Since You Can’t Rely on Advertising, How Are You Diversifying Revenue?
Four proven strategies that might work for you.
Headlines touting impressive growth in digital ad revenues may appear delightful at first glance, but the bigger picture isn’t so pretty. Unless you’re one of two companies, that is. That’s because Google and Facebook ate up 83 percent of incremental ad spending in Q3 2018, which nets out to 81 percent of the growth in digital advertising for the first three quarters of last year. This means that all of the other players in digital advertising—from Hearst and The New York Times to Amazon and Reddit—must divvy up less than 20 percent of the spend. Needless to say, the necessity for revenue diversification has never been greater.
Though media brands have regained a little of the ground lost to Google and Facebook, the wins are small, and the digital advertising market is volatile. So, it’s no surprise that an increasing number of media companies are experimenting with direct-to-consumer (DTC) revenue streams. In fact, Digital Content Next’s membership reports that 20 percent of its revenue is already derived from sources other than advertising.
Subscription offerings are high on the list. Unfortunately, despite spending on some visible support for publishers’ subscription-based offerings, both Google and Facebook benefit greatly from free content. Their massive empires have been built upon it. And though there are some very promising signs on the subscription front, paywalls will not suffice to sustain the industry. So: diversification.
Given the need to find new revenue streams, here are a few viable approaches that you should consider:
Reviews meet commerce
Sure, Amazon’s got e-commerce on lock. And the company has an incredible number of consumer reviews to bolster product selection. For a while, it looked like peer recommendations were going to supplant expert reviews. The problem is trust. Increasingly, consumers have come to realize that these sorts of review systems are being gamed, and this seems to be causing a resurgence of value for media reviews. Combine these with commerce, as The New York Times has done with Wirecutter (which was a critical piece of the companies 47.7 percent growth in “other revenues” last year), and you’ve got a winning combination of service journalism, trusted brand and capable commerce. Fashion brands like Marie Clare and Vogue are making the obvious leap from expert-editor-curated fashion to click-to-purchase, while other brands are using pop-up shops to sell everything from toys (Buzzfeed) to tech (Wired) to housewares (Good Housekeeping).
Live and in-person
The New York Times also cites live events as part of its rapidly growing “other revenues.” Without a doubt, this has become one of the most common brand extensions for publishers. Events may sound like a massive undertaking, they don’t have to be big to contribute to your overall fiscal wellbeing. In fact, depending on your audience and their needs, less may well be more. While Atlas Obscura has a wide range of on-brand off-beat travel-based offerings, the company has also done well with live events on topics such as lock-picking and solving cold-cases. Local media company Spirited Media has found low-overhead happy hours to be not only a crowd-pleaser, but also a solid revenue driver.
The revolution will be televised
There’s been a mad scramble among traditionally broadcast based media to embrace cord-cutting and capture OTT revenues. Given the rise of digital video, media brands of all kinds are getting in on the action, including Viceland (cable TV, Hulu), Bloomberg TV (Apple, Amazon Fire), and Condé Nast Entertainment (film, Netflix, TV). According to new research from Atlantic Re:Think, Gen Z shows an even higher affinity for video content than millennials. Keep in mind that this is not about a pivot to video. Please: No more pivoting. These are examples of media brands that have found new audiences on both new and old platforms and are monetizing these audiences through advertising and newfound licensing revenue.
News preferences are highly indicative of compatibility. And, with its Soulmates app, The Guardian demonstrates that its ability to understand its readers and safely and effectively match them up is also a revenue driver. Lifetime encourages viewers to indulge their “guilty pleasure” with the opportunity to stream its particular brand of movie offerings anytime, anywhere as members of the Lifetime Movie Club. Boston Globe Media launched STAT, which is “focused on finding and telling compelling stories about health, medicine, and scientific discovery.” Okay, sure, it is essentially a freemium model. But what’s interesting is how this news media company identified an underserved market, then developed a niche product to fill the need. And to reduce the company’s reliance on advertising, it offers a robust paid membership tier to support both quality journalism and the bottom line. There are a multitude of brands testing niche offerings on topics ranging from the fashion business (Vogue Business) to the Catholic Church (Crux) and the wildly popular New York Times crossword.
As Bleacher Report COO Alex Vargas put it when talking about his company’s niche offerings, “What all these things have in common is they have a profile of niche areas where we can build communities. In this day and age, audience is somewhat of a commodity.” So in a world with and over-abundance of content, interest-based audiences are easier to monetize through advertising or almost any other revenue model.
Needless to say, not all experiments will pay off. And not every revenue stream will flow equally for all publishers. However, the days of protectionism are long past us. We need to veer outside of our comfort zones to find our way to becoming the kinds of diversified businesses that will weather advertising’s uncertainties and all that the rapidly changing digital media business throws at us. And, as publishers explore a variety of DTC revenue opportunities, the most important thing is to remain focused on our audiences and deliver the kinds of positive experiences they expect from our valued and trusted brands.