Yield management has been applied in many industries from airlines to movie theaters. In many cases, the adoption of yield management principles and the supporting analytics stemmed from disruption.
The publishing industry is no different. Digital transformation of the news media industry has stressed existing publishers to such an extant that old practices are no longer sacred. The core challenges facing publishers in the digital business model are the same as in their print model; how to attract and retain paying subscribers, how to extract the most revenue from their advertising inventory and what content to publish to maximize product quality and customer satisfaction.
Each of these actions has evolved under the digital business model, and new innovative approaches to these processes are continuing to emerge.
Subscriber Acquisition and Retention
The greater importance of audience revenue to publishers creates a need for sophisticated analytics for customer acquisition and retention activities. The first significant innovation in digital customer acquisition was the metered pay wall in which a customer receives a set number of articles for free and then is required to subscribe to continue reading more content. The Financial Times was the first publication to implement a meter, and they were widely imitated.
Challenges with this approach are both tactical and strategic. Tactical challenges include enforcing the meter when readers are blocking cookies, using multiple browsers on different computers and reading content on their mobile devices. Strategic challenges are balancing the competing interests of advertising revenue and subscriber revenue.
Publishers have an incentive to lower the number of free articles to increase the number of sales attempts as readers hit the meter limit, and in general, we have seen the number of free articles decline from 20 to less than 10 a month, which places a much higher percentage of advertising inventory at risk. A dynamic meter combines information from advertising sales with subscriber analytics so that there is a formal integration and recognition of the potential lost advertising revenue from a more restrictive meter. A few publishers are piloting these dynamic meters, and the early results confirm the ability for publishers to increase subscription sales with minimal advertising revenue loss.
Other innovations in digital customer acquisition are targeted offers based on customer content interests and consumption patterns and creating targeted products that can be bundled with the core product. Subscription offers that reflect a reader’s interest in sports, local news or business are more compelling than general interest offers. Serving these offers on the publisher’s own site, as well as other sites the reader visits, can increase the number of successful sales. For subjects with large, engaged digital audiences, packaging content into dedicated products can increase offer conversion rates. We have found that in many markets, business and sports content provide compelling business cases for additional coverage that can be sold to highly engaged readers that may not consume other content from the publisher.
Advertising Revenue Yield Management
Amid the upheaval in the publishing industry’s advertising market, the biggest change is the dominance of platform firms that control the vast majority of digital audiences through social media sharing, search and mobile platforms. These platform companies are seeking partnerships with publishers to get access to their content in return for a share of the advertising revenue generated by the inventory associated with that content. Publishers have an incentive to sell advertising to be delivered on these platforms, as they will keep 100 percent of the revenue from those ads. If the platform companies sell the advertisements delivered with the publisher’s content, the publishers get 70 percent of the revenue. Publishers will need to decide what content should be offered to the platform firms and what content should be retained for their own distribution to premium customers that are paying subscribers.
Similarly, they will need to sell advertising for delivery on their own platform, sell advertising for the platform distribution and then place unsold inventory on exchanges with different price targets and business rules. Knowing what each of these advertising inventory categories is worth to advertisers and how best to sell that inventory is a challenge that publishers are tackling with a variety of tools. Perishable inventory pricing models used successfully in other industries are applicable to the publishing industry, as well. In concert with a dynamic meter, a dynamic advertising rate card can maximize the revenue yield from a perishable advertising inventory, particularly if that inventory is segmented based on targeting capability, platform, day part, day of the week and many other dimensions.
Content Cadence and Product Development
Digital content consumption can be tracked in unprecedented detail using new tagging and data storage technologies. Understanding how individual pieces of content attract readers, convert subscribers and generate advertising inventory can yield important insights for optimizing content production and packaging.
Publishers will need to use consumption data to predict how content publishing patterns will affect unique users, page views and engagement metrics. We call this content cadence modeling, and we find that in many cases publishers can do more with less, meaning that a well-designed and executed publishing schedule can get more traffic than one with more content that is not efficiently scheduled.
Packaging content is a new capability for publishers to explore. Much as cable companies have bundled groups of channels together into packages for decades, publishers also can bundle content types for purchase. The ability for publishers to use digital distribution channels removes many constraints that existed in their print businesses for customized product offerings and focused products. We find that unbundling the core product is not often the best strategy for publishers because it potentially cannibalizes their existing products without sufficient revenue growth potential.
Instead, we recommend developing augmented coverage of specific subjects with passionate audiences willing to upgrade their base subscription to include more coverage of a particular topic. On a related note, we find that using platforms (such as smartphones, tablets and browsers) to differentiate products often causes poor customer experiences. Customers feel that if they have paid for access to content on one platform, they should have access to content on all platforms. Using premium content access to differentiate customers avoids this issue.
Publishers are using yield management principles and analytics to improve business performance and generate additional revenue and audience volumes. The digital transformation of the industry has created far more data than the print publishing business model, and as other industries have demonstrated, using data effectively for business optimization can yield significant returns.