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Perspectives

DCN’s must reads: week of December 20, 2018

Our picks of the must-read stories from around the web:

Featured Post | Perspectives

Top 7 media trends in 2019

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

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

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

1. Facebook and Tech Giants Lose the Plot

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

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

2. Amazon Joins the ‘Triopoly’

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

3. Media Mergers Trump Trump

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

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

4. The Digital Media Reckoning Continues

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

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

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

5. Snapchat, Flipboard, Pinterest Rise as Facebook Falls

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

6. Linear TV Under More Pressure from Streaming

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

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

7. Podcasts Remain Strong After Some Contraction

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

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

Conclusion

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

Perspectives

5 ways non-traditional publishers connect with audiences

The digital media industry is not exactly heading into 2019 with unbridled optimism. However, with great challenge comes a sense of clarity and focus. And we have to hope that it’s finally registered that building a media company on Facebook traffic alone won’t sustain another year. An actual connection with the audience will make or break media companies going forward. As Brian Morrissey from Digiday put it: “Among the biggest lies publishers have told in the past few years, “We don’t buy traffic” ranks rather high.” Without a doubt, consumer engagement needs to top publisher strategies for 2019. 

Where to look for inspiration? A whole crop of brand publishers—admittedly free from the constraints of CPMs and programmatic ad-tech headaches (often with ex-journalists at the helm)—find ways to focus on building impressive audiences who contribute to revenue, without subscriptions. Imagine such a world! Maybe the traditional publishing world can learn something from these marketers (and one pretty radical publisher) when it comes to connecting with an audience.

Here are five big ideas to focus on in 2019:

1. Harvard: Get specific about your intended audiences—plural.

Resist the impulse to paint with a broad brush.

“When it comes to targeting, we start by asking that question upfront—Who’s the primary audience and the secondary audience?” said Mike Petroff, Director of Content Strategy at Harvard University. “The audience affects what we’re writing and how we’re evaluating and measuring. If the content is not hitting the right audience, it’s not successful.”

Petroff also distinguishes between audiences for specific channels. “With The Daily Gazette newsletter, we know the audience, we can understand the type of news a student needs vs. alumni or staff,” Petroff said. By understanding the nuances of the newsletter audience and their behavior, Petroff’s team can better serve all their readers. “We’re able to say, ‘Wow, this story really resonated with this audience but not at all with other audiences.’ We can give that info to certain editors about intent and what they can learn for future stories.”

2. Billy Penn: Ask your audience questions and listen to their feedback.

Okay, Spirited Media is clearly a publisher through and through. However,  they’ve taken such a radical approach to local news, that their advice gets included in this list. Data and market research are important for understanding audience behavior, but so is getting feedback directly from real people.

Danya Henninger, Editor at Philadelphia local news site Billy Penn, wondered if she should change the structure of their daily newsletter. “Our sister websites, in Denver (Denverite) and in Pittsburgh (The Incline)—they both start their newsletters with a personal note and then get to the news,” Henninger said.

Should Billy Penn follow suit? She brought the question to her readers: “At one point I asked, in our morning newsletter. I said, ‘Hey, how about if we do this note up here.’ And got several replies, ‘Please don’t do that.’” Henninger learned that her readers valued the format of the newsletter as it was, a brief recap of their news for the day.

3. Delta Sky: Create and empower quality content.

It pains me that this advice still needs to be shared but even in 2018. But let’s face it, quality isn’t something we can take for granted when it comes to content.

We asked Sarah Elbert, editor-in-chief at Delta Sky magazine, what constitutes quality. She replied, “Stories that don’t underestimate their readers.” And it’s working for her team: Sky’s readership among 22- to 44-year-olds has grown 32% in the past year and they’ve found that people are spending more time with the magazine.

Specifically, “it’s about finding the most alluring places to visit and bringing new elements of these destinations to life—whether it’s an adventure angle in Iceland or an urban tour of Seoul. And finding people who are just doing really cool, innovative things.” More generally, quality content includes the “kinds of stories that make the reader want to find out more. It’s about stoking their curiosity and engagement with the world.”

Creating stories that don’t underestimate readers also means trusting your writers. As Elbert said, “We allow our writers to have their own voice and we don’t dumb-down the content.”

4. BarkBox: Create an environment that people want to be a part of.

“Our philosophy as a company has always been that we’re not the party promoters—we are the DJs at the party,” said Stacie Grissom, Head of Content at BarkBox. “We’re responsible for creating the atmosphere that makes customers want to participate in the peripheral conversations rooted around our product.”

“We try to create content that sticks to your bones a bit more than just social memes and social videos,” Grissom said. “Our goal for BarkBox is to create a really entertaining experience.”

To that end, not only does Grissom have writers and social media people on her team, she also has comedians. The Bark approach is a marriage of data-driven decision-making and sheer creativity. “We tend to pursue a lot of things by thinking, ‘Wouldn’t it be cool if?’”

5. eMarketer: Don’t make your content frustrating on mobile.

Mobile is driving growth in time spent with digital media, according to data from eMarketer. An audience-first content strategy should also connect users with content that meets their mindset across devices, including when they’re on their phones. Often, that mindset is killing time in small increments.

Nicole Perrin, Senior Analyst at eMarketer, noted that content creators need to be “respectful of the user’s attention when [they] only have five minutes to look at [their] phone.” Ensure that experiences aren’t interruptive on mobile devices.

“As a user, I often get very frustrated consuming content, whether it’s on desktop, laptop, or phone, by how interruptive the experience can be with advertising,” Perrin said. She also urged creators to be smart about recognizing subscribers across devices. Removing friction from the user experience whenever possible can help you deliver value to prospective users and current users alike.

Big ideas for 2019

To make it out of 2019, and beyond, business as usual will not be business as usual. Big bets will have to be placed, and bold moves will have to be made. Making sure you’re constantly exploring strategies and tactics that make an audience want to connect with you is the best way to go on the offense, instead of spending your time playing defense against a constantly shifting market.

Here’s to learning from unexpected sources and trying new things in the new year.

Innovation

A look under the hood at USA TODAY NETWORK’s approach to augmented reality

Hot on the heels of reports that reveal AR and VR will become mainstream sooner than we expect, media companies are lining up to test the waters and push the boundaries. While they recognize that implementation of immersive technologies can bring audiences deeper into a story than text, 2D images, and video ever could, many have yet to grasp that they have to create stories that move people, not just “wow” them.

One company that is further along on learning curve is USA TODAY NETWORK, part of Gannett Co, Inc. and the largest local-to-national media organization in the U.S. It’s cleverly harnessed talent from a variety of disciplines, including video games development, to bring new life and excitement to environments (life on the USS Eisenhower), events (launching a Falcon 9 rocket from Kennedy Space Center), and formats (an investigative podcast revealing the hidden power structures behind our cities really work).

Ray Soto, Director of Emerging Technology for USA TODAY NETWORK

Peggy Anne Salz—mobile analyst and Content Marketing Strategist at MobileGroove—catches up with Ray Soto, Director of Emerging Technology for USA TODAY NETWORK, to discuss recent AR projects and delve into how media companies can leverage growing interest in AR and VR to elevate storytelling and engage audiences.

PAS:  Please bring us up to date on the storytelling experiences you have created and what you have learned.

RS: We recognize that both virtual and augmented reality are fairly new within our industry. But that’s what really motivates and inspires us to take that extra step to experiment and try something new. An example is the 321 LAUNCH app, our first AR app. It gives users a close-up live view of real launches and landings, allowing them to build and launch their own Falcon 9 rocket within the app—an experience enhanced with access to live video and real-time updates.

The aim was to combine immersive storytelling with a live launch AR broadcast, paving the way for users to engage with content in new ways. Metrics show strong retention rates and long session times, even on non-launch days. Overall, we have seen engagement times of around 3.5 minutes, and we observed that user engagement for our live launch broadcast spiked up to around 8 minutes.  Right now, we hovering at around 3.5 minutes on non-launch days and about 5 minutes on launch days.

We learned a lot from the app about how to reach and engage audiences. We also learned a lot about the development cycle and the UX. The experience of creating the app—and seeing how users wanted to be in control of their experience—helped us to focus on building the foundation that would support all our augmented reality experiences moving forward. We saw that there was deep engagement with AR through interactivity, and what we didn’t want to do was leverage existing APIs that would limit us in the types of stories we could tell.

PAS: So, it sounds like you have “augmented” augmented reality platforms to suit your requirements and ensure you can support how audiences have shown they want to interact with your app…

RS: You’re right. So, we ended up leveraging the GUI game engine, and that is essentially the foundation of our AR platform. Unity provided us that foundation, where we can leverage AR kit and AR core. But we also built on top of that to incorporate the functionality we envisioned we would need for our storytelling experiences. So what we have created is a series of editorial templates, that include design templates and animations, allowing us to quickly support interactive storytelling through AR.

A good example is the augmented reality Hurricane Florence tracker. At first, it was a challenge that I presented to my team, which is made up of former video game developers with experience working with companies including Electronic Arts and NC Soft, to turn this AR experience around quickly. And we did this. By drawing from our game design experience and working closely with our product development, mobile dev team, and the editorial team, we leveraged our template to create the tracker—which we were able to ramp up, turn around and publish within 24 hours.

PAS:  In the case of the hurricane tracker, you harnessed AR to bring breaking news to life. But to go mainstream AR will need to enhance content and experiences that are a little more downtempo. Do you have an example where AR adds a layer of storytelling, not just effect?

RS: A great example is our AR experience for The City, an investigative storytelling podcast where we developed the augmented reality trailer. The podcast is already a powerful story paired with an immersive audio experience—but it was missing an equally powerful visual. We recognized that, through our AR platform, we could create an experience that would allow you to explore the community that is the focus of the podcast and “tease” users to engage with the powerful story that was being told within the podcast.

In this scenario, AR gives the audience a sense of place. Clearly, it was a different type of story to tell and a different goal from launching a Falcon 9 rocket. However, we found we could just leverage what we’d learned from earlier projects and that was a plus. It was exciting to think no one had ever done this before—and we did. And through this, we recognized there is a real opportunity to fill in some of the gaps in content, such as audio, with AR and adapt what we create based on the story we’re trying to tell.

PAS: It’s exciting to push the envelope, but you also need to know where to draw the line. How do you decide if AR is a match with the storytelling in the first place?

It can be a tough one to call. So, we start by drawing from our experience and our understanding of the unique opportunities that emerging tech can provide and support when it comes to creating a very strong interactive story. The story comes first. Before we commit resources or time to develop an augmented reality experience, we work very closely with the editorial team to define what the story should be and how augmented reality can drive value to the story we’re trying to tell.  It’s very much a collaborative process. There have been times when we’ve gone down a path of exploration and determined that the particular story might actually be best suited to being told with the support of an interactive graphic on the web or a video experience.

We’re at the point now where we’re able to produce an offline prototype quickly to really understand how we can tell the story in a new way that the audience can engage with again and again. The goal for an AR project can never be to create a one-time gimmick that folks will see and walk away from saying, “oh hey, that was neat.” The goal—and this is our goal—has to be to give audiences the feeling they have gained something from the experience or learned something. You don’t want the technology to overshadow the story because it comes down to the story first. We understand this because our team has had years of experience, not just with game design but in VR and more recently AR.

PAS: Your team is made up of talent from video games companies, which you’ve pointed out is a plus. What talent mix should publishers assemble and orchestrate if they are serious about creating AR experiences?

RS: We’re fortunate to have a team that is made up of former game developers, but I don’t think it’s a team that has to made up of game developers exclusively. Yes, it definitely makes it much easier to create AR experiences and ramp up a team to support AR and VR. But it’s not the only way. Publishers also need to bring together people who have a passion for the work and a desire to explore what’s possible.  It’s through passion that companies can build a team able to go outside of their comfort zone. Passion guides you and helps you find ways to tell a story that hasn’t been done before. So, game development is helpful, but it’s not required for interactive storytelling.

PAS:  So, what is required? What is the checklist publishers should have top of mind?

RS: Start by thinking through how you can create a narrative arc. As I said before, it’s not about gimmick. It’s about trying to do things differently and avoid getting too comfortable with how you have told stories in the past. Even if you have a template to build a story, you don’t want it to be the same every time. The aim is to encourage people to engage and come back. We want audiences to recognize that USA Today is telling interactive stories in a new way with AR, and that means pushing the boundaries through seeing the opportunities and exploring approaches.

It’s also important to identify the gaps within the story. This is where AR platforms can enhance that story. Again, a great example is the City podcast where we could improve an immersive audio experience with AR. It still just boggles my mind that we even considered it in the first place and I’m proud of the results. We recognized that it was a strong story that we could do differently.  That’s the mindset you have to have for every project: try to do something that’s different but do it by creating a narrative arc that engages your audience and helps them coming back.

Everyone has a unique opportunity to define their path, but don’t only focus on the visual experience. You have to think about scalability and accessibility.  You don’t want to exclude users who are impaired in any way –and this is why we have incorporated subtitles within our USA Today app. We want everyone to be engaged with the experience and able to make it what they want.

PAS: Brands are also focused on engaging users with brand storytelling and experiential content. Is there a place for brands in your future plans?

RS: We’re looking for opportunities to work on branded content. That conversation started because we observed such high engagement and retention rates. These metrics tell us there’s an opportunity—through AR—to create a personal connection. We’re poised to tell our stories in new ways, and we see ways brands can build on the growing excitement around augmented reality to engage with their existing audiences and acquire new ones.

Perspectives

2019 will be tough on ad fraud—and that’s great news for publishers

As the year winds down and we look ahead to 2019, it’s time to take stock of what changed in 2018, and what it means for the year to come. This year’s changes are not only next year’s challenges, but also next year’s opportunities. The digital landscape will become tougher in 2019 and the digital content industry will be no exception.

This year we saw significant and welcome change in how the world at large treats some of digital’s most prominent and longest-running dilemmas. A series of indictments handed down this year, combined with an ongoing investigation into at least one New York-based publisher make it clear that the U.S. Department of Justice will no longer treat ad fraud as an unavoidable cost of doing business in digital. Instead, the government plans to treat ad fraud like what it is: the intentional theft of advertising dollars. While that’s bad news for anyone peddling fraudulent traffic, it’s great news for the ecosystem as a whole, and for premium publishers in particular.

A positive outlook

The fact that the Justice Department is getting serious about ad fraud may not seem like a particularly positive sign for the digital content business. After all, it’s certain to occasion some difficult conversations between buyers and sellers in the short term as officials put pressure on digital to clean up its act. However, taken another way, the move by federal law enforcement is a sign of respect for an industry that has finally reached maturity. Digital is finally seen as capable of playing by the same rules that other businesses do, both online and off.

These interventions by law enforcement officials in recent months have cast new levels of scrutiny on the digital media space. That spotlight, while intense, will also enable premium publishers to shine by differentiating themselves from the fraudsters being exposed.

The coming year presents a huge opportunity for publishers that can successfully position themselves to take advantage of the drive toward quality media. Here are a couple of critical tips:

Know your buyer

Buyers may be shifting more ad spend to programmatic, but that doesn’t mean that it’s time to de-prioritize your direct buyer relationships. Partner with your buyers to identify their unique needs. In the current climate, low levels of fraud are going to be on everyone’s wish list. These insights can be used to help package your inventory for programmatic channels and private marketplaces where premium ad dollars are increasingly flowing as marketers seek out quality guarantees.

Know yourself

Partnering with a third-party verification and optimization provider can provide more insight into the kind of quality metrics that are increasingly top of mind for buyers. As fraud investigations ramp up in 2019, media buyers will be under increasing pressure to ensure that they’re buying genuine human impressions from transparent sources. Being able to authenticate your own inventory, understand quality levels across your properties, and hold any traffic partners accountable will provide a huge advantage in conversations that will be increasingly quality driven.

Onward to 2019

Authorities getting tough on ad fraud is long overdue, and will lead to some tough but necessary conversations. It will also give premium publishers, those that are creating quality content for engaged human audiences, a chance to differentiate themselves from the bad actors among us. Ad fraud has been a murky, under-discussed digital challenge for too long. That lack of exposure has only allowed bad actors to blend in with responsible businesses. This heightened scrutiny will highlight the differences between the two, and bring about very welcome change.

Featured Post | Revenue

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

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

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

The value of a subscriber

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

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

Are subscriptions the right move?

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

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

Subscription history

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

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

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

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

Subscriptions: not just newsworthy

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

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

DTC takes work

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

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

Risky business

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

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

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

Perspectives

DCN’s must reads: week of December 13, 2018

Here are some of the best media stories our team has read so far this week:

 

Advertising | Perspectives | Revenue | Video

How OTT will be sold in 2019 and beyond

OTT content is now viewed more on TV screens (connected TVs or CTVs) than smartphones. From an advertising perspective, that means larger and more valuable video. Large digital video (greater than 400 pixels wide) has always translated to higher value. However, the biggest determining factor of worth is determined by how its sold: direct or programmatic.

By and large, connected TV (CTV) inventory is sold at a higher value than digital video. In the world of video advertising, the television screen represents the pinnacle of value. With it comes the notion of a captivated audience in their living room, and true scarcity of time and inventory.

Like Cable TV, the OTT video landscape viewed on CTV and other connected devices is highly concentrated across the “Big 4.”  The largest amount of monetizable minutes reside on Hulu and YouTube, along with Netflix (which remains ad free together with Amazon Prime Video—for now). The remaining three out of ten minutes in OTT are spent with high quality publishers and broadcasters, such as TV network brands. These create a direct sale value of twenty-something CPMs. These prices are in close proximity to traditional/linear TV rates.

The price of programmatic

As of now, publishers and virtual Multichannel Video Programming Distributor (vMVPDs), including established providers like Dish and startup vMVPDs, sell a predominate amount of OTT ad inventory programmatically, most often through private marketplaces (PMPs). Here, the average price point is in the teens, with CPMs maxing out in the mid-range of around $15.

There are a few reasons media brands are leaning toward programmatic rather than direct sales. For starters, many organizations lack direct sales teams. Furthermore, OTT is nascent. Thus, the industry needs to contend with tracking on a household level where it is getting harder to obtain IP addresses to map out connected devices. Then there’s the international reality of GDPR, which classifies IP addresses as personally-identifiable information (PII).

All in all, it’s harder to correlate traffic from OTT ads. It is also difficult to measure viewability with server-side ad insertion (SSAI), which stitches ads into content streams, especially when sold programmatically. And then there’s the issue of fraud. A quarter of all CTV impressions this year were fraudulent (never seen) according to Pixalate.

The contentious issue of fraud among broader tracking issues are keeping programmatic pricing weighed down. Where, with the employment of programmatic monetization the most a publisher can expect to optimize CPM rates is by 10-15% above the current average programmatic video price point keeping overall value in the teens CPM.

Direct sales proposition

However, by selling directly, a publisher can more than double ROI to 30-40% or higher price points above $20 CPM. These price points are well above the possible rate optimization that can be made accessible through programmatic means.

So, looking ahead to 2019 with the continuing expansion of OTT traffic and monetization opportunity, it is a good time to reconsider selling directly. This means assembling or training existing digital sales teams to sell your emerging OTT inventory, which is worth its weight in video gold. In a premium video medium with true scarcity, the future will be directly sold.

Perspectives

3 data-based opportunities publishers should be tracking in 2019

Publishers and marketers are increasingly investing in data collection. Some are becoming incredibly sophisticated with their data use but there is still a reservoir of untapped opportunities and many obstacles to overcome. So how will the data scene change for publishers and marketers in 2019?

1. Outsource versus In-House

Many headlines declare a tsunami of in-housing data capabilities but that’s just not the case. Rather, pieces of the stack are starting to reside in-house. In fact, recent research found that almost 80% of publishers and marketers say they would prefer to outsource data strategy and execution. Overall, data strategy development, management and execution require sizable investments in talent and technology – and many organizations simply don’t have the in-house capabilities or infrastructure.

For those we surveyed who don’t collect their own data (31%), a lack of resources and education were the biggest hurdles. One-third (33%) said that they did not “have the internal resources in place to do so,” while 31% said “I don’t know where to even begin.” Another 21% said “I don’t have the tools or technology needed.” Although, we’re seeing outsourcing trend outside of the U.S., the transition to in-house will be slower than everyone says. Given the obstacles, it’s not realistic to believe otherwise.

2. Successful Measurement

When asked how they benchmark data strategy success, more than half (56%) of publishers said an “increase in returning visitors, uniques, and pageviews” was key. This was followed by “optimization of ad inventory” (49%); “increase in advertising spend” (46%); “overall ROI and monetization opportunities” (38%); and “increase in winning non-endemic advertisers” (33%). Publishers are focused on driving traffic and growing audience which has a cascade effect on their ad success and the value they can claim for partners. This year, we’ll continue to see a focus on using data to drive users traffic to the site but also to inform strategies to keep them on the site for longer. Data can help publishers determine what keeps eyeballs on their page. And that understanding, and success, will lead to increase ad revenue.

3. Data Quality

Our research found that one-third of brands and publishers are creating new monetization opportunities by becoming second-party data providers. This speaks to a demand for data quality. This requires organizations to understand where the data is coming from and how reliable it is from the beginning. In the transparency and GDPR era, this is incredibly powerful. In 2019, we expect to see this trend continue. Quality, safe second party data “fills gaps” and addresses campaign opportunities, yielding significant benefits for brands and publishers.

Given publishers’ close customer relationships, they are in a position to collect a great deal of first-party data. Of course, they should use to deliver great experiences. However, when used wisely, data can also support a healthy revenue stream for publishers, big and small. By taking a few additional steps and watching trends, publishers are poised to reap the benefits of data in 2019.

Perspectives

DCN’s must reads: week of December 06, 2018

Here are some of the best media stories our team has read so far this week:

Advertising | Featured Post | Perspectives

With ad dominance comes great responsibility for Amazon

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

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

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

So many ways to dominate

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

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

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

And the content play too

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

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

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

Missteps and conflicts

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

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

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

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

Advertising | Industry-Research | Perspectives

Navigating the social media advertising paradox

There are two opposing views on social media that are impacting digital marketing decisions:

  1. Audience attention on social platforms offers a strong advertising environment (good for marketers).
  2. Consumer distrust of social platforms’ data and privacy practices detracts from their effectiveness (bad for advertisers).

Marketers and media executives discuss the social media advertising paradox ad nauseum in meetings, forums, and conference panels. Still, a whole lot of advertising dollars are being invested on Facebook regardless of its lack of transparency, data sharing, and stories of the company’s mismanagement and mishandling of data. In fact, Facebook’s Q3 2018 earnings cited a 33% year-over-year increase in advertising revenue while user growth remains stagnant in its larger markets.

Streetbees’ new research report, Re-positioning, reflects on this dichotomy. A full 86% of respondents follow brands on social media and 73% agree that a social media presence is necessary for brands to be successful. This research ranks Facebook as number one among consumers 25 and older for following brands (86%). Thus, the findings showcase Facebook as a positive environment for advertising placement.

Yet the research also finds that one-third of consumers in the US and India, Facebook’s two largest markets, do not trust the social network to keep their data safe. Further, nearly all users surveyed (98%) state that they continue to use Facebook even though they do not trust the service to protect their personal data. Yes, the paradox, a platform of users that do not trust its environment.

Facebook: friend or foe?

Streetbees’ consumer findings are analogous to advertising practices on the platform. Both consumers and marketers alike continue to use Facebook regardless of the mounting distrust of the platform. In October, Fortune exposed that Facebook inflated its video metrics for how long users were watching video content by up to 900%. Despite a steady stream of Facebook mea culpas, advertisers continue to purchase advertising on the platform.

The research also suggests that Facebook needs to focus on user retention. Younger audiences show limited interest in Facebook and older users’ attention appears to be waning. Only one in five of those under the age of 25 think Facebook is the “coolest” social platform. And when it comes to consumers reasons for quitting social media, the top two responses include “boredom” (51%) and “my friends stopped using” (22%). Eight percent also quit due to data concerns. As Facebook confronts user fatigue, growth in daily active user is significantly slow.

As social media challenges continue to emerge, advertisers need to hold platforms accountable. Short-term media strategies will not lead to marketplace sustainability. Audience attention is a critical commodity in the advertising paradigm and continued reliance on distrusted environments will undoubtedly harm the long-term success of the digital advertising model.

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