The Science of Subscriptions

After decades in which advertising revenues have been the main earnings source for online news providers subscriptions are making a comeback.

Digital consumers are increasingly willing to pay for content that interests them. This gives publishers the opportunity to optimize their business models and capitalize on renewed interest in subscriber-supported news. At the same time, ad revenue is back up for grabs as the third-party data that walled gardens like Facebook and Google have relied on to drive advertising is under scrutiny.

Balancing subscriptions with ad revenue

Traditionally, publishers who went all in on subscriber revenue struggled to drive enough traffic to continue capitalizing on ad revenue. But maximizing revenue requires publishers to balance the needs of both types of audience.

For instance, German publisher Funke Mediengruppe discovered that 50% of subscribers who churned did so because they felt there were too many ads. Funke responded by reducing its ad space by 70% — retaining only the higher value ads — to improve the subscriber experience. The reason for churning fell by 50%, and the drop in revenue was offset by a 20% higher price for the improved subscription experience.

Funke now separates its content into two categories: “reach” and “quality.” The “reach” articles are designed to drive traffic and are ad-supported. “Quality” articles are financed by reader revenue.

With a smart strategy in place, publishers need not choose between subscription or ad-driven revenue. And the right tools can make it even easier.

Intelligent paywalls make maximizing revenue easy

Editors are used to making time-sensitive decisions based on their guts, but when it comes to maximizing subscription revenue, data is a publisher’s best friend.

With the right tools, news organizations can organize content more intelligently — selecting articles for premium status with the help of natural language processing (NLP) and maximizing subscriber lifetime value (LTV) . The “FIPP From Print to Digital” report found that a daily newspaper in the U.S. saw an “estimated 3-year LTV incremental lift from subscriber revenue of $2.7m ” with the help of a premium content engine.

AI and machine learning (ML) power tools can enable better decision-making and do it automatically to ensure publishers are capturing every revenue opportunity. As FIPP puts it, “Having an effective Premium Content Strategy can increase the number of sales attempts to drive acquisition growth, convert readers who may not convert under traditional metered paywalls and reinforce the value of the publisher’s content to paying subscribers.”

Case in point: The FIPP report cites a case study where publishers compared “a targeted paywall strategy to the current state and across-the-board meter of five articles per month.” The test ultimately determined that targeted offers to the readers most likely to subscribe with acquisition offers increased acquired subscribers by 11%. Meanwhile, the publisher saved 30% in the lost advertising revenue associated with the across-the-board strategy. All in all, net digital revenue increased by 27%.

This is the kind of on-the-fly adjustment that only technological solutions can make, but finding the right cues to look for can be more of an art.

Finding and converting subscribers — and other sources of revenue

It would be tempting to assume that the number of article views or scroll time is a good metric to use when deciding which users are most engaged and the most likely to subscribe — but those behaviors can be impacted by the nature of a given site.

On the other hand, the number of site visits and visits on unique days are more reliable indicators of a prospect’s engagement, according to the Mather white paper “How Intelligent Paywalls Maximize Total Digital Revenue”. However, the white paper asserts, jumping straight to the big ask with a subscription offer may not be the best path to conversion, even for your most stable users. Building a journey that includes registration, newsletter promotion, and content recommendations can be a better way to ease potential subscribers into paying for more access.

This is also a great reminder that success in today’s publishing environment demands flexibility and a multi-pronged monetization plan that goes beyond ads and subscribers.

From micropayments to e-commerce options, publishers are finding new ways to incrementally increase revenue. In fact, the fastest-growing monetization technique for digital publishers is affiliate marketing. The Marketing Manager reports, “Some publishers are taking it so far as to become their own editorially driven marketplaces by becoming one-stop shops for online retail and content. A prime example of this: The BuzzFeed Shopping tab, which led to a commerce revenue jump of 67% from 2019 to 2020!”

Remaining open to new ideas — and being ready to act upon them — is integral to publisher success as the ad ecosystem continues to change. Armed with the right tools, publishers’ digital channels can be respectable revenue drivers in 2023 and beyond.