriptions to news publications. Recently, the Guardian began running podcast ads in the shows they produce for their membership program, which seems to be having positive results.
Reaching the Masses
However, there’s also a drive to reach as many people as possible, much like its predecessor, broadcast radio. “I don’t see us putting our stuff behind a paywall,” said Grundmann of the public broadcaster. “Our goal is to reach as many people as we can and not just people who have money.”
That doesn’t mean NPR has not benefited from new ways to monetize the format. Grundmann said it has extended its podcast-related events business because there’s “so much energy of people wanting to meet people and be part of a community.”
Whether through the draw of exclusive content for power users or listening experiences without ads, direct to consumer offerings from podcast producers are beginning to emerge. But it’s also obvious that the traditional subscription model might not be the best fit for the resurgent industry, as many producers are hesitant to go all the way and lock content behind paywalls. Creators will need to continue to experiment and test strategies to determine the best ways to monetize the connections with their audiences.
It’s safe to say that brand safety has been one of the most pressing issues in marketing over the last two years. Advertisers have been made all too aware of the perils of digital media and what can happen if an ad runs alongside harmful content. Often, marketers may not even aware of where an ad will run, thanks to programmatic. So, they can be caught off guard when the issue spreads on social media.
The most recent brand safety concern happened in February when a YouTube user posted a video that highlights patterns of comments by pedophiles on otherwise innocuous videos. These people made comments that sexualized the kids in the videos. In other instances, these commenters shared links to child pornography.
Soon after, several advertisers including Nestle, Disney, AT&T, and Epic Games all pulled their advertising from YouTube. YouTube responded by disabling comments on most videos that include children under 13, as well as on some videos featuring older minors. It had also been reaching out to agencies and brands, reassuring them that YouTube is still a safe platform for their ads.
Brands and Boycotts
Many people feel that when brands boycott a platform, it’s just grandstanding PR. And really, boycotts haven’t materially affected YouTube’s financial performance. But these days, advertisers are generally concerned by the responses from platforms like YouTube and Facebook, with one digital ad executive recently telling Ad Age that YouTube’s promises “ring hollow, however, given this latest flare up is just one of many brand safety failures in the past two years.” They just keep happening, and so the cycle of brand boycott, only to inevitably return to the platform, continues.
Ad Age noted that YouTube offered flimsy solutions for advertisers. “YouTube has offered half-measures for brands, the executive says. For instance, YouTube is telling some brands to categorize ads as ‘alcohol’ (even if the company is not an alcohol brand), that way it tricks the automated ad system into avoiding videos with themes that appeal to children and families.”
Do Advertisers Really Care?
However, some observers think these brand safety issues have been overblown. It has been suggested that some advertisers are much more worried about consumer backlash over brand-safety incidents than they are about the incidents themselves. In the grand scheme, there are relatively few flare ups when considered in the context of how many ads are served, says media analyst and consultant Thomas Baekdal.
“What brands are worried about is to be called out about something – often outside of their control – and to face some type of backlash. Because of it… they are worried about what people might say or do on social channels,” he says. “They are also worried about activists, who in recent years have grown far more aggressive. And again, with the help of both the press and social media, they have managed to have a far bigger impact using very few resources.”
That may be true. But any time a major advertiser like AT&T, which spends a total of billions in advertising annually, pulls its advertising from one of the world’s largest platforms, reporters do need to cover it – regardless of whether or not it’s a cynical PR move on the brand’s part. (You could argue that the business press should stop covering PR stunts like this altogether, but that’s an entirely different conversation.)
All or Nothing
Baekdal also questions the move to ban comments, arguing that in some cases, comments are integral to a platform’s existence, or a content creator’s success. “One of the things we have to remember is that YouTube is fundamentally a two-way channel. It’s a platform where you are communicating rather than simply publishing. So, taking away comments entirely is a pretty drastic step that, for some channels, could destroy them,” he says. “If you have a YouTube channel where the discussion and the community are what defines the focus, removing comments would kill that channel. More to the point, it punishes the wrong people.” In fact, if some of the comments are inappropriate, disabling all comments penalizes the video’s poster.
Shelly Palmer recently wrote a column for Ad Age that’s worth reading in full. He argues that we should stop looking at YouTube to ever be totally brand safe. Palmer posits that there is no possible way to make YouTube, or any environment that relies so heavily on user-generated content (UGC), 100 percent brand safe. “Asking ‘Is YouTube safe for my brand?’ is a better question, and it is the proper lens for any serious marketing discussion.”
The Quality Question
For publishers, there’s a potential upside to all this uproar. Just after the most recent YouTube incident, Digiday noted that agencies began looking to directly buy from premium publishers on YouTube, potentially providing a revenue boost.
And let’s not forget brand safety is not a one-dimensional issue. And, for many advertisers, it isn’t limited to these noisy consumer outcries and PR flare ups. At the Digiday Media Buying Summit in November, GroupM’s Joe Barone defined it in a number of ways, including viewability and concern over bot traffic. Less flashy, but still important.
“We’ve also begun to talk about is the idea of quality. If we can get a quality environment, quality inventory from quality publishers, that are seen by real people in appropriate contextual environments, those ads sell better. Brand safety is linked directly to inventory quality and client results. Clients have become very educated on this process. They ask the same questions. They start with questions like ‘you mean to tell me my ads aren’t being seen?’ or ‘bots are clicking on my ads?’”
About the Author
Maureen Morrison is a marketing consultant working with agencies, startups, publishers and brands. She previously was a reporter and editor, having spent nearly 12 years at Ad Age covering agencies, digital media and marketers.
It does not come as a surprise that most digital publishers look to the New York Times for subscription strategy advice: On February 6th, The “failing” New York Times posted digital revenue of $709 million for 2018, based largely on its 3.4 million digital subscriptions. It also bucked expectations when it came to its ability to attract new subscribers. The NYT added 265,000 new digital subscriptions in the last quarter of 2018, which it calls “the biggest gain since the months immediately following the 2016 election.” As a result, the paper has set itself the new goal of having 10 million subscriptions by 2025.
This all suggests that while the “Trump bump” was a reality, there is more to the NYT’s success than simply being the target of The President’s ire. In an interview with Ken Doctor, the NYT’s Chief Executive Mark Thompson attributes much of its success to steady investment in the newsroom – which he calls a “very simple, old-fashioned model” – through having the highest number of journalists on staff in the paper’s history.
The vast majority of news publishers, however, do not have the coffers of a national title. Later in the interview, Thompson acknowledges that the NYT has unreplicable advantages when it comes to adding staff. However, the New York Times is employing a strategy that more publishers can and should emulate: It’s giving its news away for free – to 3 million students.
Premium value
On its face, the idea sounds crazy. Back in July of last year, the NYT’s ‘The Truth Is Worth It’ advertising campaign made paying for high-quality news the responsibility of the public. Its press release stated that its research had “found that seventy-three percent of U.S. news consumers who pay and subscribe to a news source say that it has never been more important to support quality journalism.”
That rhetoric has also been employed by publications including The Times of London, the Guardian, New Statesman, and others as they market their own paid-for news products. Even local and hyperlocal publishers are increasingly pushing the idea that, while “news” is readily available for free online, quality news needs to be paid for.
In fact, the NYT is making a bet on free as a long term investment in demonstrating the value of quality journalism. As with the growth in its newsroom headcount, this is an investment the NYT is making in its future. And, while there might not be straightline attribution between these free subscriptions and total revenue for the foreseeable future, it is a smart bet that it can convert some readers who might never have paid into lifetime subscribers.
It’s a clever strategy for a number of reasons. However, it all builds upon the idea that free subscriptions for a particular demographic can convert a proportion of people –0 who otherwise might never pay for digital news – into regular subscribers.
Subscription satiation
While young people are more likely to pay for news than previous generations, there is a hard cap on how many news subscriptions they can afford. The latest Digital News Report from the Reuters Institute for the Study of Journalism found that just 14% of people globally currently pay for online news. And it’s vanishingly unlikely that the majority will pay for more than one subscription. Additionally, the price of an annual news subscription can take a back seat to entertainment services, though this is not a phenomenon unique to young people. Competition for those 14% of people, then, is going to be fierce.
(The NYT’s scheme is currently limited to students in the United States. However, the increasingly international NYT plans to open it up to international students as well, where the propensity to pay for news is typically lower than in the US).
So by offering the subscription for free, the NYT is effectively betting that it can create a relationship with enough students to make the scheme worthwhile. Having that preexisting relationship with a potentially lucrative audience is vital: With more players entering the subscription space, it’s unlikely that more than a handful of truly international publishers will be able to sustain themselves solely with the revenue from the 16% of people who are willing to pay for news in the US.
Those subscribers are a rare commodity, and getting young people on board early could mitigate some of that conflict with the NYT’s peers.
Retention costs
The Axios piece that trumpets the NYT’s 3 million student subscriptions contains a telling quote from Hannah Yang, head of subscription growth at the paper: “We already have high retention, but I think this could make it almost bulletproof.”
It’s a vote of confidence in the NYT’s ability to retain subscribers, but it’s also tacit acknowledgment that the cost of acquiring new subscribers far outstrips re-upping the contracts of existing ones. By some accounts, it costs up to five times as much to acquire a new subscriber than to retain an existing one.
While it’s never been explicitly stated, that is presumably the main reason behind similar subscription schemes at at The Financial Times, and sharply discounted student pricing from The Times of London. From an acquisition point of view, it’s far cheaper to reignite an existing relationship than forge a new one from scratch.
Corollary benefits
Having an extra 3 million subscribers – particularly younger ones – on the books also has a beneficial impact on the NYT’s relationship with advertising. Brands are keen to reach as many people as possible, and younger demographics are highly desirable to some. So, while marketing subscriptions relies on having the depth of content that the NYT’s expanded newsroom offers, marketing products and commodities requires reach.
Additionally, having data on those self-selected subscribers is invaluable. Thompson makes this observation, both in the Nieman Lab article and in the press release, noting that “we are more attractive to the world’s leading brands than we would be if we didn’t have a digital subscription business. That’s why we’re growing our digital advertising business.”
Having those logged-in users also allows the NYT access to user data that allows it to refine its publishing strategy and the types of content it highlights to interested readers. Over the course of the last few years, The Times of London has been using exactly that sort of data to reduce consumer churn by appealing to their favourite aspects of the subscription. The greater the sample size, the better the refinements. Therefore, 3 million extra subscribers equals a huge amount of data points.
From a purely altruistic point of view, too, offering subscriptions to those who might not otherwise be able to afford one fulfils the journalistic remit to inform the public. That was explicitly the reason the FT announced it was extending its free access to FT.com to 16–19 year olds globally.
The downsides
In a recent episode of the Media Voices podcast, we discussed the practical difficulties of other publishers trying to emulate The New York Times. It has, after all, a number of inherent strengths that most newspapers simply won’t be able to replicate.
In particular, it has a profitable business that allows it the luxury of both investing in its newsroom and the time to let those free subscriptions percolate and, eventually, have a chance to develop into full subscriptions. As a national title, it also has strong brand recognition, and can reach students from coast to coast.
Some other publishers, particularly local papers, simply don’t have the time to let those experiments play out. They also may not have enough students or other potential future subscribers in their patch to make it worth their while, and consequently we are already seeing many local publishers iterating on a hard paywall model rather than letting a particular demographic in for free.
Ultimately, it all comes down to whether free student subscriptions allow a newspaper to bypass that hard cap on propensity to pay for news. If reducing the friction of onboarding, deepening the relationship with the user during their free trial, and using their data to support other parts of the business adds even a few percentage points to the number of people who will re-up that subscription, the endeavour will have been worthwhile.
On January 29th, at the 2019 DCN Next: Summit, Rappler CEO Maria Ressa outlined the role social media and concerted, well-orchestrated disinformation campaigns played in perpetuating false information and media distrust in the Philippines, as well as attacks aimed at Rappler.
She then went on to have a wide-ranging discussion examining the various pressures on media credibility (and safety) worldwide with interviewer extraordinaire Kara Swisher, Co-founder of Recode.
Less than two weeks later, on Wednesday, February 13 at 5 p.m. local time in Manila, plainclothes officers from the National Bureau of Investigation, an agency within the Department of Justice, arrested Ressa on charges of cyber libel. As Ressa wrote in a statement: “We are not intimidated. No amount of legal cases, black propaganda, and lies can silence Filipino journalists who continue to hold the line. These legal acrobatics show how far the government will go to silence journalists, including the pettiness of forcing me to spend the night in jail.”
The Board of Directors of Digital Content Next (DCN), a trade association representing nearly 80 high-quality media companies, said, “The arrest of Maria Ressa is deeply troubling. Maria traveled to the U.S. to share her developing story with our members only two weeks ago. It is vital we value and protect the independence of media organizations and journalists around the world. Any effort to silence journalists or use intimidation to reduce their reporting is an affront to freedom. We encourage global leaders and the press community to make it clear this cannot be tolerated.”
In light of Ressa’s arrest, and to reinforce our support of a free press everywhere, DCN is pleased to share the video of Ressa and Swisher’s interview (full transcript below):
And, for those who would like to show support for Rappler and Ressa’s work, she has provided a link to their crowdfunding page.
Below, we’ve shared a full transcript of Ressa’s conversation with Swisher.
Alexandra Roman: [00:00:00]
I am truly honored to introduce this next conversation interviewer
extraordinaire Recode’s Kara Swisher. She’ll be speaking with a very special
person in our world these days. Named Time magazine’s Person of the year as one
of the guardians of journalism, please welcome the CEO of Rappler, Maria Ressa.
Kara Swisher: [00:00:33] So we’re going to start…first Maria is going to make a presentation then we’re gonna have a full fantastic discussion. Maria was on my podcast recently. It was, it was an amazing experience for me and I’m so glad she’s here and safe in the United States right now. We’ll be talking about that more. But first Maria go ahead.
Maria Ressa: [00:00:52] So
I like that Jason [Kint, CEO of DCN] talked about trust. And this is stuff I’ll
show to you from our perspective in the Philippines because it’s got the data
to prove the thesis and then I think you guys are not quite… I think you’re
not seeing the termites eating at the the credibility that you have as news
organizations and those termites are coming from geopolitical power plays. We
go back to information is power and with that that let me show you what’s
happened in the Philippines.
January last year, there were two surveys that came up exactly the same time but they’re almost complete opposite results. The top is real world Pew Global Attitudes Survey: How do Filipinos look at traditional media? And they came back they said 86 percent think traditional media is and the right quote is “fair and accurate.” But the Philippine trust index, which is part of the Edelman Trust survey, they came out with a survey that same month a year ago. And they asked people on social media and they came out with 83 percent “distrust traditional media.” Right. So how did that happen? We tried to figure out why is the world upside down? That’s really the question right. Why is the world upside down?
We have a database that we started gathering in July of 2016 when the when the drug war began in the Philippines because the attacks all came on social media. In our case it’s Facebook. But this is a timeline of attacks on traditional media. And in Rappler because we were the main focal point for a period of time, [which] started January 2015 and then moving to April 2017. January 2016 was when the campaigns began and the social media machine of then Mayor Duterte. He Was elected to office May 2016. You see that one? And you can see the fracture line Byaran means corrupt. Bias. So Bayaran is the one in the middle. The first long line and bias is the last one. If you look at that it’s a fracture line of society right.
There were mentions before but it was constantly pounded until it became a straight line after president Duterte was elected the weaponization of social media happened after he was elected because it was repeatedly pounded until it became fact. A lie told a million times its truth.
Maria Ressa, CEO of Rappler
Right. So, then what happened? Here: This This is the database I was telling you about right? We call it The Shark Tank. The one on your left is the URLs that are spreading fake news in the Philippines. The middle column are the court the Facebook pages that are spreading that page. And I always look at the average reposting time which is the one all the way to your… my right, sorry it’s flipped.
I want to show you when the real attacks began against Rappler and it was after we came out with a three-part series on the weaponization of social media. It was October 2016. I went to Facebook with the data August 2016. So, October 2016 this is what it looked like. In October 2016, if it’s more than 10 times reposting, it turns red, You can see how it turned red. This Facebook page Sally Might Die accomplished its goals by April 2017. It’s been deleted from Facebook but you can see … This was something we created for our social media team so that you can see it’s a cut and paste account. And they post; look at how many times they post in one day! Each one of those squares is just one day. And this is where they post the groups. They posted to go viral in the campaign pages of Duterte it and Marcos, the son of former President Ferdinand Marcos.
oneI’m going to just show you the last thing which is how can we figure out who’s attacking us. Well you can gather the data and it looks like this but if you put it in a network map, It looks like this. This is the network that was attacking Vice President Leonie Robredo about a year ago and it is the same network that constantly attacks me, Rappler, and every traditional media. It is so systematic that the content creators of the network are broken down by demographic. For the Motherland, it is pseudo-intellectual and tries to target the one percent but pseudo-intellectual. The middle class is targeted by thinking Pinoy and the mass base is this Moka Olsen blog who is former singer dancer. They used to use to build her Facebook page by having it like she has a singing group called the Mocha Girls and they do pillow fights every Sunday. That was how they first built her Facebook page. Then she became the head of social media for the presidential palace and it became a whole other thing.
Anyway, you can see this is what attacks what attacks
journalists systematically. And it happens so many times. I just want to show
you one last thing which is something we did for Rappler. Natural Language
Processing to pull out. So, we looked at the entire Lexis Nexis right to try to
figure out … What do we need to learn? What Is the data telling us about the
articles that were written about us at the time when I was about to come home
for bail to file bail? Yeah, I had an arrest warrant then.
Right. So, the Philippines wrote 34 percent of the stories.
The United States wrote 27 percent. You guys are a potent a potent force for
us. But what was most interesting is that the Filipino stories are part of the
reason it’s in a line like this is because they essentially just regurgitated
the press release of the Department of Justice. It was the American news
organizations that talked about it as a Duterte rights crackdown. That wrote
about it in context. That was an amazing thing. I want to leave you with sorry
I don’t know what wrong thing, I think. I want to move forward. I want to leave
you with this information warfare. Yeah, I guess this is the right one.
So, with information warfare I’m going to bring it to to Russia. Dezinformatsiya. This was really interesting because. For Duterte to end the drug war. Sorry about that my slides were. OK so… I don’t know if you remember Yuri Andropov. He was the former KGB Chairman. This quote stuck with me because it fit the Philippines. Dezinformatsiya works like cocaine. If you sniff once or twice it may not change your life. If you use it everyday though it will make you into an addict. A different man. I think this is the impact on our democracies and we’ve seen it.
The first reports came out in November of 2017 saying that cheap armies on social media are rolling back democracies all around the world. And at that point it was something like 28 countries. By last year, it was 48 countries. It’s doubling. We started looking at Ukraine to try to understand how we can use the data the way Ukraine started fighting back. It is information warfare. It is political. It is about power and the money part of it … or the people who are actually or who are actually catering to the politicians. Russia backed Facebook post, this was November of 2017, this is the first time that I saw Americans really starting to look at it. But even when I saw this ok they reached 126 million Americans. I think what people missed is it happens all the time. It wasn’t just ads, it was it’s all the time …
I talk about termites. This bot is interesting to me because
it tweeted about U.S. elections. First, remember the Philippine election of
Duterte was one month before Brexit. After Brexit, there were U.S. elections
and then the Catalan elections. This little bot Ivan tweeted about all of
those. So, we found him from the Catalan elections. And when I’ve looked at his
account, it was specifically only tweeting about the Philippines. When we
posted this story, within 24 hours Twitter took his network down.
On Facebook, this is the last part I want to show you, the most recent thing that I found fascinating. In December, two groups came out with reports based on data that was given to the US Senate Intelligence Committee. This is the chart that is from new knowledge. And this thing at the bottom, I want to show you the connection between the Philippines and that chart. It’s this: So we tend to map the networks around us. Let me just. Try to get this so that you can see it. There. This is the attack network. Not connecting.
OK. So, this attack network was from November. Sorry it’s frozen. There. Yay. OK. November 8, December 7th. This network. And you know what I used to map the network is this free tool called Flourish. It’s a startup. This is little Rappler. And what’s so interesting and this is where I will make the pitch that I don’t think we have any other choice but to actually collaborate together. Rappler is here. This, all of this, is a disinformation network that’s attacking us and you can kind of literally see it right.
But what’s so interesting is in the Philippines this
overshadows the information landscape. The traditional media groups are so set
aside they’re desperate. I’ve been trying for the last two years to get our top
television networks our newspapers to work together like retweet re share each
other so that we can rise up together in the algorithms. We refuse to do it
because people think it’s competitive. But you know what? You’re competing
against disinformation not against each other now.
I want to show you this because and I’ll end with this one… so this disinformation network is so interesting right. But this is the most fascinating one. When we saw this, I was surprised because this was created a year ago. It’s only one year old the daily sentry dot net. And yet the larger the circle, the larger the eigenvector centrality, the more powerful the account is. This is exponential pushes behind it. What’s interesting about it is that this is the first time we saw a direct connection to the Russian disinformation landscape because daily century dot net uses experts in quotes from this network. Sorry I can’t I can’t do the thing but on that chart there is an American man who who’s often interviewed by our de Sputnik by Iranian television … His name is Adam Gary. He is now an expert who’s popping into the Philippine ecosystem. He came in through the Daily Century and he’s from the Daily Century and he jumped into traditional newspapers from there. There’s a direct link to him because he writes for Global Research dot ca a group in Canada and connected to two other groups: one is Eurasian affairs dot net here. Another site both of whom come from a Russian IP address.
All that data in the chart came from the data that was given
to the Senate Intelligence Committee and published last December. This is
what’s happening in my country. I think you’re finding out what’s happening in
yours. But I think we’re only a small case study of what is happening globally
and that scares me.
Kara Swisher: [00:14:13] OK. All right. So, how was prison? [laughter] No really. How was prison?
Maria Ressa: [00:14:20] I, oh, I hope I won’t get there but you know…
Kara Swisher: [00:14:25] You were arrested. Explain what happened to you? We we did a podcast and I said you should not go back to the Philippines because you will be arrested. And what happened.
Recode’s Kara Swisher in conversation with Rappler CEO, Maria Ressa
Maria Ressa: [00:14:32] Of
course I went back. Right. But I wasn’t arrested. OK. I thought I would be so
our lawyers told me … My flight arrived on Sunday night at 9:30 p.m. The
court, which is supposed to be an all night court, well it closes at 9:00 p.m.
So, if they had picked me up that night I couldn’t have filed bail until Monday
morning when courts opened. In the Philippines, if you have an arrest warrant
you’re not told you have an arrest warrant. They just come get you. I came I
went home and I was I wasn’t going to change anything and it went OK. I filed
bail. I I filed bail once I filed. I posted bail five times actually in that
week.
Kara Swisher: [00:15:16] But
to be. And you weren’t actually arrested.
Maria Ressa: [00:15:18] No
I wasn’t arrested. I wasn’t arrested.
Kara Swisher: [00:15:20] Please
explain to everyone here who doesn’t know why they [are going to] arrest you.
What are the charges?
Maria Ressa: [00:15:26] Well
charges are ludicrous. Tax evasion. It’s really one event, the same event, that
I have four other cases of. They’re alleging, the government is alleging, that
I am working for, well, that Rappler is owned by Americans one and that I am
essentially working for them to take down the government. Very Putin-esque.
None of that is true. And then on top of that, the arrest warrant came from
taking that same charge: the investment instrument that we used, which was
constitutional. They then decided that… we didn’t pay the right taxes. And
the reason why they said we didn’t pay the right taxes was because they
reclassified Rappler into a stock brokerage agency.
Kara Swisher: [00:16:16] Rather
than a journalist.
Maria Ressa: [00:16:17] Rather
than a newsgroup.
Kara Swisher: [00:16:18] Right.
Maria Ressa: [00:16:19] And
that’s what I have to post bail for.
Kara Swisher: [00:16:21] The
reason I’m asking what this is I want people to understand how people can use
social media to create trumped up charges and then arrest you for them arrest
you for it.
Maria Ressa: [00:16:32] Well it is interesting that you said that because all of these charges. I laughed off because they first appeared on social media. And they were thrown at me. CIA you’re a foreigner. I am a dual citizen. But, all of that. Like termites you know they just came at it and then a year and a half later it comes out of President Duterte’s mouth during the State of the Nation address. He said that you are a journalist; I’m covering the State of the Nation address. And then President Dutertet says look at Rappler: They are American. So, then I just tweeted back. President, no we’re not owned by Americans.
Kara Swisher: [00:17:12] Right, right. So, let’s talk about the state. Well, last we talked you, you made a very passionate plea to Facebook to do something about what’s happening. What you’re showing here is essentially organized disinformation campaigns to pull you down because you’re doing critical coverage of the president in the Philippines. And so they’re employing a very slow moving but powerful network to do so and using in the Philippines as you said most people get their news at not just the Philippines but across the world from Facebook. This is the purveyor of news. And these malevolent forces have created pages and news organizations and fake organizations to try to battle that. Talk a little bit about that. About what where you are right now because at the time. You were sort of subject to the biggest news organization attacking you being used to attack you.
Maria Ressa: [00:18:06] OK.
So I think that there’s a whole information ecosystem that has been
manufactured and it is manufactured reality. And we went down to a point where
we were looking at you know how how powerful is it really. We manually counted
the impact of 26 fake accounts. 26 fake accounts can actually reach up to three
million other accounts in the Philippines and it wasn’t we were the first
targets because we expose them. I was so naive.
You know, I thought wow we can just do a hashtag no place
for hate campaign and people will come back because you think these are real
people. They Are not. And after we did that, we became the target. And as you
saw in the first slide it’s not just us it is traditional media because the
main goal is to kill any trust in any institution that can that can push back.
All we have done is challenge impunity. Impunity here in information warfare and impunity in the drug war. You don’t know how many people have been killed in the Philippines during this drug war because they keep changing the numbers. At most recent count the Philippine police will admit to killing 5,000 people. Even that number alone is huge compared to the fact that 3,200 were killed in nine years of Marcos rule. Right. But. There’s this other number they never rule out. It’s the homicide cases under investigation and there are 30,000 people who’ve been killed there. So, If you think about it since July 2016 you can have more than it is tens of thousands. Thirty five thousand. I know the way they parse the number and I’m even cautious in the way I tell you how many people have been killed.
Kara Swisher: [00:19:58] So
what they’re doing is trying to use social media to stop you from writing about
them.
Maria Ressa: [00:20:03] Not just trying to use it they’ve used it effectively. iI think this is the first the first weapon it’s a new tool against journalists and against truth. And part of the reason we’re having a crisis of trust is because this is global.
Kara Swisher: [00:20:17] Right.
So, talk a little bit about your efforts with Facebook to do this initially. You
ran into Mark Zuckerberg and told him about this.
Maria Ressa: [00:20:28] F8 April 2017. There was a small group of us who had lunch together. It was founders groups of companies that were working with Facebook and I invited him to come to the Philippines because I said you know you have no idea how powerful Facebook is. Ninety-seven percent of Filipinos who are on the Internet are on Facebook. We’re 100 million people. And he was frowning and I was going so why are you frowning. And he just said, “Maria what are the other three percent doing?”[laughter]. We laughed: huh.
Kara Swisher: [00:21:05] Ah.
Ha. Ha. That’s how the board talks. But go ahead.
Maria Ressa: [00:21:09] But
that’s when you realize that that they didn’t understand their impact. What
they understood was their goal. And so I think now that’s changed.
Kara Swisher: [00:21:21] Right.
So they did that and then you brought this information to them. What happened
initially?
Maria Ressa: [00:21:27] Nothing.
You know by the time Mark Zuckerberg was in Congress for me everything that you
guys were finding out here is you know “been there done that.” We’ve
talked about this. I feel like Cassandra, you know. I’ve talked to maybe more
than 50 different officers and friends inside Facebook.
But we’re the Philippines and maybe people think you know
you’re out there. But, when He appeared in Congress and he said it would take
five years to fix this with AI. I was like you can’t do five years. Because In
the global South in my countries in Myanmar Sri Lanka and the Philippines every
day that it isn’t fixed means people die… I think they’re getting it. I think
partly your coverage you know the 2018 has spotlighted this but I don’t think
enough because it’s still being used.
The good thing is there have been take downs take downs of
Russian networks, Iranian networks, they’ve been to take downs in the
Philippines. The most recent take down was about three weeks ago of a network
we identified and did a story on 13 months earlier. You know so it’s a little
too little too late but you know what. I will take everything because at least
it cleans it up. But the fundamental problem is that. our gatekeeping power …
So, we used to create [and] distribute the news and when we distributed the news we’re the gatekeepers. Now that power has gone to the social media platforms. Facebook is now the world’s largest distributor of news and yet it has refused to be the gatekeeper. And when it does that when you allow lies to actually get on the same playing field as facts, it taints the entire public sphere. And it’s like introducing toxic sludge in the mix. And this I think that’s the fundamental problem. They have to actually at some point say take down the lies instead of allowing it to spread.
Kara Swisher: [00:23:33] So
what do you face when you go there and say you need to take down these lies?
Tell me what happens or how are they now working with you.
Maria Ressa: [00:23:41] It’s
it’s significantly different now. And that’s part of the reason.
Kara Swisher: [00:23:46] Well
they’re very sorry now. But they’re very very sorry and also very very very
sorry.
Maria Ressa: [00:23:53] I think they’re starting to understand what they’ve done. And I think they’ve started to hire the right people. In January of 2017, Nathaniel Glaser who was in charge of counterterrorism in the Obama White House. You know he was hired and shortly after that, well took a while, because this is a manual effort right? Tracking these networks down like counterterrorism requires somebody like a law enforcement official to go look for them. And so that’s part of the reason you see the takedown start starting to happen. I think it goes. The main thing that they have to do is to go to the content moderation system that they’ve put in place.
Kara Swisher: [00:24:39] Right.
Maria Ressa: [00:24:40] As journalists we have values and principles. We call it the standards and ethics manual. As tech people they tried to atomized it into a checklist and then this checklist goes to content moderators in — you know the two largest for a long period of time we’re in Warsaw and Manila.
Kara Swisher: [00:25:01] Right.
Maria Ressa: [00:25:02] And in Manila … I don’t know if you saw the movie, it was done by..
Kara Swisher: [00:25:06] The
Cleaners?
Maria Ressa: [00:25:08] The
Cleaners, right. And in that one you can see that that these content moderators
who barely make you know minimum wage here in the States but they they have
seconds to decide whether to delete or whether to let content stay. And if they
just go by a prescriptive checklist they’ll just go up delete delete and let it
stay. And the guy who took down Napalm Girl was a Filipino and he took down
Napalm Girl because check list naked.
Kara Swisher: [00:25:35] So there’s no famous photograph of the girl running from napalm in Vietnam. Pulitzer Prize-winning photograph. It was news.
Maria Ressa: [00:25:44] So
these Filipinos who were in a call center in the Philippines are taking down
terrorist content potential are taking down supposed hate speech without any
cultural context without understanding the content.
Kara Swisher: [00:25:59] So
what do you what is your solution to them. I’m using Facebook as a broad thing
but they really are the game. Twitter is sort you have the same problems with
Twitter and other social networks?
Maria Ressa: [00:26:10] Twitter
is only 7 percent of penetration in the Philippines.
Kara Swisher: [00:26:13] So
it’s an unpopular service. So yeah.
Maria Ressa: [00:26:18] No, but it’s same right the same content moderation policy as YouTube. YouTube is huge. Also in the Philippines. And you know what this disinformation cuts across all of them. So I mean you saw it in our shark tank. We had the you or else I would love to give that to Google and have them down ran some of that. Right. Because.
Kara Swisher: [00:26:39] This
is just you doing their work for them. Correct?
Maria Ressa: [00:26:43] You
know I… I guess for me when you’re dealing with this stuff. and you’re
breathing it, it’s like toxic fumes every day. You just want a solution. And it
takes… Imagine if somebody from America comes to the Philippines and tries to
figure this out. It would take them a year. I already know it. Here take it. Do
something with it. I don’t look at it as their work. I think OK. This is where
I’ll be really generous. I know that they didn’t mean to do it. It is an
extremely powerful tool and the reason why I continue to work with Facebook is
because I think if they had the political will and the economic will to do
this.
This is a game changer for the Philippines. Rappler couldn’t
exist without Facebook. We zoomed we grew 100 to 300 percent year on year
because of Facebook at the beginning in the good times. And I think they made a
crucial error in 2015 and that was instant articles when they brought all the
news groups in and then all of a sudden were at the same algorithms as the joke
that you heard or what you had for dinner. And when we became mob rule when
facts became determined by mob rule then it changed the ecosystem of democracy
in the world.
Kara Swisher: [00:28:03] And
what do you propose now that these… So, YouTube is a problem.
Maria Ressa: [00:28:09] YouTube
is huge…
Kara Swisher: [00:28:09] A
huge problem. Are you getting the same responses from them: So sorry. They’re
really, really sorry. [laughter] No they really are. But they’re not in any way
whatsoever.
Maria Ressa: [00:28:22] So
yeah. Tell me do you think they will act on it?
Kara Swisher: [00:28:27] You know I have an expression that was from one of my grandparents: You’re so poor all you have is money. I think they like their billions. I think they think they’re doing good for the world. And I think they’re careless. It’s sort of like from The Great Gatsby. They were careless people and they moved, they did damage and moved on.
Maria Ressa: [00:28:47] But they now know they’re not. And they’re killing people. They know that now.
Kara Swisher: [00:28:52] I
think they, what I’m getting now from a lot of people, is you’re so mean to us.
[laughter]
Maria Ressa: [00:28:59] Because
I do see them see this.
Kara Swisher: [00:29:01] When they say that I’m like fuck you. [laughter, applause.] You know what I mean. So it’s very hard for me to. But they are there’s a lot of victimy.
Maria Ressa: [00:29:11] I
mean until now. But you don’t know.
Kara Swisher: [00:29:14] No
I think they’re they literally get angry when people say hey hey now you know
hack democracy you really need to fix it. And they… I think one of the things
that I find interesting is when there is money to be made or whatever, they are
it’s their company. Yes.
And when there’s problems to be solved, it’s we all togethe have to solve it as a group. You know I mean and I’m like we didn’t get 64 billion dollars that I looked at. You know I have real old shoes. I don’t know. I mean we didn’t share in the upswing. And so I think again I joke. I’m so sorry but they feel badly but then I think are actually incapable in any way of taking care of it. I think they have they don’t have the mentality. They don’t have the talent. I think they’re incompetent to the task. That’s what I think.
Maria Ressa: [00:30:02] But
if that’s the case they will die. I mean it’s going to be a slow painful death.
But you know what I mean I guess for me I’m taking almost an opposite that it’s
there’s this phrase on enlightened self-interest that is…
Kara Swisher: [00:30:17] One
would think. One would think. No because this this will eventually… the
product will become terrible to use.
Maria Ressa: [00:30:24] Right.
Kara Swisher: [00:30:25] Or
it will become very addictive to use. And then what’s the difference? Like you
said with cocaine, I think. So, how do you … what are you wanting. What would
you like from them? You’d like them to become gatekeepers in other words.
Maria Ressa: [00:30:37] I don’t think they have a choice. I think they have to be. Otherwise we will leave. Right? Or again they’ll break be broken up by regulation or people will leave. In the Philippines so look at the immediate reaction. Alexa ranking of all the websites where do Filipinos go? From 2012 to 2016: number one Facebook. Undisputed. But then when the toxic sludge began mid-2016, by January 2017 on Alexa ranking Facebook dropped from number one to number eight. And then by January 2018, it went back to number five. In January 2019, right now, if you look at Alexa ranking in the Philippines, it’s number four.
So slowly they’re rising up but there’s no way. So, I mean
my thing is if they don’t fix it we will leave. We will leave. So that’s why I
think it is in their best interest they have no choice. But They are going to
have to suck it up and they’re going to have to have they are going to have to
hire real people. Machines can’t do this. But those real people will train the A.I.
and it will get better over time and they will have to lose money because they
will have to hire real people.
Kara Swisher: [00:31:52] So
talk to me a little bit about that business because you’re trying to create a
real business.
Maria Ressa: [00:31:57] Yeah.
2019 I’m trying to be a good CEO.
Kara Swisher: [00:32:00] Being
arrested attacked and essentially they’re trying to put you out of business.
Maria Ressa: [00:32:07] The
government.
Kara Swisher: [00:32:07] Talk
about the actual business. Because it’s hard enough to do a digital effort. You
know that. I know that.
Maria Ressa: [00:32:14] Yeah.
So, in the Philippines and in many other parts of the world good journalism is
really bad business and I wear both an executive editor hat and I’m the CEO so
it’s my job to make sure our business survives. In 2017, when the attacks started
happening we realized that and we had a big board battle. You know “you
journalists, you know you gotta tone it down” from the business men. And then,
from the journalists, because we had we were the largest group of shareholders
in Rappler. We had 3 percent more votes. So we pushed forward and 2018 was
mission and a lot of anger management issues. But 2019, I have to be a good CEO
and we need to build the business. So what we’ve decided. So when you’re under
attack by the government your advertisers get scared almost immediately they
don’t want to be associated with the brand. They always say you know Maria
we’re behind you but they’re very very far behind. [laughter].
Kara Swisher: [00:33:18] And
nice Time cover!
Maria Ressa: [00:33:23] So
I found out about it on Twitter. And I had to check whether it was real! But
the time cover is the first time I saw the ecosystem come up like real people
who were afraid. Fear is very real in the Philippines and I’m sorry. Before I
before I talk about the fear and I just want to finish on the part about the
business. So businessmen the businesses… they’re not the protectors of
democracy. And even if their values say that they want to do that they just
don’t because the money isn’t there. So, you can’t attack Facebook in the same
way or if you’re run by businesses your values — sorry — they follow
afterwards after the money. So, well, what we did is: We came up. We were
forced to be agile. And A lot of the things that you saw–the mapping, trying
to understand unstructured big data ,all of these things– we came up and
pivoted and became a consultant. Like I essentially carved out another team
that can do the same things we do for Rappler for other companies.
Kara Swisher: [00:34:37] So
your business… so, in that environment what do you do? Because good
journalism like you said is bad business.
Maria Ressa: [00:34:44] Rappler
continues doing good journalism. And I’ve we’ve taken the business and pushed
it away and we actually found a new business. The two things that we did. We’re
the first in the Philippines… The crowdfunding part, actually I didn’t think
it would work in the Philippines. But when our legal fees became like a quarter
of the entire monthly spend, we asked our community and they helped. And that
that helped pay for some of the legal fees. And then we, just December, we
began a membership program we called it Rappler Plus. I don’t think it would
have worked in the Philippines because unlike the United States or Europe
unlike the more developed countries, we don’t have a history of that but not
even subscriptions. People don’t want to pay for news especially in a country
where you struggle to put food on your table three times a day. So the Rappler
Plus took off much faster than I had expected and I think it is because of the
fear. People are afraid and by standing up … By being the kid telling the
emperor he has no clothes. By telling him he cannot do this with impunity.
This Is the most powerful man that we have had in since… I
think he’s more powerful than Marcos was. He controls the executive. He owns
the legislative and by the time he leaves office he will have appointed 11 of
13 Supreme Court justices. You guys in the states worry about one Supreme Court
justice he’ll have appointed 11 of 13. This is our next generation. And It’s
extremely worrisome, especially with this information warfare, with the young
men in our country who are sucking up these fumes. You know the levels of
misogyny according to our data women are attacked at least 10 times more than
men.
Kara Swisher: [00:36:40] Alright,
we have questions from the audience and then we are going to end. Are there
questions from the audience? Yes, you over here. Right here. Put your hand up.
Recode’s Kara Swisher and Rappler CEO, Maria Ressa
Question: [00:36:51] Hi. Krishan Bhatia from NBCUniversal.
Thank you for sharing this story and the insights and everything that you’re
doing to uncover this. My question for you is in the US market, as we sit here
today as premium publishers most of whom have some sort of news business and we
serve large cap marketers in the US: What should we be doing differently with
respect to Facebook in particular but platforms in general that we’re not
doing.
Maria Ressa: [00:37:20] I think we have [to address the issue]: Who is the gatekeeper right now? But I think that ideas are very simple to me. If information is power. And the gatekeeping determines what information is taken by everyone. And we all focus … the debate in the US focus is on all of these different demographics and the polarization. The polarization happens because we don’t have the same facts. So it goes down to that. Please push. I think Kara asked the solution for me is when you have something like Facebook or YouTube moving beyond prescriptive to where we used to be which is what are the values? What are the principles like standards and ethics for journalism right? It can’t be prescriptive because. Ironically what they keep saying they defend free speech but free speech in this case is being used to stifle free speech. So, you’ve got to take the toxic sludge out of the body politic because that is killing us and everything else is organ failure you know because you’re not getting the oxygen that you need.
So please push you have far more power than little Rappler
does in terms of pushing for action in my part of the world I guess you know
maybe I’m happy with little because it’s been so long. We have elections in May
and these take downs will do a lot. I’ve seen the reactions of the people
running those those Facebook pages. But please look also do the investigations
here in the United States. The data is coming out now. I think that our
credibility are and I mean are for traditional media and the new ones coming
up. I think we’re getting eaten up by termites without realizing that that the
floorboards are about to crack. That’s why I think there’s a crisis of trust.
Kara Swisher: [00:39:19] Yes,
I would agree with that. Finish on this question of fear because I think it’s a
really important thing of fear of not speaking up of rocking the boat of all
kinds of stuff or just people just are exhausted by it because you’re not doing
journalism you’re spending time dealing with lawyers you’re spending time
moving businesses around you’re not doing the actual job which of which you
were.. used to do.
Maria Ressa: [00:39:43] Yeah
that’s also true. I know it just means I’m not sleeping that much. But you know
I find that the journalism… So look, Rappler has been mission-driven and all
of the friction of a normal organization is gone because everyone who stayed
with us and everyone did stay with us on the journalism side we lost sales and
tax strangely. But the mission is so clear and the purpose is so clear and I
think the challenge for all of our news groups is to be able to maintain that.
In a society, what fear does, what this stuff does is normal
people will not… When you get attacked like this I didn’t show you any of the
attacks, but when you’re attacked so viscerally when you’re threatened with
rape with murder, you just shut up. And that’s exactly it’s meant to pound you
into silence. But our community realizes this. So in a strange way. I. We’re
not just journalists anymore also that’s weird.
Like when I’m at the airport sometimes a family a family
came in and hugged me and I hug them back. I didn’t know who they were but it
was because they are also they are afraid to speak. So when you speak for them
you fulfill a role that I think that’s the mission of journalism. I think I
have a natural tendency to be more positive I should hang out with you a little
bit more. [laughter]
But you know when you’re in my place, I put one foot in
front of the other. The mission is clear. We’re going to have to deal with
this. And I think this is what Facebook has to realize. They have to get
through this because it’s not just us. We’re just the canary in the coal mine.
It’s here it’s happening here. Your problems are because of stuff like this. I
think. I think it’s global.
Kara Swisher: [00:41:37] Are
you scared?
Maria Ressa: [00:41:39] No
because there’s too much to do. Not right now. You know there are times when I
think it was far worse when no one was paying attention because when the
attacks were so personal the first two weeks…I got 90 hate messages per hour.
Not one nine. Nine zero hate messages per hour. And when I got that, it took me
two weeks to just figure out how do how am I going to deal with this and what’s
real and what’s not and then do I need security? You know all of that stuff. So
no I’m not afraid because now I know what it is. And the data helps me
understand it. So that’s the certainty. That’s why I know it’s important to
have the facts. You cannot fight back if you don’t have the facts.
Kara Swisher: [00:42:24] All
right. On that note Maria Ressa. [applause]
The
best things in life aren’t free, they’re loved.
In the table-setting remarks opening the 2019 DCN: Next
Summit, I shared a publisher challenge that I strongly believe our industry is
well on its way to overcoming: “Fighting the pervasive mentality that content must
be free.”
Truth be told: We don’t know if direct revenues from the audience will suffice to sustain the industry in the broadest sense. However,
there are positive trends on all dimensions. We’re certainly seeing more
evidence across the DCN membership that people are willing to pay for premium
publisher services. It’s no longer simply the financial or national news
outlets that can garner subscription and membership revenues. Local news outlets, entertainment channels, and new bundles
are attracting consumer revenue. We’ve started to capture these learnings in DCN
research, as well as through our events on direct audience revenues.
We see three positive subscription trends happening:
If you want to differentiate a news or
entertainment service, you need to compare it to the rest of your category on
YouTube or the Facebook news feed. Your offering, your brand, needs to clearly stand out as compared to the next best user-generated
offering in the ways more and more users are discovering
it.
Every new subscription to a publisher’s product drives
more intelligence and more investment back into the product so that the next
subscription is easier to convert. In a world of more stable and dependable
payments from your audience, it’s also easier to drive a percent of the revenue
back into constantly improving the product (see trend 1) whether it be hiring
more journalists or adapting the experience to the needs of the audience.
The population that has grown up with digital devices
shops for news and entertainment with the tap of their fingerprint on a mobile
device. Subscribing to Spotify, Netflix, Hulu, Apple Music, and more is a way
of life for them. They will not hesitate to invest in news and entertainment
that they trust and value. Each successful experience drives their behavior
going forward and is more likely to bring their friends into the market of
paying subscribers.
Importance of free to Google and Facebook
Whenever the sentiment is shared that people simply won’t
pay for content in the digital age of abundance, it’s likely that Facebook or
Google is lurking around a corner. They’re a crafty pair. Often, they prop up
this notion with a truly worrying concern: that a shift to paid content will only
serve to further divide the public based on ability to pay. However, their
intention is to protect their free fortresses. An industry-wide effort and
belief that audiences will pay for content is bad business for them. Hence the
veiled efforts over the years to spin the narrative and control the outcome.
DCN has long established that the free digital content
market has mainly benefited these two companies. The math is simple, and it’s
been cited far and wide. However, it’s important to recognize how critical the
free content ecosystem is to their unbalanced equation. And you don’t have to
take our word for it. On Monday night, the UK government released the
long-anticipated Cairncross
Review, which contains over 150 pages of analysis of the
digital news marketplace.
The Cairncross Review highlights two clear problems with the
disturbing dominance of the Google and Facebook business models:
1. The first problem (that forms the foundation of the duopoly’s dominance) is Google’s control over the buying, selling, transacting, and measuring of the digital ad marketplace. As Cairncross so eloquently puts it:
“Google has ad inventory in the form of Google Search and YouTube videos, and it owns ‘demand side technologies’ (used by advertisers to bid and buy inventory online), such as Display & Video 360 and Google Ads, and supply side intermediaries (that publishers will use to sell their ad space to advertisers), such as Ad Manager and AdSense. It also owns supplementary technologies such as Chrome browsers, Google Analytics (a ‘freemium’ web analytics service that tracks and reports website traffic as a basic free service, with more advanced features that can be paid for), and the Android mobile operating system.”
It’s clear what’s wrong with this: Antitrust much?
2. The second problem that bolsters the foundation of these platforms’ superiority is Google and Facebook’s unmatched ability to collect voluminous amounts
of personal data on peoples’ everyday interests and behaviors in both the digital and physical
worlds. Again, Cairncross astutely captures:
“Publishers gather user data from their own sites, including login data for their subscribers, but this pales in comparison to the power of online platforms, which have a rich set of user data giving them significant advantage over others in the market. Whether it is search data (Google), the social networks of users (Facebook) or generally the devices, locations, interests and behaviours of users online (both), these players have an unimaginable wealth of information – valuable to advertisers and publishers – about who is coming to which news sites, and who is seeing which adverts.”
Google and Facebook are fueled by the amount of personal
data available to their heavily-controlled advertising systems. Subscriptions
inevitably create more user friction and restrict the flow of data. This means
that movement towards subscriptions also forces these companies to step outside their carefully
constructed profit guardrails. For risk-taking Silicon Valley start-ups,
they’re terrible at stepping outside their shareholder comforts. Cairncross hits the nail on the head in calling for regulatory
scrutiny (without
mincing words) of these businesses — in how they deal with
publishers, their position in the advertising market, and how their algorithms
make decisions in promoting journalism.
So, who is the knight in shining armor?
To be clear, there are also positive moves by industry and government to encourage
these developments. Interestingly, the Cairncross Review takes a similar position to the Canadian
government by recommending a tax incentive for subscribers to
news, local news, or investigative content. Again, we agree with this
recommendation and expect it would help support publishers.
To their credit, Google and Facebook have made donations to innovation, journalism
institutes and, in the case of Facebook, run seminars to share best practices
on subscriptions. Again, their profit guardrails make it impossible for real moonshots. So, while these are good efforts, they are not enough.
And then there is Apple. A company with the leadership,
the payment systems, the brand architecture, and lack of dependence on
everything in between Facebook and Google’s profit guardrails (data collection,
advertising). And, as news starts to trickle out on Apple’s plans for a
subscription news service, there is a lot to like in it. However, as I
shared with Ad Age, the reported 50% revenue share is offensive especially
if it also comes with the risk of another intermediary controlling the customer
relationship. I’m frankly surprised they would roll out with anything close to
these terms and hopeful it’s merely a head fake.
I don’t have any proprietary information, but my
back-of-the-envelope numbers on Apple’s offering means that the 100 million
monthly users of Apple News translate to approximate 10-20 million daily users.
Even if 10 million of these users moved into a subscription tier, this
is a mere $120 million in revenue. And according to what’s being reported, a
paltry $60 million would get divided between all of the participating news companies. That math doesn’t add up. If Apple has higher
confidence in their model and ability to expand the market, then they’re going
to need to put some revenue share behind it.
It’s just business. Oh, and the future of
journalism.
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.
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.
“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.
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.
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.
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 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.
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.
