It’s no surprise that advertising isn’t quite the engine for media companies that it once was. Horsepower is leaking away as print circulations shrink and digital ad spend is hoovered up by platforms rather than publishers. At Digital Media Strategies ’17, a panel of media experts from Hearst Magazines UK, Dennis and Future Plc discussed the need to move away from an overreliance on advertising and discover new revenue streams.
Future Plc’s chief financial officer Penny Ladkin-Brand began the morning sessions by explaining the situation as succinctly as possible, saying: “There’s a lot of headwinds around digital advertising right now. That’s why we’re focusing on diversifying our product portfolio”.
Consequently, she notes that Future Plc has been focusing on acquisitions that promote new revenue sources, noting that its acquisition of Team Rock earlier in the year was driven in large part by its pre-existing membership service.
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And in fact the benefits of developing new recurring revenue sources was a consistent theme of the morning’s sessions.
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Launching new ecommerce products using the expertise of different brands is an increasing focus of many publishers. Dennis Publishing’s CTO Paul Lomax explained how the company’s acquisition of buyacar dovetailed so well with Dennis’ existing proposition and has become a significant revenue generator:
“Our model is more trying to make a sustainable growth model where once we apply marketing to it it will be cash generative. What we’re just started doing is leveraging our automotive titles… we’ve got a really great asset there.
“People do want to transaction online now. We’ve always been wary of how a transaction model would work [alongside advertising]. Is that going to reduce the value of advertising for the advertising partners? We’ve found it can work if it’s targeted well.”
As Dennis’ James Tye has previously told TheMediaBriefing, ecommerce of that type makes sense for big ticket items. Since Dennis’ automotive titles enable it to reach two-thirds of people in the UK who are looking to buy a new car, diversification into that ecommerce model makes sense.
And building upon existing editorial expertise was noted as being essential for revenue diversification. The more well known and trusted a brand, the more capable the parent company is to build new products around it. Hearst Magazines UK’s CRO Duncan Chater explained:
“We now have a diverse range of events… lots of different ways for partners to engage with us and for us to take extra revenue direct from consumers. The consumer is an area that’s been growing massively. A lot of advertisers want to get involved in some way It’s really allowing us to use our expertise. Last year we launched Esquire Town House and that really gave us the opportunity to use Esquire’s deep contacts.”
Of course, it’s no use building products or services that don’t have the opportunity to scale. The Business of Fashion’s chief commercial officer Nick Blunden explained how its team builds products in an extremely lucrative vertical, built upon the foundation of a great relationship with an audience created by means of great content:
“We’re a startup media business focused on the £2.4trillion global fashion industry, we’re predominantly a B2B play.
“Off the back of that we launched events… which has been great for us. Beyond that we have membership revenue streams… the reason why [we don’t call them subscriptions] is that we look at is as more than a subscription proposition. It’s a five revenue stream business model.”
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Lomax does note, however, that simply having the editorial expertise in a given vertical is no guarantee of smooth sailing when it comes to diversification. He notes that Dennis was lucky in having its expertise in automotives – with buyacar now responsible for fully a quarter of Dennis’ revenue – but it had to work hard to build that side of the business:
“Most of our titles are quite lucky… very close to transactions. The challenge in events and ecommerce is… they’re both bloody hard. You can acquire that scale expertise but it’s very hard to if you’re doing them as a thing you do once a year as a bit of a sideshow… it’s very hard to make money from them.”
Blunden concurred, noting that not every publisher has the luxury brands around which they can build new products: “For each business you have to be really disciplined. It doesn’t work for every brand and every business.”
Chater noted that diversification required a whole new set of metrics to measure the success of those new products, particularly when it comes to measuring how the relationship between quality magazine content can drive purchase intent in other areas. Despite that, the panel agreed that when it comes to building those new products to compensate for falling magazine print revenue, it will be quality content that is ultimately responsible for the company’s ability to launch a new product or service.