Digital publishers that take a hybrid approach to underwriting content will unlock growth.
Expanding revenue streams, audiences knowing what they want and changing ad technologies to meet privacy laws will make the open web increasingly challenging in 2022—but also ripe with opportunity. There’s a major shift happening and digital publishers that take a hybrid approach to underwriting content will unlock growth.
By no means is advertising going away, but a direct-to-consumer strategy presents just as big of a revenue opportunity as digital advertising. According to e-Marketer, U.S. digital ad spend will reach $293 billion by 2024, while U.S. e-commerce subscriptions are projected to reach $239 billion by 2025, according to Marketwatch.
Subscriptions are very attractive because they help solve for three consumer and industry forces: consumer demand, revenue diversification and rising friction between walled gardens and the open web.
First, consumers want more—more choice, more control over their experiences, more convenience and more value. And they’re willing to pay for it. This trend—reflected in both media consumption and tangible product experiences online—has been happening over the last few years and has accelerated in the last 18 months. Today, the average American has 3.7 subscriptions, according to eMarketer.
Second, subscriptions offer an alternative, incremental growth revenue stream. I am not talking about cannibalization of ad revenue. In fact, you may find the lifetime value of a subscriber far outweighs that of an ad-supported user. But there is plenty to go around for both streams. And by leveraging the ecosystem with partnerships, you can defray consumer acquisition costs and help contain operating expenses.
Third, we all know that walled gardens are putting increasing pressure on the open web as they demand more control and change the rules of ad targeting. Subscriptions offer publishers that offensive play to take back that control and limit their dependency.
If solving these three problems isn’t enough to convince you, research by the subscription management company Zuora shows that subscriptions-based businesses have grown nearly six times faster than the S&P 500 over the last nine years. We’re amidst a transition to a subscription-based economy that reflects changing consumer preferences and is likely to be with us for some time.
Ultimately, diversification puts you on the offensive. Recurring revenue is the opportunity.
A subscription model has both short- and long-term benefits. A subscriber base, particularly one with long-term retention, will no doubt take time to build. But early adopters and the most loyal within your user base can drive sales and revenue growth as early as year one. They will also provide valuable data that will drive your business over the long term. Who your subscribers are, what they will pay for, how much they will pay and what it takes to keep them are all questions your users are happy to answer. You will never get 100% of your user base to convert to subscriptions, so focus your efforts on those who will.
As publishers create and shape premium subscription products, looking at the data to discover what users need and would be willing to pay for helps zero in on that “just right” value exchange. We’ve used AI-powered ad products to understand user behaviors and patterns that identify those with a propensity to subscribe to The Weather Channel premium app.
Here are other tips to consider when building a subscription business:
Super serve consumers with what they love
Successful features tend to build on what people already enjoy rather than build a new habit. Radar fans want an expanded radar experience; those who want hourly forecasts might pay for more hours listed.
Remove friction and create faster access to what users want
Like many digital experiences, consumers want ease of use. A difficult login experience, long load times and overly complex messaging or terms can cause consumers to abandon the subscription process early in the flow. Offer an ad-free experience Sometimes it’s as easy as that. Many subscribers want a clutter-free experience. Delivering what subscribers need and want without ads interruption enables the premium experience users are willing to pay for.
Exclusive content and membership privileges
Subscribers love knowing they’re getting the “best of the best” from a publisher—exclusive content, insider views and dedicated customer service are just a few examples we know users value.
Don’t be fooled by the momentum
When launching a subscription business, early adopters will show impressive growth. There is a ceiling to that low-hanging fruit, so prepare for that inevitable stall. Focus equally on acquisition and retention.
As any content owner stands up a robust subscription business, it’s important to build a subs team and operation that is different from a typical content and product organization. It requires a much stronger focus on data analytics, partner and product marketing and acquisition tactics; a team that knows how to growth hack and is set up to do rapid, nimble experimentation is key.
With change comes opportunity. It’s becoming increasingly important for publishers to optimize their strategy to produce alternative revenue streams, leverage advanced technology and strengthen the value exchange with their users. As the open web, we have the power to define a new future. It’s time we call an audible and get back to playing collective offense.
This article was written by Sheri Bachstein from Ad Age and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to [email protected]