The advertising industry is in freefall. Particularly when it comes to publishing, and particularly online.
2020 has been especially disastrous, with the impact of COVID-19 causing businesses of all kinds to drastically cut their advertising budgets. This — as has been exhaustively reported — led to what the Financial Times has called “carnage” for digital publishers, who are still reliant on advertising revenue. The results? Heavy staff layoffs, downsizing across the board, and vulnerable titles — particularly local media publications — closing shop altogether.
Global pandemics are, of course, almost impossible to predict. But the accelerated decline of advertising? How could anyone not see that coming?
Advertising revenues have been see-sawing for well over a decade now. The last time they were this bad was during the 2008 financial crisis, and while the industry has been hoping for a recovery, that didn’t emerge over the following 10 years. (2020 was, ironically, supposed to be the year digital publishers finally turned a profit.) Instead, the industry continued to decline: Mass advertising in print and TV no longer influenced consumers, and audiences were more likely to block digital ads than click on them. This culminated, in 2013, with Jonathan Perelman, then vice-president of agency strategy at Buzzfeed, stating that “You’re more likely to summit Mount Everest than click on a banner ad” — 279 times more likely, in fact, according to Solve Media.
The decline continued, but the final nail in the coffin may have been 2018’s Cambridge Analytica scandal. While that controversy was based on Facebook’s alleged harvesting and use of users’ personal data in the 2016 US elections, it opened an even larger can of worms. End users were suddenly presented in no uncertain terms with how much personal information they were inadvertently (and unwillingly) sharing online. Publishers’ almost religious commitment to the latest in targeted advertising proved deeply unpopular, demonstrating as it did how consumers could be pursued by advertisers across websites, platforms, and even accounts.
So, if their advertising revenue has been threatened for well over a decade, why weren’t publishers better prepared?
The Issue With Subscriptions
In general, the publishing industry is not particularly experimental. Publishers are willing to grow if opportunities present themselves, but they are far slower to course-correct when they need to. Ironically, this can best be seen when we look at how publishers have addressed the decline in advertising dollars to date. They rightly acknowledged the need to focus more on reader-generated revenue, but virtually to a one, they all steadfastly embraced one single business model — growing subscriptions by implementing paywalls.
Loyal readers enjoy subscriptions, because it’s an easy way to consume — at a flat rate — the content they really like. Unfortunately, they don’t appeal much to casual readers, people who may want to regularly read a few articles but aren’t ready to make a commitment. Subscriptions are not an appropriate answer to people’s surfing behavior because they ignore that we all consume content on a myriad of sites but may only want to subscribe to one or two. One could say that subscriptions ignore or sacrifice the overwhelming need of the many for the benefit of a few. And that’s why paywalls are a real kicker — potential regular readers find themselves forced into either accepting a subscription model or not being allowed to access the content they want.
Many publishers are seeing their subscriptions grow during COVID-19, leading them to believe this is a sustainable revenue model, but I believe it’s actually a false-positive. Especially during the early months of the pandemic, when consumers were frantically searching for information, they were devouring unprecedented amounts of content online and so, naturally, subscriptions grew. But can publishers expect that to continue once the coronavirus begins to abate? Or will the Reuters Institute Digital News Report prove correct, predicting that users no longer want to have multiple news subscriptions?
A Mindset Shift
Publishers are missing the chance to establish and nurture value. Intensifying their relationship with users by allowing them to access precisely the content they want, when they want it. And unfortunately this is because they are not accustomed to adapting to their users’ needs. Publishers need to stop thinking just from their own perspective and instead they must accept that a paradigm shift has taken place — from a push to a pull model. Now the power equation firmly favors the user. If a reader hits a paywall when they try to access the content they want on one site, they’re more likely to go somewhere else to find it. The power is in their hands.
Cosmin Ene is the founder and CEO of LaterPay, a payments and technology company with offices in the US and Germany. Under Cosmin’s leadership, LaterPay has become the monetization standard for local publishers in Germany with over 200 clients, and has expanded to the US market.