The opportunity cost of content monetization
There's no need to rehash the economic devastation wreaked upon the newsmedia over the past decade. The reflex reactions, as we know, were to (1) cut, (2) be "digital first" and (3) seek to aggressively monetize content.
While we might cut our way to short-term viability, we can't cut our way to long-term prosperity. And the sometimes chaotic efforts to rapidly become "digital first" – rather than "customer first" – led to the disastrous customer experiences and privacy concerns that have, in turn, been manifested in ad blockers and, frighteningly, digital revenue declines at some highly visible publishing companies.
At first blush, content monetization seems a reasonable pursuit. Such pursuit has taken many forms, but two of note include (1) the broad domain of "paywalls" or metering of digital content, and (2) aggressive pricing actions for both print and digital content.
Why do I say reasonable "at first blush?" Here's why:
- I strongly believe that only a relatively small fraction of consumers will pay for digital content. This belief is fundamental to the law of supply and demand – and the supply of digital content is virtually infinite. It may not be your content – but it is content that delivers a comparable amount of utility for most of us – and it's free. Don't believe me? Google my beloved Denver Broncos and you will find unrestricted access to more content than can be consumed in the entire upcoming NFL season.
- Pushing the limits on subscription pricing will indeed yield revenue increases. But if we raise prices until someone yells "Uncle," inevitably many do. Models designed to maximize circulation profitability do that very well – but they fail to account for the commercial value of a customer relationship lost or never acquired.
In neither of these scenarios is the overriding objective to optimize the number of customer relationships, or the volume of commercially deployable intelligence that can derived from those relationships. What is the opportunity cost of a customer relationship that never materializes?
I often quote Bob Gilbert, vice president/audience at Morris Publishing Group, who said, "Revenue follows audience(s)." These three words have dramatically reshaped the manner in which I communicate the urgency with which the newsmedia must embrace a data-driven approach to the industry business model.
It is essential to recognize that one customer relationship can contribute to dozens of audiences. Those audiences can be defined in multiple dimensions – demographics, lifestyle interests, content consumption, channel preferences, purchase intentions, etc. For those visionary enterprises that have aggressively invested in the identification, development, packaging and delivery of those audiences both geographically and digitally, the future is compelling.
I briefly discussed the reflex reactions of cutting resources, digital first and content monetization. As many now believe, the truly measured response is one of revenue diversification that embraces events, native advertising, digital agency services, video, niche publishing, email marketing, direct mail and more. The success of each and every one of these initiatives – and those that have yet to be conceived – are vitally dependent on the depth, diversity and integrity of our customer intelligence. It is only through this knowledge that we can ensure relevance of communications and content.
Do I advocate abandoning efforts at content monetization? Absolutely not, but I strongly believe that the paradigm to do so must add value to the customer relationship beyond just content. Hence, I favor membership initiatives that not only deliver added value through offers, discounts, spiffs, etc., but also capitalize on a sense of community. Moreover, I encourage the forward-thinking to reconsider the currency of exchange. It often costs consumers nothing to "pay" you with meaningful data; in turn, smart marketers can transform that data into much more revenue than the cost of a subscription.
As we watch ad revenues fall across the industry, we must question whether the continued devastation is self-induced to some extent. That is, are we so focused on maximizing the value of our content that we are failing to optimize the prospective value of our audiences?
Tom Ratkovich is the founder and managing partner of LEAP Media Solutions. He can be reached at email@example.com.