2012 in review: 5 disruptions to digital publishing models

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The urgency to drive digital revenues increased this year as media companies sought new ways to offset declining print revenues or to build sustainable digital-only publishing brands. Looking back at the news and trends we blogged about on eMedia Vitals throughout the year, five emerging revenue streams stood out as the foundation for a new era of magazine and newspaper publishing.?

Native advertising

Digital publishers have dusted off the print advertorial and spruced it up for the digital age as ?branded content.? Branded content is part of a larger trend that took hold this year as ?native advertising,? which encompasses programs that integrate an advertiser?s content and creative more tightly into editorial presentation on the web or on mobile devices.

There was plenty of discussion throughout the year about what native advertising actually means. But there?s little doubt that digital dollars are shifting in this direction. The banner?s share of digital ad spend is declining: eMarketer said banners will account for 23.3% of digital ad spend in 2012, down from 23.6 in 2011. Spending on sponsorships, by comparison, is expected to grow from 4.2% of total spend in 2011 to 4.5% this year.

Sponsorships and other native ads can take several forms. Forbes? BrandVoice (originally called AdVoice) allows marketers to publish blog posts and videos directly to Forbes.com. Buzzfeed and Atlantic Media?s new Quartz brand integrate branded content into their editorial streams. Gawker has created an entire division to help advertisers created branded content; Studio@Gawker ran nearly 70 campaigns across its eight sites in the third quarter, across a variety of formats, including sponsored posts, events and video, according to Digiday. In November, the BostonGlobe launched a new "Insights" program that lets local businesses syndicate their blogs and other social media content on Boston.com. Dedicated pages include social sharing tools and company information and are optimized for mobile.

Proponents say native advertising provides a ?consistent user experience? and that credible content from brands can be valuable to an audience. Detractors say it blurs traditional church and state lines between editorial and advertising.

Questions also remain about the effectiveness of sponsored stories, branded content or other attempts to commingle marketing messages with editorial content. Not every publishing executive views native advertising as a white knight for digital publishing.

?To suggest that this re-discovery of ?native advertising? will somehow do away with the banner is simply silly,? Jim Spanfeller, CEO, Spanfeller Media Group, told Digiday. ?It has its place, but at the end of the day, readers and viewers have a relationship with professional content creators that is unique, and they are certainly smart enough to understand the difference between content created for their general consumption vs. content created to sell a product or service.?

Tablet subscriptions

When Apple first launched the iPad in April 2010, there was much hand-wringing over its 30% revenue cut for subscription sales and its unwillingness to share customer data with publishers. Those initial concerns are a distant memory, with most publishers now offering in-app subscription plans. Time Inc., one of the last holdouts, began offering digital subscriptions through Apple?s Newsstand in June, and launched subscription options for its titles in Amazon?s app store in November.

Most publishers have spent Year 2 of the Tablet Revolution refining their distribution models and integrating tablet editions into existing subscription management operations. The result has been a groundswell of apps and a rising tide of digital subscriptions that bode well for the still-evolving tablet space.

McPheters? latest State of the App report says more than 9,000 magazine apps were in the market as of October, twice the number from a year earlier. Adobe says more than 2,000 apps have been produced using its Digital Publishing Suite, accounting for 40 million issue downloads as of August. Zinio says it has has more than 5,000 publications in its digital newsstand.

The Alliance for Audited Media said digital replica editions surpassed 5.4 million for the first half of 2012, more than double the previous year?s period. In May, Hearst Magazines said its monthly tablet magazine sales had reached 600,000. Hearst?s Cosmopolitan achieved 100,000 paid digital subs in March.

There?s still plenty of experimentation to be done in how publishers package and sell content on tablets and smartphones. In April, Nieman Labs? Ken Doctor explained why publishers must adapt their pricing models to a new era of 99-cent media. "If you have lots more to sell, then 99 cents isn't a price, it's a price of admission,? he wrote ?It's not about the money ? it's about establishing a new relationship."

Paywalls

The Great Paywall Debate continued unabated this year, especially among news publishers looking to compensate for rapidly declining print revenues. The Washington Post, a persistent holdout, finally blinked late in the year and is expected to add a metered paywall in 2013.

Successful models are emerging. In July, the Financial Times said that digital subscribers exceeded print subscribers for the first time. The New York Times in October reported an 11% increase in digital subscriptions across its three titles, although those gains

were not enough to offset declines in both print and digital advertising.

Gannett announced in October that Q3 revenues from print circulation increased 5.6 percent, which it attributed to all-access subscription plans that many of its newspapers had implemented. ?The early success of our new, all access content subscription model resulted in significant growth in company-wide circulation revenue,? the company said in a press release.

Smaller publishers also experimented with pay platforms. TinyPass, which sells a ?content access and monetization? platform to independent, regional and ?long tail? publishers, grew its customer base from 20 early in the year to more than 250 by October.?

Some publishers are looking to preserve their high-volume free sites by launching separate sites that house newspaper content behind a paywall. The Boston Globe launched BostonGlobe.com as a subscription-based companion to its existing Boston.com site in 2011, but attracted only 25,000 digital subscribers in the first year. Still, others are following suit, with the Houston Chronicle and the Philadelphia Inquirer and Daily News announcing initiatives to split from their free sites and create new subscription-based brands.

Many media watchers continue to advocate for paywalls as the only way to save news organizations. In November, CJR?s Dean Starkman argued that the Washington Post?s ?anti-paywall? strategy is actually an anti-growth strategy.?Starkman condemned any ?digital-first? model built around ad-supported, free content instead of a subscription paywall.

But strict paywalls are more of a Band-Aid for bleeding business models and outdated infrastructures ? not a long-term fix for the publishing industry. Scout Analytics? Matt Shanahan argued that successful digital subscription models will be driven by monetizing usage rather than the users themselves. ?Comparing print subscriptions to digital subscriptions highlights why usage behavior is the basis of revenue, and applying the principles of yield management shows why metered pricing models produce the most revenue,? he wrote.

Commerce

U.S. retail e-commerce sales surpassed $43 billion in the second quarter, up 15 percent year over year ? the 11^th consecutive quarter of year-over-year growth, according to comScore. No surprise, then, that more publishers looked to grab a piece of the e-commerce pie in 2012.

Media companies such as F+W, Thrillist and Techdirt launched or expanded their commerce offerings, underscoring the appeal of e-commerce to broad product segments, from arts and crafts to men?s fashion.?

Publishers are also dabbling in e-commerce enhancements to their digital editions as consumers embrace tablets as a shopping platform. A 2012 survey by Keynote Competitive Research found that 62% of tablet users purchased a product from their tablet.

The promising future of tablet-enabled ?couch commerce? has grabbed the attention of some media companies looking to expand their digital business models. MyLuckyMag.com, a new e-commerce website that Conde Nast?s Lucky brand launched in August, is optimized for tablets, and Lucky?s new digital edition apps will let subscribers purchase items directly from their devices.

In addition to integrating commerce functionality into editorial content, publishers are exploring ways to help brands add commerce features into advertisements. Brands and agencies have been slow to invest in tablet-optimized advertising ? just 13% of the ads in publishers? iPad apps have commerce capabilities, according to McPheters & Co.?s latest app-tracking research.

Marketing services

In its latest Communications Industry Forecast, investment firm Veronis Suhler Stevenson predicts marketing services spending will increase 4.4% in 2012 to $204 billion, rising steadily to $236 billion in 2016. That?s a big playground for publishers looking to expand their relationships with marketers and agencies beyond traditional advertising.

One services segment where brands? purse strings may be opening wider is content marketing. A November study by the Custom Content Council and ContentWise found that brands spent an average of more than $1.7 million on branded content in 2012, a 5.1% increase over the previous two-year average, and 38% of respondents said they expect their branded content budgets to increase in the coming year. What?s more, more than half of respondents said they outsourced at least part of their branded content creation to external agencies. That?s an open door for publishers looking to leverage their content expertise.

Another segment that?s heating up is social media, with publishers such as IDG and Meredith turning their internal social media expertise into service lines. IDG?s Amplify encompasses nine distinct services, products and programs for IT marketers, ranging from monitoring to advertising to content development. The social practice within Meredith Xcelerated Marketing (MXM) provides a range of services including strategic consulting, community management and analytics. The group also has a creative team that helps clients develop and curate social content.

For B2B publishers, lead scoring and lead nurturing services are gaining favor among marketers looking to improve the quality of their lead-generation efforts.

Magazine brands that want to build a marketing services business have to make sure they don?t stray too far from their identity as content creators. If they do, they risk losing the brand equity they?ve built up with their audience. A declining audience means marketing services become far less appealing to advertisers.

Source: http://www.emediavitals.com/content/5-disruptive-digital-revenue-models

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