The continued and rapid decline of print and digital advertising revenues is leading increasing numbers of publishers to explore reader revenue models like subscriptions in 2018. The Reuters Digital Leaders Survey shows a clear but not universal view that advertising for media will become less important over time (62%), with one in ten (10%) saying they are actively planning for a future with little or no display advertising.
This trend is a significant one. Adjacent display advertising that worked well in print, was largely ignored on the desktop, and has become irrelevant on a mobile screen. Meanwhile, the economics of supply and demand has driven down prices, ad fraud is rife, and ad-blocking is widespread. What’s more, the big tech platforms are taking most of the new digital advertising money because of their ability to target any audience efficiently and at scale.
However, 2018 could see a partial revival of digital advertising’s fortunes. The advent of browsers that automatically block overly intrusive advertising is the culmination of several years’ work from the Coalition for Better Ads. On the way out are ads that flash, autoplay sound and video, and those that take over the page. Retargeting of ads across websites will also become much harder in Europe after GDPR regulations come into place in May. Worries about ads being placed next to poor-quality content could also help publishers sell premium advertising either on their own or in alliance with others.
From ads to readers
For traditional media, we’ll see a growing gap between big brands successfully managing digital transition and the rest that are struggling. Almost half of publishers (44%) see subscriptions as a very important source of digital revenue in 2018 – more than digital display advertising (38%) and branded and sponsored content (39%).
The shift to subscription is driven by a combination of desperation and hope. The success of big US publishers like the New York Times (2.3m digital subscribers) and the Washington Post (doubled digital subscriptions in 2017 to 1 million), as well as several European titles, including both up-market general interest papers like the Helsingin Sanomat in Finland and tabloids like Bild in Germany has inspired others to switch the focus to reader payment.
The Guardian has defied its critics to report 800,000 paying customers, including half a million subscribers or members, and 300,000 one-off donations. Meanwhile, for the first time, the Guardian is attracting more revenue directly from readers than from advertising.
The shift to reader revenue is well underway, but this model will not work for everyone; most people have no intention of paying anything for online news today or in the future. In practice there will be no one-size-fits all model for reader payment or for business models in general.
New media era, new media opportunities
For now, it seems that many publishers are hedging their bets. The majority of print and digital-born publishers in Reuters Institute’s survey are pursuing multiple revenue streams, with an average of six different options viewed as very or quite important.
Paywalls are being tightened. The Times has set a stretch goal of 10m subscribers by sometime in the 2020s and that will require a much more international and multilingual product with more local journalists for customisation.
Another key weapon in the battle for paying eyeballs will be bundling. The Washington Post’s partnership with Amazon Prime, for example, gives it an enormous advantage at home, as well as abroad. What’s more, hundreds of local newspapers offer a Post digital subscription as part of a bundled national/local package. Expect to see more bundling deals in 2018, especially with utility, phone, and pay TV companies looking to provide more lock-in value for customers.
The subscription model
More publishers in Reuters Institute’s survey said digital subscription (44%) would be a very important revenue stream than any other option. Membership was considered very important by 16% and one-off donations by 7% of commercially funded respondents.
Up until now, most attention has been focused on getting domestic customers to pay, but as that gets harder, there will be a battle for global subscribers and the focus will switch to an international audience with differential (cheaper) pricing to drive numbers.
Shifting strategy from reach + ads to engagement + subscriptions is not just a simple change in business model – it is forcing publishers to rethink the content they create and the audience they are targeting.
A registered reader, as opposed to an anonymous one, is far more valuable in this age of personalisation, even if they are reluctant to sign up to a subscription. Therefore, publishers are asking users to sign-in or register for websites and apps, as well as investing heavily in data – to help deliver more personalised content and messaging.
As we move through 2018, we will see a renewed focus on data, as the ability to collect, process, and use it effectively proves a key differentiator. Media companies will be actively moving customers from the ‘anonymous to the known’, so they can develop more loyal relationships and prepare for an era of more personalised services.
What this means for the future
Research shows that some young people, perhaps sensitised by Netflix and Spotify subscriptions, are more interested in paying for news than we had thought. However, for those who can’t pay, with a growing amount of quality journalism behind a paywall, there are worries that a two-tier information system will emerge, widening the current disconnect between the elites and the rest of the population. We could potentially see a situation where those who can’t afford to subscribe are subject to the lowest quality journalism and the highest amount of misinformation – in turn leading to more polarisation and division.
In 2018, we’ll see far greater awareness of this problem and some attempts to tackle it. Expect to see media companies setting up more student and library offers – and to extend schemes that allow others to sponsor subscriptions for those that can’t afford them. But we’ll also see more examples of publications trying to engage communities to pay something to keep content free for all. As for how far along that journey they’ve come already, we’ll find out next month.