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Perspectives

People are watching OTT—but not how you think

You’re a cord cutter. You’re a cord never. You’ve extended the cord with your choice of OTT beyond cable TV.

You commute to work. You’re out of home more than you’re home during the week. So, your mobile phone has become life’s remote control for productivity and connectivity with family and friends and media, and social network(s).

As you pass fellow citizens on the go, you see them watching live sports, movies, binging shows, or catching the latest episode of a series. You can get your coffee to go. You can get your tapas to go. And now you can get your TV to go. It is easy to assume that this is the likely way that most OTT is consumed.

The Comfort of Home

However, most OTT is actually watched from a TV turned Connected TV through a smart app or OTT dongle made by one of the big four: Fire TV, Chromecast, Apple TV, or Roku. The big screen is still the preferred screen to watch TV video content. You want to be home. You want to have surround sound. You want to snack.

We consistently see this trend in OTT media from analytics revealed by the largest content streaming service provider; over 70% of the time, Netflix is viewed on Connected TVs. A majority of YouTube TV is also viewed on Connected TVs, although the service is positioned as a mobile-first viewing platform. We also see viewing of direct to consumer (DTC) OTT brands of all genres – whether business, entertainment, or family –  primarily take place on Connected TV, in some cases as high as 80% of the time.

Screen Time

In contrast, just 15-20% of OTT is viewed on mobile devices. Of those views, an interesting and often overlooked statistic “casting,” in which viewers are mirroring or remote controlling OTT to their smart TV wirelessly from their phone. The remainder of OTT streams are being watched on computers.

With the majority of OTT being watched on a Connected TV, the medium is taking the shape and the form of the TV industry. vMVPDs are the new MVPDs. NewFronts are the new Upfronts. Even co-viewing is now a thing in OTT discussions with buyers. In this case, the number of viewers in the room watching an ad on a Connected TV is being considered, as with TV.

All in all, the trend of watching TV over the top compared to traditionally now accounts for a third of total daily TV time globally. The adoption rate will likely continue to grow as access and content proliferate over the top. Although we live our lives on the go and do most things on our smartphone, the preference and actual predominance of watching TV over the top is on a Connected TV, at home. OTT is really the new TV.

Perspectives

DCN’s must reads: week of March 14, 2019

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

Featured Post | Revenue

Podcasts are booming. So, what are the revenue models?

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.

Advertising | Perspectives

Why brands are changing their tune about podcast advertising

Though it’s been around in some form for well over a decade, podcasting has sort of limped along in its evolution. Unlike other digital advertising manifestations – such as search or social media – which enjoyed meteoric rises, podcasting has sporadically entered and exited the consciousness of marketers since its inception. Today it accounts for only a sliver of the global advertising marketplace – around 1% of total spending.  

One explanation for advertisers’ hesitancy to embrace the podcast channel is due to straightforward herd behavior: You don’t get fired for buying ads from Google and Facebook. These digital marketing stalwarts emerged almost literally overnight in the late aughts, enjoyed glowing press coverage for a decade, and attracted tens of billions of dollars in advertising during their ascent.

The other is guilt by association. It’s well known that while online ad spending has grown (particularly for Facebook and Google), other channels – television, print, radio – have shrunk. And, for better or worse, podcasting has been lumped in with radio advertising. So, it lacked the shiny new appeal of its digital channel brethren in mobile, search, social and video.

On The Hunt For Alternatives

However, there is one aspect of the digital ecosystem that everyone can agree on, and that’s insanely rapid evolution. There’s a saying among digital media buyers that captures this spirit, and it’s only mildly hyperbolic: “a campaign that worked just fine before breakfast might fail miserably after lunch.”

Today’s advertising environment is, of course, dramatically different than it was a decade ago, or even a year ago. A combination of questionable management practices (see: privacy; see also: safety), absence of customer governance (see: Russia), and aggressive tactics (see: exorbitant prices) has some brands seeking out alternatives to the duopoly. And podcasts are going to be one of the beneficiaries of this shift in the coming years.

Why the Time is Right for Podcast Ads

Though not a one-size-fits-all kind of advertising channel, we’re advising brands to seriously consider adding podcasting to their media mix in a meaningful way, for one or more of a variety of reasons.

The Price Is Right

Due to the relatively low cost of entry and ongoing management, as well as the influx of deep pocketed players like Spotify and Luminary – which are spending hundreds of millions of dollars to shore up their podcasting capabilities and aggressively pursue market share – podcast advertising can be more cost effective than pricey online formats such as paid search or high-end social media. And attractive long-term deals are typically made available by aggressive players in the category. This makes podcasting easy to insert in planning conversations.

Ease of Implementation

Most podcast advertising involves a few lines of copy that is read by the host and/or an offer that might require an accompanying landing page. And that’s it. No pricey multimedia creative, or really any image-based assets are necessary. Indeed, for all but the earliest stage companies, these items are already in place.

The Future is Bright

From a certain vantage point, podcast advertising is, in fact, a “bright and shiny object.” Most prognosticators agree that both the volume of podcast listeners and their level of engagement will grow meaningfully over the next few years. However, while daunting and even prohibitive to some, the idea of getting in to a new channel as an early adopter is enticing to many brands.

The Duopoly Aren’t Dictating Terms

While it might seem trite, many brands are experiencing Google and Facebook fatigue. Though few can remove the duopoly from their media mix altogether anytime soon, the prospect of engaging with new and friendly outlets is enticing.

Be On The Lookout For Speedbumps, Not Obstacles

As with any new tactic, there are of course issues being worked out in the podcasting category. These include lack of widespread familiarity – necessitating executive education – a shortage of case studies, and the reality that most successful podcasting efforts to date have been part of a multichannel campaign. Also, in comparison to other online channels, the turnaround time on investments is typically longer, in part because podcast advertising is often used for general brand building. But the cost-benefit equation works in enough situations for the tactic to be considered in earnest by most advertisers, if not necessarily for every type of campaign.

A New Instrument, A New Tune

One explanation for the slow adoption of podcast advertising is that it has been historically lumped into the broad “offline” advertising category, which of course has been out of vogue for the past decade or more. And while podcasting doesn’t offer many of the bells and whistles we traditionally associate with digital advertising – like immediate response, easily identifiable last touch attribution, and aggressive acquisition – it’s unquestionably gaining momentum among advertisers. Its evolution in the coming years will almost certainly be unlike other online tactics that preceded it, which were pursued in stampede-like fashion, but it’s an interesting emerging tool in the digital advertiser’s toolkit, and worthy of a close look by most brands.  

About the Author

Tim Bourgeois (@ChiefDigOfficer) is a principal at East Coast Catalyst, a Boston-based advertising audit company.

Perspectives

DCN’s must reads: week of March 7, 2019

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

Featured Post | Perspectives

What advertisers think of YouTube’s brand safety problems

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.

Innovation | Perspectives

How integrating analytical and editorial teams drives subscriptions

Publishers are reclaiming their voice when it comes to how and when they are reaching their most important readers. As the market continues to feel pressure from ever-changing trends of the duopoly, publishers are putting more effort into direct relationships with their audiences and leveraging actionable intelligence from data. This means much more than ad targeting today. Data allows publishers to better serve their readers and, as a result, better profit from true engagement.

A study by the American Press Institute surveyed over 4,000 consumers of news and found that 78% respondents value getting reliable, accurate facts. An audience survey conducted by The New York Times, found that 73% polled believe “that it has never been more important to support quality journalism.” As consumers are willing to pay for quality journalism, publishers are looking to leverage these trends to deliver their best content and form meaningful reader relationships that will sustain the media business.

Although the vast majority of readers don’t subscribe, those that do are the that do are the most impactful. They spend longer on site and drive greater revenue. Of course, it is important to remember that there is no one-size-fits-all for subscriptions. Solutions will be different for every publisher and publishers must adapt to audience behaviors quickly, as they change often.

Flexible paths to subscription

For example, some audiences respond well to metered paywalls. Among digital subscribers, it was found in the same study by the American Press Institute that 47% of respondents became a subscriber after they reached a limit on free access. Other audiences engage after enjoying a newsletter. Deciding on what content to show and when to show it is something that needs to be finessed in order to satisfy audiences (and hopefully entice them to subscribe).

Yet, even as subscriptions become a focal point, advertising revenue still accounts for the majority of publisher revenue, despite per-ad revenue declining. At the same time, readers are getting savvy about how they choose to consume content, bouncing quickly from pages when they are blanketed with disruptive ads. Publishers that deliver a clean website experience are more likely to build long-term relationships with readers.

Engagement is key. But getting there is not easy. One route is personalization. In fact, publishers who successfully drive subscriptions share a common theme in understanding the importance of integrating both analytical and editorial teams to provide deeper reader personalization in this digital era. This can mean content personalization, but it can also take the form of personalizing subscription offers based upon customer behavior and preference.

Data driven success

Hearst Newspapers has integrated various initiatives where their growth is fueled by data. The publisher’s goal was to evolve its digital properties into a portfolio of diversified subscription and ad-supported sites. Through the use of AI, Hearst analyzed over two years of subscriber data and can now identify what users are going to convert and where, as well as analyze pre- and post-subscription patterns.

Editorial teams at The New York Times use content analytics platforms to understand readership in real-time. They also centralize the data for actionable intelligence that helps them better serve their audience. (We’ve seen customers who take this kind of approach increase conversions up to 200%.)

Data enhances the reader experience and makes valuable connection for publishers by allowing editors adjust content strategies based on where audiences come from and how they convert.

By being data informed, publishers can better understand reader engagement as well as how that readership consumes their content and what helps convert them from casual readers to seriously committed, and even to become subscribers.

Advertising | Perspectives

Malware and redirects: Publishers need to protect customers now more than ever

As the programmatic revolution reaches its potential, bad actors continue to find innovative ways to exploit the system. The technological advances to increase advertising efficiency are the same ones targeted by bad actors who are incentivized to move at a faster pace in order to keep their revenue streams flowing. The result is an endless scourge of malware and auto redirects that threaten the viability of the overall digital advertising supply chain and the relationship the industry has with the end consumer.

Programmatic provides a green field to bad actors, who consistently evolve their attacks, bypassing defenses and attacking publishers and their digital customers. Once thought the answer to publisher woes, malware blockers have proven to be a short-term fix. Unfortunately, malware incidents have almost doubled since the solution’s relatively recent introduction. Clearly, something has to change. That’s why smart publishers are calling in the experts and forming a joint task force between their Ad Ops and the IT/security teams to combat the problem together.

Bad ads aren’t your only problem

Digital ads are not the only security issue that publishers need to watch. Digital publisher businesses have diversified their revenue streams, evolving from advertising-only models to introduce subscription services and merchandise stores such as the ones hosted by most major news outlets, like The New York Times, NBC, and the The Washington Post. These new revenue channels introduce a new significant security risk for publishers due to the storing of personal data and credit card information.

Publishers are an even more tantalizing target for cybercrime groups, especially those behind large-scale malicious campaigns like Magecart, ShapeShifter-3PC, and ICEPick-3PC. Cybercriminals increasingly use the digital ad supply chain targeting payment pages to steal personal data and payment card information. Publishers trust that the payment processing vendor provides perfect security. However, time and again, these vendors are compromised, either through a direct hack, employee error, outdated code or misapplied patches. Even worse, when a breach happens, the customer will hold the publisher accountable. Headline grabbing news regarding major breaches in the past year focus on the brand, not the vendor. That makes sense since the brand has the relationship with the consumer.

Cybercrime groups zero in on vulnerabilities in third-party code in the digital environment to execute their attacks. Digital ads serve as delivery vehicles for third-party code. Publishers also rely on third-party code to optimize and monetize the user experience. Beyond ad-related platforms, the use of analytics, content delivery systems, video platforms, and widgets carry the risk of being compromised, exposing the website and its users to harm. One recent example is the havoc wreaked by the JuiceChecker malware, which utilized vulnerabilities in third-party code to enable smart malware delivery, which evaded multiple detection efforts including malware blockers.

Interdepartmental partnership

These complicated scenarios leave publishers with difficult choices. While using ads and other types of third-party code help to generate more revenue, they also expose them customer base to more vulnerable code, ready to be exploited by cybercriminals who know how to find and exploit weaknesses. Exposing customers to these threats have long-term consequences. Failure to strike an appropriate balance between revenue and security kills the user experience and creates situations where customers don’t return.

Clearly, a modified approach is necessary if the balance is to be struck correctly. This approach involves bringing product and IT/security teams into the ad/revenue operations fold. An interdepartmental culture is already being fostered by many publishers in order to stay on the right side of legislation such as the EU’s GDPR and California’s upcoming Consumer Privacy Protection Act.

The need for digital security expertise

Moving forward, advertising and revenue operations must work with both product and IT/security teams to review publishers’ existing vendor relationships and strategize how to drive revenue without sacrificing security. Internal security teams are experts in the latest threats and can help develop a comprehensive plan to protect the digital environment and deliver a better user experience.

The ability to successfully generate revenue through multiple revenue streams is important. It is up to the revenue teams to engage with the security experts within your organization to make sure the Internet remains a safe place for advertisers, businesses, and users alike.

About the Author

Steve Stup is responsible for developing and overseeing the revenue and product strategy at The Media Trust. Previously, he ran digital strategy as the General Manager at The Washington Post. In this capacity, he was pivotal in the publication’s digital transformation effort and served on the leadership team that helped position it as one of the most innovative digital publishers in the industry. He led teams responsible for driving product strategy, ad innovation, and revenue operations. Prior to that, he was in technology sales at Lexis Nexis, and other recognized brands. He received his MBA from The George Washington University and is an alum of Virginia Tech.

Perspectives

DCN’s must reads: week of February 28, 2019

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

Featured Post | Perspectives | Revenue

How The New York Times’ free student subscriptions strategy will pay off

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.

Perspectives

Putting users and publishers at the center of the online value exchange

Publishers are getting a raw deal in the current online advertising ecosystem. The technology they depend on to display advertisements also ensures they lose the ability to control who gets their users’ data and who gets to monetize that data. With third-party cookies, users can be tracked from high-value publishers to sites they have never chosen to trust, where they are targeted based on their behavior from those publisher sites. This strips value from publishers and fuels rampant ad fraud.

In August, Mozilla announced a new anti-tracking strategy intended to get to the root of this problem. That strategy includes new restrictions on third-party cookies that will make it harder to track users across websites and that we plan to turn on by default for all users in a future release of Firefox. Our motive for this is simple: online tracking is unacceptable for our users and puts their privacy at risk. We know that a large portion of desktop users have installed ad blockers, showing that people are demanding more online control. But our approach also offers an opportunity to rebalance the ecosystem in a way that is in the long-term interest of publishers.

Publisher Pros and Cons

There needs to be a profitable revenue ecosystem on the web in order to create, foster and support innovation. Our third-party cookie restrictions will allow loading of advertising and other types of content (such as videos and sponsored articles), but will prevent the cookie-based tracking that users cannot meaningfully control. This strikes a better balance for publishers than ad blocking – user data is protected and publishers are still able to monetize page visits through advertisements and other content.

Our new approach will deliver both upsides and downsides for publishers, and we want to be clear about both. On the upside, by removing more sophisticated, profile-based targeting, we are also removing the technology that allows other parties to siphon off data from publishers. Ad fraud that depends on 3rd party cookies to track users from high-value publishers to low-value fraudster sites will no longer work. On the downside, our approach will make it harder to do targeted advertising that depends on cross-site browsing profiles, possibly resulting in an impact on the bottom line of companies that depend on behavioral advertising. Targeting that depends on the context (i.e. what the user is reading) and location will continue to be effective.

Curing Advertising Dysfunction

In short, behavioral targeting will become more difficult, but publishers should be able to recoup a larger portion of the value overall in the online advertising ecosystem. This means the long-term revenue impact will be on those third-parties in the advertising ecosystem that are extracting value from publishers, rather than bringing value to those publishers.

We know that our users are only one part of the equation here; we need to go after the real cause of our online advertising dysfunction by helping publishers earn more than they do from the status quo. That is why we need help from publishers to test the cookie restrictions feature and give us feedback about what they are seeing and what the potential impact will be. The technical documentation for these cookie restrictions can be found here. To test this feature in Firefox 65, visit “about:preferences#privacy” using the address bar. Under “Content Blocking” click “Custom”, click the checkbox next to “Cookies”, and ensure the dropdown menu is set to “Third-party trackers”.

We look forward to working with publishers to build a more sustainable model that puts them and our users first.

Perspectives

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