INMA Researcher-in-Residence Grzegorz Piechota talked content economics in a live Webinar on Wednesday, taking a look at breaking down silos to grow digital subscriptions, advertising behind the paywall, and designing paid packages.
Piechota, who is leading INMA’s Readers First initiative, had several guest presenters on these topics: Andiara Petterle, vice president of product and operations for RBS in Brazil; Robin Govik, head of digital for Mittmedia in Sweden; Alan Hunter, head of digital for The Times and Sunday Times in the United Kingdom; and Professor Edward Malthouse of Medill School of Journalism at Northwestern University in the United States.
Breaking down silos, integrated structure
Andiara Petterle of Grupo RBS in Brazil discussed how her company integrated different roles and departments within to break up the compartmentalised silos for increased digital growth.
At RBS, the company used to be divided between two business models: advertising, marketing, and sales were one, and the B2C delivery model was another.
“All of these activities used to be in different areas, but now they are all part of the newsroom,” Petterle said. “When we look into our B2C operations, it has to be one business unit, completely separated. It’s related to the newspaper business, but we’ve divided it like that, into B2B and B2C.”
The new integrated structure has been successful three years in and has resulted in digital growth of 118% CAGR. The total reach is increasing, and RBS has crossed the line of having more digital than print subscribers. “We are expecting to grow at least 50-55% this year,” Petterle reported. “So we are happy with the results.”
She considers this move as a start-up, she added, because while the company will continue to grow its base, she foresees a time a few years down the road when RBS will not need print anymore.
The organisational structure was the most difficult part of the change, Petterle said. She compared it to when the newspaper used to be delivered to homes via a carrier: Once the newspaper hit the doorstep, the journey with the customer was over. Not so with digital. When the customer subscribes or clicks open the site, the journey has just begun.
“Digital is a completely opposite way of operating; it’s a completely different journey. Now we have teams where we can put people from different areas, and they work in completely different ways than they have in the past — with complete autonomy and acting much faster than they used to.”
The changeover was complete four months ago, and the team has seen tremendous improvement already. “It also has the objective of implementing a better way to share knowledge because we are losing digital talent so much. It was very hard to implement, but it’s working very well.”
The most difficult part of totally integrating the B2B and B2C sides of the business was getting people to give up the power that they used to have, especially in the newsroom. “They were so used to deciding for themselves what to do, and a boss who tells them what to do,” Petterle said. “People really do not like to lose power, so that is the most difficult part. At the end of March, we are going to turn the entire newsroom into the agile methodology. So even the traditional newsroom will be working with the agile model.”
INMA: We are currently experiencing a lot of shifts in our paid meter launch, and one of the biggest thing is the silos. What suggestions do you have on merging those silos when it comes to taking away power?
Petterle: We started these power transitions two years ago. In 2015, we implemented a structure with marketing people inside the newsroom, sharing all the product decisions with the editorial team. It was very hard at the beginning, but a few years later we are seeing that it is working very well. The newsroom has no total power themselves to decide what to launch; we do have to do this with data and market research and everything. The next step of doing this with the agile model is easier than at the beginning. It takes time.
INMA: Can you expound on what you mean by newsrooms losing power. Does that extend to editorial decisions, or just product ones?
Petterle: The product decisions are really shared for over three years now. We don’t do any new product before we do the planning and analysis together with marketing to launch a product. The power that the newsroom is losing on the editorial part is related to distribution, not really the content production. We have so much data related to the reader journey that we know exactly what kind of content that people are looking for, and when (for example, what kind of content to push out at 4 p.m.). The editors have the call to decide what is in the front page and the stories that they do, but they have to follow the guidelines and they have to listen to the data that we have.
Digital revenue: advertising versus consumer subscriptions
Mittmedia is the publisher of 20 media properties in Sweden. Robin Govik, head of digital for Mittmedia, reported that over the last year the company increased its display advertisement revenue by 20%, in spite of forces acting to decrease that revenue. The company did this in two ways:
- Focus on digital subscribers: Increase the product value and reduce friction for the users.
- Let digital subscribers be the foundation for the advertising revenue: Increase ad prices by focusing on adding demand.
Govik said that this decision even led to Mittmedia removing some of its ad inventory. The changeover began four years ago, when the company’s digital ad revenue was close to zero. “It wasn’t sustainable,” Govik said. “We got less and less revenue for our traffic, and we came to the conclusion that the market was ready for a digital subscriber strategy.”
When they introduced the paywall, of course he was afraid of losing ad revenue. “The digital subscription model would compete with the ad revenue model, which was not something we wanted.”
But what they found was that, with the increased audience data obtained from the digital subscription model, Mittmedia’s advertisers could buy ads that are displayed to a specific market rather than a section of the newspaper. “We now have the same ad targeting model as Facebook or Google,” Govik said. “Where the ad is displayed is changed to who the ad is shown to. That difference in logic is fundamental.”
Mittmedia increased ad revenue in 2018, as well as increasing prices and volume. “We must get higher ad prices and sell more ads. All inventory is sold programmatic, even the ads we sell ourselves. We also have manual price optimisation, achieved with a sales tool called Reacher. In Reacher, it is also impossible for a sales rep to give a discount. We train our sales reps to reflect the ever-changing ad tech.”
A publisher can’t just add a new business model to the existing model, Govik said. You have to have an entirely different strategy: “Sit down and decide what you are going to achieve together.”
“This wasn’t an easy journey for our sales team, but it was necessary if we were going to be successful,” Govik said. “We decided that it was time to put all our journalistic content behind the paywall. I was a little afraid when this happened, but our ad team was able to increase the revenue by 20% last year.”
He explained that the higher the paywall, the more information a publisher has about its users. Therefore, the more precisely the publisher can target advertising, and the more they know their audience and have more loyalty from that audience.
INMA: I understand that you developed the software you use to sell the ads?
Govik: We developed it exactly the way we wanted it, with a graphical user interface. We haven’t built an entire ad ecosystem, but we do what Facebook and Google don’t do.
INMA: Can you tell me something about these local advertisers and getting into local advertising and small business budgets?
Govik: We used to have tens of thousands of advertisers, but the number of advertisers has decreased dramatically. So fewer advertisers are doing more business with us. That’s why we created this simple tool that can also be a self-service tool [for the advertisers]. We have a partnership with Facebook, Google, and LinkedIn, but what we offer our advertisers is expertise on a local scale.
Building habits, not page views, is more important
Professor Edward Malthouse discussed the study he undertook with the Spiegel Research Center and Local News Initiative at Northwestern University.
“We’re working with 16 different newspapers in the U.S., covering the entire range from very large city newspapers to small-market and mid-size newspapers,” Malthouse said. “So we’re able to study all different types of newspapers. They’ve given us access to their data; all of them have some sort of paywall, and can gather a good bit of information from their subscribers. They’ve also given us click-stream data. Depending on the news organisation, some track subscriptions to newsletters as well. We looked at print plus digital, as well as digital only.”
The metric that stands out is tracking page views and time per page, Malthouse said, because these metrics are directly tied to ad revenue. “The local news industry really needs to rethink this, to shift emphasis to ways that people are willing to pay for their news. Think more broadly than just subscriptions; think events, newsletters, that kind of thing.”
Malthouse was looking at questions such as what behaviours lead to willingness to pay? Which of these behaviours are linked to subscriptions and drive outcomes that make a current subscriber remain?
“Daily habit is a variable that stands out across all our 16 markets as a powerful driver,” he said. “If I’m getting value from the paper every day, I’m going to remain a subscriber. So if daily habit drives subscription, what kind of content brings them there?”
Differentiated content versus commoditised content
The research took a look at the different story types.
Differentiated content: Local news, local sports, local columnists, local entertainment.
Commoditised content: National news, national sports, syndicated columnists, national lifestyle.
“So the question is, which of these drive habit as well as subscriptions?” Malthouse asked. “The more I read per month, the lower my cancellation rate is.”
Summary of findings
Habit is consistently an important driver of retention. Reading local (differentiated) content drives retention and habit, but the nature of the most powerful content varies across the market.
In smaller markets, reading national news drives retention and market, but less so in large markets. The people in these smaller markets depend on the local news organisations for information on the nation as well as what’s happening next door.
Subscribing to updates, newsletters drives retention and habit
The study found a danger of overloading consumers with too much content. “We want to warn against drowning them in too much content, versus focusing on content that your audience is specifically interested in,” Malthouse said.
INMA: Isn’t it somewhat opposite of creating habit with personalisation? If the newsletter or delivered content is too personalised, then you miss out on seeing the overall news.
Malthouse: Definitely, and we are doing a lot of research around this. Within the recommendation system, there’s a focus on fairness and transparency that’s aware of not creating a news bubble. A good recommendation system will help you find stuff that you didn’t know you wanted to read. Striking that balance is really important.
Content that spurs subscribers and engages readers
Alan Hunter, head of digital at The Times, shared his team’s study of their own content and what type was most successful at getting new subscriptions and retaining them.
“First, we looked at what content converts subscriptions and what content retains them,” Hunter said. “We found that our magazines on Saturday and Sunday converted and retained really well, but we wanted to look much more closely at what type of content [within those magazines] was really working with our readers.”
The team found the Times’ core content has not changed much in the digital era. “While there’s great merit in telling stories we’ve built over 200 years, we felt there was a way we could do it better,” Hunter said. They set about analysing 16,000 articles against taxonomies used by the Swedish social publisher KIT.
“We did this by hand and cross-referenced it against our performance data,” he explained. “What we found that the stories that perform the best are the ones that are uniquely ‘us’ — stories that couldn’t have been done by anyone else but the Times. Not just the basic reporting of the story, but the particular analysis that we put on it.”
Covering the same stories as everyone else has no value, and expertise adds value to every story. For example, the Times may send a reporter to Syria, uncovering unique stories and angles other newspapers aren’t covering.
“This may all seem completely obvious — but we weren’t doing it,” Hunter said. “We’ve talked a lot in this process about the who and the what of the story. But the how and the why were almost done by muscle memory. We’ve now asked editors to consider the why and the how just as much — to commission consciously.”
The Times has also reduced the number of stories it publishes and promotes those stories that are unique to it, he said: “We’ve been cutting down on some of the commodity stories that are available everywhere else and focusing the newsroom on the more value-added stories.”