How to monetise news? by Digitalis

How to monetize news, what to do when no-one really knows?

It’s a new dawn and a new day for news as publishers pull out a plethora of predictable and less-predictable strategies to engage their readers and monetize their content. These are the five remarkable changes happening in the world of news publishing following an unpredictable landscape with strategies changing every 5 minutes.

1 – It’s physical

The Independent became the UK’s first national paper to go fully digital. The company shifts to an app-based subscription model, the success of which rests, The Drum argued, on the paper’s ability to offer a variety of products and price points, as well as developing digital ad formats that engage rather than enrage its readers. Advertising agencies supported this move to a digital-only proposition, the article continues, as it allows publishers to offer a richer mix of video, native and display inventory, as well as allowing this inventory to be bought more intelligently via data-driven programmatic platforms.

Six months into it, The Independent has turned profitable for the first time in 20 years, according to its owner Evgeny Lebedev. “By going online-only we freed ourselves from the unwieldy infrastructure of print, and allowed ourselves to be far more flexible”. “It is still early days, but the first six months have shown that by being nimbler and digitally focused we can better serve our new,much bigger audience online. “We are profitable for the first time in 23 years, which brings with it new opportunities.”

As other newspapers in the UK and around the world try to build digital businesses and survive the long-term decline of their print readership, the progress of the Independent is being closely watched. The company says its digital switch has been vindicated by significant growth online — from 15.8m unique users in February to 21m in June ahead of the UK’s referendum on EU membership, before falling back to 16.2m in August.

With a younger staff on lower salaries and no printing or distribution costs, the Independent said it now had a sustainable long-term future. But it is unclear whether the digital Independent can retain its distinctive voice and reputation in the medium term after a significant churn of its staff.

The logic for the restructuring was clear in the 2015 accounts, which carried a warning from the auditors that there was “significant doubt” over the print business’ “ability to continue as a going concern”.

Independent Print Ltd, which ran the newspaper, made a pre-tax loss of almost £7m in 2015 and had net liabilities of £69m. Mr Lebedev and his father Alexander loaned the newspaper business £7.8m to keep it afloat. With print advertising expected to be down by at least 15 per cent in 2016 and circulations continuing to fall despite a bounce since the vote to leave the EU, many other newspapers will wonder if they should also take the plunge into a digital-only future.

2 – It’s digital

In stark contrast to the digitization of The Independent, Trinity Mirror is almost simultaneously launching a new low-cost physical paper: New Day. The company believes that, although this is “the first standalone national daily newspaper for 30 years”, the analogue product can succeed in our ostensibly digital world. As national daily newspaper sales fell by half a million a day between 2014 and 2015, this product strategy certainly appears to be swimming against the current. Many have voiced support for the New Day, hoping, like The Conversation,that there may be an underserved older readership which still prefers to consume news content from a single editorial voice and feel paper in their hands. The New Day will also be running counter to conventional wisdom by following pioneers like NowThis News in not having a website – all its digital output will simply be published direct to social media. No homepages for the New Day, only front pages.

3 – It has a voice

Launching a print edition newspaper allows publishers to create and control a strong editorial identity or voice, but it also limits a publisher’s ability to cater to a range of different advertisers and readers. Many digital-first publications, as Digiday explored this week, treat their readership as a group of communities based around specific interests, the result of which is that publishers like Buzzfeed and the Huffington Post have up to 80 or 90 individual Facebook pages dedicated to different topics: from “BuzzFeed Weddings”, “BuzzFeed Parents” to “HuffPost Divorce”. These pages implement various editorial tones and strategies, refracting the established parent brands into different shades to engage different readers. Allowing readers to discover these shades based on their preferences is key to the future success of news publishers who will have to enlist automated bots to carry out these strategies at scale.

4 – It’s formal

Two weeks ago Quartz launched a pioneering new app that delivers news content to your phone in the form of a private messenger. The app has divided audiences, The Media Briefing explores, due to the prescriptive and informal chattiness of the content delivery. On the other hand, the strategy is at the forefront of several trends in the market, including the prominence of social messaging apps in audiences’ mobile usage, the incorporation of unobtrusive advertising, and the appetite for light-touch ‘snackable’ content. Needless to say, the app’s target market is not expected to be regular readers of the New Day.

5 – It’s free

Lurking behind these emergent strategies and business models is the understanding that monetizing newsgathering is simply getting harder. For the most part, digital technology has unlocked many of the gates at which traditional publishers would get readers (and advertisers) to pay for content; if we want to read about a story, there is now a seemingly unlimited list of sources where we can do so for free. These sources are often poor quality, but consumers’ willingness to pay seems low regardless. The Sun, for example, has had to give in and remove the paywall from its website in an attempt to revitalize its user base, despite producing what is considered popular mainstream content. The reality is that publishers of free high-quality content can quickly build substantial but capricious user bases online which, as HuffPo notes, can be eroded just as quickly when confronted by a paywall.

Online revenues thus remain a tiny proportion of print, The Conversation reports, with the Guardian attributing recent losses in part to slow digital growth and the need to invest. Publishers must continually invent new ways of driving take-up of digital services in a world where readers are willing to pay for only the most premium content, and as Three announces the launch of a trial of network-level adblocking it’s also clear that the risks to the profitability of free services are only just beginning.

What does the future hold for news?

At Digitalis, we believe that it’s early days to validate any of the strategies above, and that there will be plenty of developments in the very near future. Former Digitalis EMEA Managing Director, Daniel Carnerero, explains:

“The current news landscape complexity makes it very difficult to assess its medium to long term picture. There are far too many elements affecting the overall result. For those that have eliminated printed operations and reduced salary costs, there will be positive outcomes in the short term but also uncertainty around brand, reach and exposure over the longer run.

It’s a juggling act, driving cost down while keeping your revenues stable, if not increasing them. Newspapers live from a loyal customer base, the reputation of their editorials and the overall customer experience. In turn those bring the revenue in sales and advertising, with brands aligning to what the customer base is perceived to be. If newspapers lose relevance over time, or the quality of their work decreases, then revenues will align to that pretty fast.

To find the right balance, at this point, is almost impossible, especially when factoring the role of social media players, recent developments on fake news, and a clear influence of politics and investors. Keeping audiences engaged is challenging and uncertainty is the worst enemy of investors and marketing/advertising budgets. If you cannot forecast your return on any ‘investment’ you can hardly justify it, so advertisers will go somewhere else. There’s a clear downturn in physical newspapers advertising revenues, as traditional retailers do not see or are able to quantify their returns on them. That’s hurting, and a key struggle for newspapers fighting to stay up.

The coming years will bring changes and many of the well establish brands will have to take tough decisions to secure long term profitability.”

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