Publishers: Focus on digital ads and subscription growth to offset rising costs | What’s New in Publishing

At a time of skyrocketing costs around the world, industries are feeling the pinch. News publishers remain stuck in the middle of this crisis. Print production costs rise along with energy bills and more. Publishers are seeing success with growing digital revenues, but finding the right balance between digital ads and subscriptions in the print-to-digital shift is complex – but the 2 can work in tandem. How are publishers increasing their focus on digital ads and subscriptions?

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Publishers’ financial struggle examined

Publishers increasingly plan divest from printing according WAN-IFRA World Press Trends Report. Examination of the latest financial reports from 3 US publishers sheds light on the mounting print cost challenges in 2022. Lee Enterprises recently announced a loss in the second quarter of $6.7 million, citing lower printing revenue among the reasons for the losses. The publisher has laid off dozens of employees and reports confirmed this week that 400 others have lost their jobs.

Gannetfinances tell a similar story with a loss of $54 million. Alongside the decline in printing revenues seen in Lee, Gannet were also affected by all increased printing costs. The cost of newsprint is up 31% compared to a year ago. Rising newsprint costs also had an impact Dallas Morning Newsof which the prices of printed newspapers also increased by 31%. This, combined with other factors, including an $800,000 drop in print distribution revenue, resulted in losses of $2.4 million in the second quarter.

Importantly, challenges have also been observed in engaging readers in digital. To INMAit is recent webinar some hard-hitting statistics stood out. Heavy users of information products have shrunk by a third since their pandemic peak. Overall user sessions are also down 14% since the first quarter of 2021. Perhaps the most concerning stat presented by Greg Piechota was that news subscription cancellations are up 34.4% since the first quarter of 2021.

It’s not all gloomy, there is digital hope

Despite the issues with print and perceived digital struggles, there remains a sense of hope. Only 7% of participants in INMA online seminar said they were pessimistic about news engagement and subscription growth in the fall and winter, with 81% having mixed feelings.

Source: INMA Webinar

Gannetit is Phil Schroder brought optimism. He believed the news could continue to grow for the rest of this year and beyond, especially with the upcoming U.S. midterm reviews. Aleksandra Sobczak of Gazeta Wyborcza also explained that newspapers have faced many crises in recent years, but people still need good journalism to explain things. She firmly believes that during an economic downturn, readers will stick with publishers to receive the information they need.

Central to their optimism is digital growth. GannetThe Q2 financial statements reported a 1.5% growth of digital revenue compared to Q2 2021, representing 35% of total revenue. Lee Enterprises also reported digital growth 33% year-over-year, with digital accounting for 31% of total revenue. While digital is clearly gaining importance, what is the balance between subscription and advertising?

Digital subscription revenue continues to grow despite cancellations, focus on retention

Despite rising cancellation rates and pessimism surrounding follow-up subscriptions netflixlosses at the start of the year, digital-only subscriptions continued to grow linearly since 2019. Subscriptions might not be the things people are going to cut right away according to Greg Piechota. This is because they are a means of making deferred purchases.

Source: INMA

The publisher’s focus on digital subscriptions paid off. Gannet reported a paid digital subscriber number in the second quarter 1.87 milliona 35% year-on-year growth figure. Dallas Morning News added 2053 new digital-only subscribers in Q2 to bring their number to 62,688, up 18.4% from the end of Q2 2021. Digital-only subscribers in Q2 Lee Enterprises now total 501,000, up 49% year-over-year. Acquiring digital subscriptions is clearly working well for publishers, but rising churn rates suggest a need to focus on retaining subscribers.

Gannetit is Phil Schroder highlighted the success by focusing on that. Their most important retention tactic was to continue to remind subscribers of benefits through a monthly benefits newsletter highlighting stories, apps, and other features like the ePaper. These newsletters have a high open rate and CTR compared to their daily newsletters. In August, Gannet launched its first engagement campaign solely with app users. Click-through rate increased 3x compared to other in-app campaigns. Perhaps the most interesting retention experience Gannet the launch plan is direct mail (yes, real mail!) to unengaged users on the digital side. According Phil Schroder, studies have shown that younger audiences don’t receive physical mail, so it’s now more effective than 10 years ago. The publisher will launch the test with its 3 weakest cohorts of users.

After acquisition efforts came to the fore in the pandemic era, it’s clear that retention is needed most now.

Subscriptions and their data put publishers in the best position for digital ad revenue

Invest in your subscription business also pay in your advertising business. The cookie is crumbling but thanks to registrations and subscriptions, publishers are well placed with the data. According Adobe, first-party data acquired by publishers is the basis for strategic partnerships. These partnerships are increasingly made with advertisers according Media Innovation Consulting. With other industries unable to leverage their users’ first-party data, publishers are now a central part of the ad tech ecosystem. They have a golden opportunity to use their data.

The focus on ads is worth it for publishers looking to replace print revenue. Digital advertising money can supplement subscriptions. Digital advertising as a whole grown by 33% in 2021 and ad spend is expected to grow 9.7% to $836.9 billion in 2022. Zenith predicted digital advertising across all channels will exceed 60% of total global ad spend for the first time in 2022. When it comes to digital advertising for publishing in particular, WAN-IFRA found these revenues increased by 16.5% in 2021. With the expected growth of the digital advertising market, there is clearly room for these revenues to increase.

Source: WAN-IFRA

Some publishers have started to find success with their digital advertising strategies to start moving away from problematic print. Despite their losses, Lee Enterprises reaches the digital inflection point in advertising, with digital ads now generating 51% of overall ad revenue. Gannet also always see success with ads for subscribers. Their all-access digital subscription with ads is cheaper for subscribers and still more popular than the premium digital product without ads. In Europe, West France operates a freemium model with Evening Edition. Once readers hit the signup or subscription wall, they can watch ads to learn more.

Subscriptions and ads can work hand in hand, and finding multiple revenue streams to replace print offers a greater chance of rebuilding revenue. Publishers must work to find this balance.

Matthew Lynes
Media Innovation Analyst @ Twipe

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