Striking the right balance between advertising and subscriptions

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Advertising and subscription revenues are sometimes seen as incompatible. But at a recent media conference, Financial Times CEO John Ridding said publishers don’t have to choose; there is still “strong growth” to be had in both revenue streams.

  • Riddings revealed that revenues from digital content at the FT are bigger than all the newspaper’s other revenue streams combined. The next biggest is print advertising, worth three times less than digital content.
  • He also said that the FT’s digital advertising revenues grew 30% in 2020. This rate of growth put digital advertising ahead of print advertising in the final quarter of the year.
  • The paper’s chief executive explained that the growth was not a coincidence: “It’s the result of deeper audience data and, as a result, an increasingly effective marketing proposition. So it isn’t ads versus subs – there is strong growth to be had in both.”
Robust foundations

Ridding’s take on the advertising versus subscriptions discussion was that, as a publisher, you, “can have your cake and eat it”. But he introduced a significant caveat – only if you have a “robust reader revenue foundation”.

  • The FT is now reaping the rewards of moving early into gated content.The paper first launched its first online paywall in 2002 and now has a combined print and digital subscriber base of more than 1 million.
  • “For others who left it late and chose to focus on scale, reach and advertising it involves casualties and consolidation,” Riddings said. “We saw that last year with the retrenchment of some of the main challengers from new news media and we’ll see more this year.”
Revenue mix

There has long been a drive to diversify revenues away from old-school ad-funded models. In 2012 the then chairman of Hearst magazines David Carey said a publisher needed five or six distinct revenue streams to survive.

  • For many publishers, revenue diversification has meant adding events or ecommerce and a turn away from advertising. This has been compounded by the dominance of Google and Facebook in the digital ad space.
  • However this view from the FT will encourage many publishers that it is possible to develop a paid content business and protect the advertising income, which is still significant for most publishers.

In his Rebooting newsletter, ex-Digiday editor-in-chief Brian Morrisey argues that ads are still a great business opportunity. He cites twice-weekly business strategy newsletter ‘Not Boring’ as a strong example.

With 40,000 free subscribers on Substack, the newsletter producer Packy McCormick has chosen to forgo paid subscriptions, instead running “well done, in-depth ads on a well done, in-depth newsletter”.

Morrisey expects ‘Not Boring’ to eventually adopt a hybrid model that mixes the profitability of advertising with the security that recurring revenue from subscriptions provides. But long term, there are still questions over how a mixed advertising subscription model will work online.

  • Will paying readers accept advertising within their subscription content?
  • Does asking people to pay get in the way of the scale that advertising relies on?

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