The digital media industry is on the rocks – but it won’t sink

If 2018 was digital media’s Year of Great Upheaval then 2019 is starting off like a year determined to snatch that title for itself.

Before the first month is even done we’ve already seen Buzzfeed announce plans to cut 15% of its workforce and Verizon reveal plans to cut somewhere in the region of 800 jobs in its Verizon Media division including HuffPost, Yahoo and AOL.

In a sign of the times it’s also been reported that the WarnerMedia investment arm which helped to boost the coffers of the likes of Mic, Mashable and Bustle has turned off the taps and will no longer be investing in media companies.

It’s all helped fan the flames of a narrative that is already pretty bleak: that the economics for digital publishing are irreversibly broken.

As NBC reporter Chris Hayes despairingly asked on Twitter: What if there is literally no profitable model for digital news?

Certainly, this picture doesn’t look particularly pretty when it also includes a list of exhibits such as: Mashable being sold for $50m when it had been valued at $250m 18 months previously; dmg media writing down its investment in Elite Daily and then selling it for a reportedly knock-down price; and Vice putting a freeze on hiring after missing revenue targets.

Then you had millennial-focused site Mic laying off its entire editorial staff at the end of 2018 before being sold for a fraction of its previous value to Bustle Digital Group. As she left the business, Mic Publisher Cory Haik talked of “macro forces” at play, “unsettled” business models and how “tough” the business of journalism is.

In this instance the “macro force” at play was Facebook’s decision to cancel the Mic Dispatches show on its Watch platform, for which Mic was reportedly being paid $5m a year. This seemingly was the final straw for a publisher which was overly reliant on Facebook for its audience and which had already suffered when the social media giant reduced its focus on news content in early 2018.

Facebook has been given the blame for various other recent digital media failings. The shuttering of LittleThings and Cooking Panda owner Render Media were directly blamed on declining love from Facebook, while the plights of TheAwl in the US and Unilad in the UK were at least partly put down to Facebook’s changing focus.

Along with Facebook, the other major player taking the blame for much of digital media’s ills is Google, with the two together forming the so-called duopoly which is draining the internet of its advertising money, leaving very little for publishers to fight for.

Google and Facebook’s dominance of digital ad money is such that research group eMarketer estimates they took 58% of all market spend in 2018. That did slip from 59% the previous year, but only because another tech behemoth, Amazon, grew its share of the $111bn total spend.

And that dominance is making it increasingly hard for publishers to make money from the web. The digital ad ecosystem rewards scale over quality and there is no shortage of inventory to be had – at mostly rock-bottom prices.

So it’s not hard to understand the current narrative of doom and gloom around digital media, with seemingly no obvious way out of the current predicament.

But when looking at the big picture it’s important to note that there’s a pattern on show here, one which involves digital publishers getting big audiences in a short space of time and, often, taking on significant levels of investment to try to make the most of that growth. But when the money doesn’t come in at the same levels to balance out those investments then a correction is needed. Sometimes that correction is slight and sometimes – sadly – it’s terminal.

What the industry does appear to be doing, however, is slowly learning from what is going on around it. Amidst the apparent chaos, there are signs of a positive future, where quality and genuine engagement trump scale.

At the Times, which stubbornly refused to get drawn into a battle for digital eyeballs, instead staying firmly behind its paywall and keeping its journalism only available to subscribers, the accounts are back in the black after a year where pre-tax profits hit £9.6m. There, digital subscribers now outnumber print for the first time and together equal more than 500,000.

Also in London at DMGT, the MailOnline now appears to be showing signs of being a reliable money maker after years where costs outstripped revenues. While audience numbers have been slipping over the last year, revenue is on the up, increasing by 14% in the last three months of 2018. Notably, DMGT highlighted that future growth will be “driven by increasing engagement with the direct audience”. Not by trying to keep up with the tech giants on scale.

There are other green shoots to take hope from, as digital publishers increasingly focus on delivering a value exchange direct to their most loyal and engaged users. This “pivot to readers”, as it has been knowingly termed, has been gathering momentum in 2018 and early 2019.

The Guardian is the poster child of the membership model which has successfully seen it step back from the precipice of financial meltdown towards returning to the black as a result of 1m donations from readers keen to back what The Guardian stands for. This model has apparently been so successful that internal discussions about a paywall at the publication have now been taken off the table.

Meanwhile Dennis, which publishes The Week among others, has seen success from a different approach to generating revenue direct from its readers – through ecommerce. Through its Buyacar title it has been linking its motoring content with a car sales business with the result that it expected 40% of total group revenue to come from this stream.

There are many other potential revenue streams being discussed and experimented with, from micropayments to events to blockchain technology. Some may work, some may fall by the wayside – and the same is true of digital publishers.

What’s clear is that the endless pursuit of digital scale without a clear prize in sight is over. Now, more than ever, it will all be about delivering something that people value. And ideally value enough to put their hand in their pocket.

No publisher should be surprised if Facebook pulls away the rug

Facebook is a commercial business. Facebook makes decisions which it believes are best for Facebook. Facebook is out for number one.

All the above are statements of fact. So when fears grow that Facebook might be about to make a change to its product which could leave publishers in a bit of a jam, one emotion that really shouldn’t be expressed is surprise.

After all, Facebook has form with doing this sort of thing when it believes its interests are not best being met — regardless of whether that might be hurt publishers in the process.

Back in 2011, with much fanfare at Facebook’s f8 conference, the Guardian, Independent and others launched what were referred to as social reader apps. Essentially what they did was allow a Facebook user to share what news stories they’d been reading with their Facebook network.

Mark Zuckerberg himself referred to these as having “the ability not only to change the way we think about news but have the ability to change the way the whole news industry works”.

Alas, it turned out that people weren’t actually that keen on broadcasting to all and sundry what stories they were privately reading and the user feedback Facebook presumably quickly got back was that this was a bad idea.

And so the much-feted social reader app experiment disappeared within a year, despite a number of publishers having sunk significant development cost into the project — with some publisher apps never even seeing the light of day.

And you can’t blame for Facebook for pulling the plug. If something is not delivering the user experience that is required then it should be shelved, regardless of collateral damage.

So, six years on and with concerns whirling that Facebook might be readying to move all publisher posts into a separate (lower-profile) Explore Feed — with the inevitable reduction in referral traffic that would bring with it — the thing to remember is that user experience will prevail.

Which means that if Facebook’s current crop of tests spits out data to suggest that users dwell longer and engage more deeply with a feed shorn of publisher posts then a feed shorn of publisher posts is what will surely come to pass.

Conversely, if it turns out that scrolling seamlessly between a post from a friend and one from a publisher you follow is what Facebook users want then that is what will continue.

Either way, what publishers have to accept is that, in a world where much of their digital audience comes from and exists on Facebook, if Facebook decides to make a change which it believes is the right one and that happens to hurt publishers then that’s just the way it is.

Think you might need some help dealing with a challenge like this or moving your digital media business to the next level? We’d be delighted to help. Please get in touch and let us know what you are trying to do.

Will people pay for news online?

Are there enough people who are willing to dig into their pockets and pay real money to consume news online?

That’s the question the digital publishing industry has been wrestling with for many years – and has been asking in increasingly urgent tones as revenue from digital advertising has plateaued for some and declined for many others.

So it was little surprise that there was an impressive turnout for the launch of the Reuters Institute for the Study of Journalism and Kantar Media’s report into attitudes to paying for online news.

Fronted by the ever-insightful Nic Newman, the report revealed some cautiously encouraging stats for publishers keen to find a way for a sustainable future which doesn’t solely rely on the dwindling pot of advertising revenue.

It’s well worth reading the full report, which was funded by Google’s Digital News Initiative, but the main theme I take from it is that there is a willingness in theory to pay for news online from a reasonable proportion of people – but they don’t always do so.

As the authors of the report say:

There is value is various aspects of news – both the content and the delivery format – but this
is tempered by the context of abundant free content. The problem is exacerbated by the
fleeting nature of much news, which quickly dates and becomes worthless.

And some of reasons for people not being willing to pay for news are summarised in the slide below.

So, it seems, one of the key reasons people don’t currently pay for news is simply because they usually don’t have to. There are such a variety of sources of free news around that the perception is that there’s rarely the need to pay.

The exceptions mostly appear to be those which offer niche or high-value content, the Economists and Which?s of the world – rather than the mainstream news offerings.

There is value in news about specialist topics and coverage of niche interests, as well as
content from writers of repute. There is also value in variety, which allows serendipitous
content discovery, as well as evergreen content that remains relevant beyond the daily news
cycle.

But the question that was left hanging tantalisingly in the air was what would happen if the norm was to have to pay for good quality content from the vast majority of publishers. There was a sense that, just as people have got used to paying for music on Spotify and films on Netflix – they may get accustomed to paying for news online too.

A number of options on how to access news content were given to the subjects of the research to understand their willingness to do so:

  1. Propositions that permit or bypass advertising  eg providing an email address to allow tailored advertising, turning off ad blockers or paying for an ad-free experience.
  2. Fundraising propositions eg fundraising to support the brand/business or paying for membership with benefits
  3. Paywall access and subscription propositions eg paying for unrestricted access (soft paywall), paying a brand subscription (hard paywall) or pay-per-use (micropayments) of a bundle of providers (aggregation)

The option that particularly interested me was the final one – the idea that users could pay small amounts of money to access content across a range of sites. And it seems that consumers were also inclined not to dismiss the idea:

This proved the most interesting and appealing proposition for paying for online news, and
had been anticipated to some extent in the consideration of the other propositions. It actually
combines two ideas – micropayments and aggregation – both of which resonated to some
extent, although the aggregation element drew stronger support.

One of the major problems with micropayments up to now has been the high level of effort asked of the consumer to access content. Can you really expect someone to fill in a laborious sign-up form and proffer their credit card details just to access a piece of content with a value of a few pence? And then ask them to do it again for a different publication.

But there are signs this is changing. Google has recently announced that it is offering publishers the chance to be a part of its Google Contributor scheme which allows users to buy an ad-removal pass to use on selected sites, starting at £5 in the UK. Business Insider is one of the better-known sites signed up.

And there are other companies out there working to make it as easy as possible for publishers to ask for small amounts of money from their users. Propositions from the likes of Blendle, Jamatto and Admiral offer publishers the ability to add micropayments into their business models, while Medium recently launched a membership model which is a variation on the same theme.

If there was a way to make the experience of paying as seamless as it is when you download an app from the Apple or Google Play app store – and to include content from a range of sources within one safe, secure wallet – then perhaps there’s a glimmer of a future business model for an industry in real need of recalibrating the value exchange between themselves and their consumers.

Think you might need some help moving your digital media business to the next level? We’d be delighted to help. Please get in touch and let us know what you are trying to do.