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Going Beyond Advertising: Revenue Diversification in Publishing

The pandemic has had a profound short-term effect on publishers around the world -- a jump in readership somewhat dampened by disappearing advertising revenue. In many media firms, the digital channel has become most important, accelerating the move to digital while also highlighting the fragility of the display advertising market.

Can publishers from both the traditional and online worlds really expect to have a decent future if they rely only on display advertising? As you can probably guess, this is a loaded question. After all, more than 60% of digital advertising in the United States is controlled by either Google or Facebook, and some publications have little choice but to engage the major players for advertising. Additionally, consumers indicate a general distaste for advertising (just look at the predominance of ad blockers), but have also repeatedly shown that they are rarely prepared to reach into their pockets when asked for payment.

It is every publisher's responsibility to at least explore how to establish a variety of revenue streams. Many firms are already pursuing revenue diversification as a core element of their strategy -- though with mixed success -- so it is a good time to review advertising alternatives.

Where can publishers generate revenue?

Going Beyond Advertising - Publishing 24th November.pngLet's look at the available options to generate revenue and examine which might work for you. Ironically, we can look back at the old dead-tree publishing world for some inspiration here. While advertising has pretty much always subsidized the production costs of print newspapers and magazines, it isn't the only source of revenue, as is often the case with digital offerings. Let's examine traditional revenue sources as well as those unique to digital channels.

Traditional revenue sources

Direct revenue. Selling copies of periodicals at newsstands was arguably the original publisher revenue model. This source is in decline in paper-based products (hit especially hard in the pandemic), and more tricky for digital publications. Direct revenue is best-suited to books, guides, annuals, or professional journals.

Subscription or donation revenue. The nirvana of publisher models -- build a loyal paying audience that frees you from day-to-day sales and readership concerns and provides a steady forecastable income stream. I will have a lot more to say in future posts about the success of this model, and how firms like The Guardian and The Atlantic are making it work, but it is not for everyone. If you are a high-traffic, general-interest publisher, there is a risk that casual visitors will just turn to free sources.

Events. Publishers with a distinct brand and loyal readers have often used their credibility and following to front events. Either attendees pay to participate in the event or partner vendors pay for access to the attendees, both very profitable arrangements if done well. The Financial Times and The Economist -- with their business and professional readerships -- have run high-profile events for years. This type of revenue has declined with the travel and in-person gathering restrictions of the pandemic, but it will recover (in some form) over time.

Digital revenue opportunities

Revenue diversification is not just about transferring revenue models from the old world to the new. The digital channel has some unique revenue opportunities that are made possible online. 

Aggregator revenue. Getting consumers to pay directly for access to content may be too much of an ask for many publishers, so why not let an aggregator worry about that and just cash the checks? Well, services like Apple News+ don't have great publisher terms and, as of yet, nor do other aggregators. Interestingly, some governments may change the arrangement between technology platforms and publishers. For example, Australia is pursuing legislation to get Facebook and Google to pay publishers, but the reliance on legislation to change the model is usually a long and frustrating journey.

Alternate media revenues. Counterintuitively, given the competition in video, radio, and podcasts, several publishers like The Times are looking at other communication channels for growth. Much like in the events model, a strong brand and loyal cohort of readers can be driven to other media -- especially if familiar writers, columnists, and journalists are working across channels.

E-commerce affiliation. E-commerce platforms, much like advertisers, pay for the source of consumer sales via affiliate programs. This can work well for digital publications focused on reviews, self-improvement or home improvement, or travel, provided strict editorial walls are maintained. Interestingly,  publishers like Dennis are taking this concept further by moving from listing and reviewing cars into financing and selling cars.

The disappointments

The drive to diversify away from digital advertising is by no means a new phenomenon. There have been various ingenious efforts for at least a decade, but with little sustained success. Crowdfunding platforms like Kickstarter allowed some book publishers (and digital content providers) to realize their visions, but many failed to hit goals or, even worse, took the money and failed to deliver. Similarly, crowd subscription platforms like Patreon have worked for some content creators and small to midsized firms, but haven't scaled. Finally -- and this may still take off -- microtransactions that enable per-article payment showed early promise, but hit the dual wall of transaction costs and consumer payment reticence once they got beyond the experimental phase.

Difficulty versus payoff

Everyone pretty much understands how the advertising model works, though there is definitely room for optimization here. However, many of the new revenue opportunities are somewhat unknown in terms of effort and technology requirements versus the potential upside and payoff. 

The trade-offs in revenue diversification will vary for each publisher. Broadly speaking, models like events, aggregators, and e-commerce affiliations demand more negotiation and people skills, while subscriptions, direct revenues, and alternate media require both a shift in reader emphasis and new technology investment.

Online performance, delivery of rich media, personalization, and security will remain key components of any successful publishing strategy. Revenue generation opportunities require agile technology platforms, robust security solutions, and the ability to scale reader surges. Akamai works with some of the world's biggest publishers to ensure their digital offerings are secure and efficient, without sacrificing performance.