The Spotify Model is Not Only Sensible – It’s Essential – for News
2 Apr, 2015
Lets start with what is indisputable. The traditional online news business model is dead.
The banner ad model was insufficient to begin with, and never generated the revenue publishers needed in their migration from print. The bigger problem is that the interaction rate for banner ads has dropped roughly 1,000-fold over the last 20 years. This leaves only one inescapable conclusion. It’s the same that one would have for any other product which dropped in effectiveness by 99.9%. It no longer works.
Evidence of this can be seen broadly in the gargantuan growth in supply of banner ads, and in the shift of marketing investment from above-the-line media buys to owned and earned media. It’s also evident in more tactical shifts wherein the ads that do sell, are increasingly sold on a last-click basis, with immediate, measurable ROI to justify the investment. And it’s also why the industry is under siege to in-view ads, auto-refresh, bots, etc. There are many different theories and complaints about why banner ads don’t deliver, but what is clear is that they don’t.
The worst part of this truth is that digital growth was supposed to be the salvation for news publishers. Publishers are still grappling with the demise of their print businesses, and trying to bring them to a ‘soft landing’. For them to now face a necessary reinvention of the digital business model at the same time seems an especially cruel twist. But, it is what it is.
Which leads us to what is new. The declining effectiveness of banner ads has spawned three hopes for the future of digital advertising. Data, native advertising, and content marketing. The first means that fewer of us need to suffer through irrelevant ads for Viagra and breast enhancements. The second, means that readers are increasingly presented with content that they don’t always realise is an ad, and the third is the marketer’s attempt to connect directly with her audience by broadening the communication platform and attempting to provide value through education.
All three of these models are indeed promising. However, data plays directly to the strength of platforms like Facebook and Google, which hoard declared information — logins, interests, networks, etc. For publishers who still serve a majority of anonymous users and can at best deliver ‘inferred intent’ through ‘behavioural advertising’, the opportunity is limited. The same goes for native ads. It’s one thing for Medium to partner with Marriott and create a travel site. But when people read a ‘Times’ or a ‘Herald’ or a ‘Tribune’, they expect an unbiased and incisive assessment. The line that news publishers are treading on native ads is a dangerous one, and one that is unlikely to yield huge gains for their core products. And the last, content marketing, once again does not benefit publishers whose newsrooms are already overstretched by producing ephemeral news stories for the broadest possible audience. Instead, this new opportunity has proven superbly well suited to PR firms that are increasingly staffed with former journalists, and deliver custom-made, ‘evergreen’ content.
So the first trend benefits the big technology platforms, the second — niche publishers, and the third — PR agencies.
Where then, is the solution for news? The simple process of elimination shows us, it’s not with advertisers, and it’s not with other buyers of content, so the answer for publishers must lie with the readers themselves.
Getting readers to pay for content is clearly the path of greatest resistance, but also, ultimately, the path of greatest promise. A mobile news publisher today will likely make less from a reader in a year than a bank will in one ATM transaction. This is a value exchange that makes no sense. Especially since the consumption of, and the need for, news is greater today than it has ever been, and rising.
So ultimately we come to the question of how to break down the resistance to paying for news. And on this, the data is clear. The reason why e-malls replaced the corner shop, why Spotify and Netflix and Hulu exist, and indeed, why Uber exists, is that the sum of the parts is greater than the whole. When you aggregate supply, you end up aggregating demand, and in so doing, you achieve cut-through and scale that would be simply impossible to attain individually.
This aggregation and optimization is the founding principle of inkl. Users are presented with an aggregation of content, at a subscription price, and are able to pick and choose what content makes most sense to them.. They want to consume beyond the paywall, but do not want to be limited to accessing a single brand due to the high price point. They are able to meet their intellectuatl needs, across multiple platforms, and pay, without being beholden to one single brand. They are willing to pay a premium price for U2’s Mysterious Ways without being subjected to “The Fly.”