The Economist’s digital strategy and the limits of a model based on advertising

http://www.niemanlab.org/2015/04/the-economists-tom-standage-on-digital-strategy-and-the-limits-of-a-model-based-on-advertising/?utm_source=Daily+Lab+email+list&utm_campaign=464c55f003-dailylabemail3&utm_medium=email&utm_term=0_d68264fd5e-464c55f003-395827456

by dnetesn • 11 years ago

63 49 11 years ago

niemanlab.org

inthewoods3• 11 years ago

It's telling to me that the former editor left to go to Bloomberg. Bloomberg represents, in my opinion, a more sustainable approach to news - they want their news org to break even or make money, but they don't expect it to be a barn burner and recognize that having the news sources internally gives them an advantage in their core business - their terminals. Dow Jones is taking a similar approach. With this approach, they can afford to pay for excellent journalists while not being a slave (completely) to the advertiser. It keeps them out of gray-areas like native advertising as well (although Bloomberg may have that as well).

hackuser• 11 years ago

Dow Jones is taking a similar approach

What is Dow Jones doing that's similar?

inthewoods3• 11 years ago

Bundle news services with professional/investor services - they are obviously much more a pure media play via News Corp and the WSJ.

lrei• 11 years ago

Bloomberg does native advertisement but they label it as such.

The whole anti native advertisement movement seems so late it's silly considering news publishers have been basically doing it for years without any disclaimer. PG wrote about this some back in 2005: http://www.paulgraham.com/submarine.html

inthewoods3• 11 years ago

PG was writing about PR and the ability to place stories. This is different from native advertising. PR can place stories because, as PG points out, the news media is lazy and needs to feed the beast.

Native advertising is the reporting being actually bought and paying directly. Native advertising is a natural outcome of a struggling business model - they looked at what they were doing around PR and concluded that they could make actual revenue on it.

michaelchisari3• 11 years ago

I wish we could do micro-subscriptions in a seamless way. I would gladly pay $0.50 a month for a site to get the ad-free version of it.

Unfortunately, the legal and financial problems with those kinds of systems have kept that from becoming a reality. It's not a particularly difficult technical challenge.

bodyfour• 11 years ago

Probably the bigger problem is that the more money you'd be willing to pay to get rid of ads, the more your eyeballs are worth to a potential advertiser. You're demonstrating that you have disposable income that you're willing to part with to overcome an inconvenience.

michaelchisari3• 11 years ago

the bigger problem is that the more money you'd be willing to pay to get rid of ads, the more your eyeballs are worth to a potential advertiser

I think that's a concern, but it's not a bigger problem than money laundering or illegal activity or anything else that micro-payment systems have had to deal with.

With micro-payments, you can't deal in actual currency. You have to move around some kind of "Credits" that at some point get exchanged back to currency in bulk to a payment processor, otherwise the transaction fees are greater than the payments themselves. This is dollar signs in the eyes of anybody who likes to play games with international money.

It's a space for cryptocurrency to be sure, but the push-based architecture makes recurring subscriptions a little tricky from a user standpoint. Not to mention that the user has to have cryptocurrency to begin with.

lsc5• 11 years ago

Probably the bigger problem is that the more money you'd be willing to pay to get rid of ads, the more your eyeballs are worth to a potential advertiser. You're demonstrating that you have disposable income that you're willing to part with to overcome an inconvenience.

Hm. Conventional wisdom is that at least for websites making money off of adsense, you don't want to advertise to Engineers, because like most sophisticated customers they don't click on ads.

My take is that the class of consumers willing to pay money to block ads is likely to be more sophisticated than average, and thus less likely to click on ads.

hmahncke• 11 years ago

I don't think $0.50 a month is going to keep The Economist going - it costs $160/yr.

michaelchisari3• 11 years ago

True, but I think we'd all be surprised at how much our favorite ad-supported services are making per-user per-month on advertising. My back-of-the-envelope calculations on some of them has led to me to believe it's really not much.

slyall• 11 years ago

I subscribe to the digital edition of the Economist, mostly read it via the mobile app but previous I read it on the website. Got really annoyed recently since they raised their prices from around $100/year everywhere to being a discount on the local cover price.

What was worse that since the cover price where I live (New Zealand) is much high than the US I was paying 2.5 times the US price to subscribe to exactly the same digital product, without even the excuse of delivery costs. So I changed my address to the US.

More details here:

http://blog.darkmere.gen.nz/2015/03/parallel-importing-vs-th...

CONTRARlAN2• 11 years ago

That's unfortunate.

The Economist's attempts at creating a sensible digital pricing model has just been a range of awful options. From the Kindle, to the iPad, etc.

To say nothing of the fact that it's still cheaper to just find a decent discount on the print edition and access the web version via that account, than it is to save the materials and costs and go digital-only.

For all the normative claims they make about the need for better environmentalism and economic policies, they sure seem to have difficulty keeping their own house in order.

dingaling• 11 years ago

To say nothing of the fact that it's still cheaper to just find a decent discount on the print edition and access the web version via that account

I thought I had found a clever trick when I called them and asked them to stop physical delivery ( as will they do if you're going on an extended trip, for example ). The next week they also suspended my digital access...

I tried to explain to them that I didn't actually want the paper copy but it didn't register with them. When it came to renew, I let the subscription lapse because it felt so wasteful to be throwing the magazine straight from the letterbox into the recycling bin. And I wasn't prepared to pay more to go without the paper!

sumedh• 11 years ago

Its also about the purchasing power of the country. In India the yearly subscription is about 85 USD.

Most Indians will not be able to buy it if the cost was 400 NZD per year but maybe New Zealanders can afford to pay 400 NZD per year.

gerty2• 11 years ago

Got really annoyed recently since they raised their prices from around $100/year everywhere to being a discount on the local cover price.

Wow, that's actually true (though I'm in Europe). I can consider myself lucky to have taken a 3-year subscription last summer under old pricing model. Now it's almost twice the price, it would also make me think twice now before renewing. I love the Economist and I do take a look at the Espresso from time to time, it's really well done, but, as a long time subscriber, I'm not willing to finance their video or "Buzzfeed model" experiments.

IkmoIkmo• 11 years ago

The fairest pricing model is I guess to do a profit-based one. Take your costs and add the profit you want and that's your price.

As in, if it costs $2 to deliver a print, and the content costs $4 to produce, and you want $1 of profit, you price it at $7.

If you take out the cost of delivery, and find that the software team (hosting, apps, web design, database etc) costs $1 which replaces the $2 print delivery, you price it at $6.

The $6 would be pretty much universal, the $7 might be $9 in some places where delivery is expensive.

Anyway their current pricing is one of those things that the market should sort out in a few years. Seems like they can temporarily get away with charging 2.5x the American price because the costs of mailing is so expensive. But once you get other media going fully digital, or even partially digital, with the ability to massively undercut that price while staying profitable, you'll probably see prices come down a bit (or stop growing as fast as the rest of the world.)

Shitty thing to do though. On the other hand, consider this... NZ is probably a bit of an outlier. A place without a big enough market to make massive shipments by relatively cheap water, forced to do expensive shipping, and small enough for local printing not to make much sense logistically, creating a huge gap between digital costs and print costs. A discount-on-print is probably a pretty smart, easy, straightforward and fair pricing model almost everywhere else. Is it a better alternative to go with a pricing model more convoluted, more volatile and less straightforward for the entire world market, to accommodate a small market? I might have made a similar pricing decision if I worked there. Anyone got other good ideas?

aembleton• 11 years ago

Annual subscription in the US: $127

Annual subscription in the UK: £126 (~$187)

In the UK, we're being charged nearly 1.5 times as much and The Economist is based here!

tomjen39• 11 years ago

the promise we make to the reader is that if you trust us to filter and distill the news, and if you give us an hour and a half of your time — which is roughly how long people spend reading The Economist each week — then we’ll tell you what matters in the world and what’s going on.

Except then somebody else mentions something else that the Economist hasn't talked about, or shares another article on Facebook and then you still have to go read that, or be left out.

Plus just getting your news once a week: 9/11 happened on a Tuesday, you wouldn't know until friday. The US president is elected wednesday night, you don't know until friday which means the people you talk with are going to assume you are a fool.

draugadrotten• 11 years ago

Plus just getting your news once a week:

You seem to believe that the Economist is a newspaper. They clearly say they are _not_. They are a news _filter_

I find The Economist's core idea to be very good. They "he promise we make to the reader is that if you trust us to filter and distill the news," They do not aim to be reporting the latest breaking news like CNN or Twitter, in real time. They aim to be the only media you need to read to understand "what matters in the world and what’s going on." No small undertaking, but a great goal.

tomjen39• 11 years ago

Certainly a great goal, but every newspaper claims they are a filter (All the news that is fit to print is a filter) when they are really a newspaper (ie a paper with news).

What I question is the delay. If I have to wait several days to know what is going on, then by definition, I don't know what is going on. Even if I finally catch up on friday, by saturday I will still be behind.

zmb_• 11 years ago

I've actually been relying entirely on The Economist for my news for over a year now. I used to spend a lot of time reading various news sources, but then at some point started asking myself for each story I read: "Does having this information make any difference to me? Do I need to know this? How much information does this actually contain?" to which the answer was "No, no, and very little".

The Economist's weekly schedule filters out a lot of the useless noise and it gives time to write in-depth analysis rather than just bloating up non-news to fill the 24h news cycle. As a result I have a much more in-depth understanding of the current affairs than I had before. Of course my view also gets slanted by The Economist's biases, but those biases are at least well justified and supported most of the time.

Of course that does not mean I'm blind to the world around me. When a president gets elected or 9/11 happens or something else that actually matters, I will hear about it. It's just that a lot of the useless noise masquerading as "news" gets filtered out.

tomjen39• 11 years ago

The problem I have with filtering out news articles is that you are right about the mean, median and 0.9 quantile of news.

I am not convinced that the value/impact of the 1% doesn't drastically outvalue the rest. That said it seems they are offering a month free so I guess I should go have a look.

toyg2• 11 years ago

Plus just getting your news once a week:

Which is why they launched Espresso, a daily roundup.

It's always been clear they don't want to be a 24h-news org -- they would never have enough resources to compete with the likes of Murdoch, and that's really poor journalism anyway. They basically want to be the most popular think-tank ever -- that's what "thought leadership" means. So they just have to do enough to let you feel like you're in the loop, and then put the hammer down where they want to steer discourse.

davidw• 11 years ago

9/11 happened on a Tuesday, you wouldn't know until friday

Do you really think you wouldn't have noticed through some other channel? It was kind of hard not to be aware of.

tomjen39• 11 years ago

Advertising doesn't work because ads are so badly targeted. For kicks I turned adblock of on Facebook and the offers are so generic and useless, "oh you are a single guy you must be interested in this subpar dating service", you must be interested in saving money on heating from this company 100 miles away, you must be interested in a Bitcoin miner, are you really sure you don't want to sign up for a subpar dating service, here is this game that you can play it sucks like all the other free to play games.

The only company that can actually target ads is Twitter.

blumkvist2• 11 years ago

I find it pretty funny that you say that the only company that can target ads loses money every quarter, while you bash on a company who makes gobs of money through advertising.

Also, advertising certainly does work. Just not so well for organizations like The Economist, because they are pressured by new media companies like Facebook, which have the eyeballs and the necessary targeting options to deliver the same audience cheaper, plus every other audience you can imagine.

tomjen39• 11 years ago

Do you have evidence to suggest a causal relationship between Twitters inability to make money and its better ad targeting?

That is to say, would Twitter be better at making money if it had ads that were targeted worse?

toyg2• 11 years ago

This is a pet concept of mine:

"the idea that news organizations can hand over their content so it can be consumed on other platforms. The advantage, obviously, is reach, and maybe that model works [...] I’m not sure it does — it just means you’re splitting the advertising revenue with someone else.

Standage assumes this model can only work where "other platforms" are sustained by advertising, but I think that's not the case. Any app with a subscription model could do it, and at that point you as a news org are actually tapping into their revenues, regardless of where they come from. I think the first reputable news org that will make its content developer-friendly from a licensing perspective, will soon become a platform for all sorts of revenue-generating experiments.

Software and hardware devices will keep expanding -- any news org in isolation will constantly struggle to keep on. The Economist were among the first to launch on iOS, Android and Kindle, but they've missed other boats likes Snapchat Discover and this can only happen more and more frequently as the web expands. The only way to exploit this is to leave the minutia of platform-specific tweaks to other developers, and concentrate on producing great content people want to pay for.

the-dude• 11 years ago

The Economist is already on Blende ( https://blendle.com ), an article-publisher/aggregator with micropayments from a wallet, no ads.

mike_hearn• 11 years ago

I'd really like to see a strong competitor to the Economist that reuses their core model, but minus the absurdly over the top biases (sorry, opinions). Sort of like a weekly more in depth version of BBC News, with saner digital pricing and a more attractive website.

I used to be a regular read of TE, but stopped last year because of the infuriating and endless propaganda re: Putin and Russia. The topics they write about where the editors have very strong opinions on controversial topics have always been by far the worst of their output.

As Standage points out, people read TE to feel at the end like they're informed. To read TE and at the end feel like I've been treated like a child, or shovelled a big steaming plate of angry warmongering ... well, it didn't give me the TE experience I was paying for.

They should have learned from their experience of strongly supporting the invasion of Iraq, but apparently no such luck. I hoped after Micklethwait left they'd get a grip on this but it only got worse. They just don't seem capable of talking about wars or foreign policy with anything like the same detachment that they'd discuss e.g. the economy of Indonesia.

When I read on the BBC occasionally I read something eyebrow raising too, but it's much, much rarer. They have a specific commitment to being unbiased, they clearly separate fact from opinion instead of mixing them and overall they don't seem to have many journalists or editors with extreme opinions. The BBC's accuracy suffers badly however from being a real time news organisation. Whenever I read something that's clearly (factual) nonsense on the Beeb it's pretty obviously always because someone who wasn't a subject matter expert had to throw together a story within an hour and struggled to do it well.

A combination of the two approaches would be something I'd happily pay for again.

RyanMcGreal• 11 years ago

"what we actually sell is what I like to call the feeling of being informed"

Ugh.

The Economist’s digital strategy and the limits of a model based on advertising

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