UPDATE: Scott did get back to us and said he was reluctant to talk because he feels it's quite a sensitive issue. He didn't want to come across as arrogant or question other approaches and he's certainly not turning his back on ad revenue as it is still very important to the business. But he says he's been looking for the tipping point for the past seven years and he reckons it arrived when the business started "comfortably and reliably generating more [online] revenue from subscribers per week than from advertisers".
"We've reached that point, so it becomes a matter of encouraging subscribers to support us." And to do that it's decided to enhance the experience for readers and clean up the site.
He says the top banner will be the only display ad remaining across all the pages on the site, and it might occasionally sell the NBR equivalent of a takeover, but it will still sell ads in the thousands of email newsletters it sends out each day.
Original story: Online media is largely fuelled by advertising revenue. And many believe this inherently parasitic relationship is inspiring a race to the bottom as publishers seek clicks and scale above all else. But the NBR is going the other way and focusing on growing subscriber revenue. And, as part of that strategy, it is getting set to remove all but one of the ads from its homepage.
Strangely, publisher Todd Scott didn't want to talk about the decision until November when it could show the results, but he was quoted in the NBR saying: “In this day and age you simply can’t expect to fund a good-quality news service from advertising alone. Thus our focus is to deliver the very best experience for our member subscribers and ask them to help crowd-fund to greatness, without the need to clutter a website with annoying pop-up ads, or worse, ads that appear smack bang in the middle of an article ... We need the business community’s support to take business news reporting to another level. We are moving away from such a heavy reliance on advertisers and asking businesspeople to help fund the best-resourced and business focused newsroom in the country through subscriptions.”
Whether a subscription should be called crowd-funding or simply 'business' is up for debate, and while it's calling the move "radical", it's not clear if other ad zones on the site will also disappear (at present, the big banner and all the other ad zones on the home page are running house ads). But, as Scott says, less reliance on ad revenue means "harder stories".
Many believe the need for scale with the ad-funded model has decreased the quality of journalism, with ever more click-bait and personality-driven stories leading to a dumbing down of society (a la Mike Judge's seemingly quite prescient Idiocracy), and the rise of native advertising leading to a gradual erosion in trust and independence. The Telegraph was accused of this recently after supposedly going soft on one of its major advertisers, HSBC, as was the new owner of the Financial Times, Nikkei, for its non-coverage of the Olympus saga and other corporate dodginess.
When we talked with Fairfax Media's Simon Tong recently about stuff.co.nz's quest for scale, he said people have been questioning the quality of journalism for years, and that the perception clickbait was taking over was a fallacy.
“We’re blessed with Stuff as it’s not tied to a masthead and it allows us to play with a broader range of content. It’s allowed us to be a serious news site through to a less serious site, which, quite frankly, people enjoy. You get this view of serious vs. clickbait and I don’t buy into that. I think you can do both. What we need to do is get the content into the right place. You want to read the stuff that’s important to you and not the rubbish.”
But it's hard not to see the light overtaking the shade and the sugar rush of vanity metrics impacting the types of stories mainstream media brands cover. Over time, that impacts on a news brand's standing. And, as Jemaine Clement tweeted yesterday after becoming the subject of a 'story', "social media is not news media".
Business media does have an advantage over mainstream media because it's generally seen as content that can be helpful for people's jobs so it's more valuable and it is also often paid for on the company credit card. Last year, the Financial Times claimed two-thirds of its 665,000 subscribers were digital and they generated more than half of its overall revenue. But at the opposite end of that spectrum, Quartz, which is owned by Atlantic Media, has succeeded by offering free business content with a commercial model based on high quality display ads and native.
There are many different models being experimented with to keep the journalism flowing, from the New York Times' leaky paywall, to Pro Publica's public interest model to the quiet billionaire/charitable trust approach of The Guardian or First Look Media. As Dallas Gurney said, NZME has chosen the advertising model, but that has its dangers. nzherald.co.nz has recently been running some fairly low-rent ads on its site. And while programmatic networks claim to offer publishers the ability to choose the types of ads that run, it seems hard to believe a respected news brand like the Herald would be happy with them. It also uses Outbrain for recommendations and sponsored content that feature at the bottom of the page (as does Stuff), plenty of which necessitates those who do actually click on it to give themselves a good scrubbing down. As comdedian Aziz Ansari said recently, getting trapped in the addictive cycle of online content is like reading a million pages of the world's worst book.
When we last talked with Scott, he said the fact that an increasing number of subscribers—whether through its corporate IP subs or individual subs—were willing to pay for online access made it a more appealling audience for advertisers to target and it could charge premium rates. So could the NBR maintain both revenue streams? Magazines have been playing on this 'engaged audience' since ages ago to attract advertisers. And Sky TV is an interesting example of a media company that has its cake and eats it too, with subscribers paying high prices for subscriptions and also being forced to watch ads (Sky says around ten percent of its revenue is derived from ads). There is a line, of course. But NBR's ads were not particularly intrusive. Still, with even more scarcity, it will be hoping it will drive up the price of its main banner.
As a recent op-ed in The New York Times said, consumers should have the option of paying online services like Google, Facebook, Instagram and Twitter to not be treated like a product. Interestingly, some companies are able to pay adblockers to get their ads through. But ad blocking is becoming a big issue for publishers with traditional display ad-funded models—and the advertisers that pay for the space. Companies like Buzzfeed that incorporate ads into their editorial rather than rely on display can fight against that, but it's set to become an even bigger issue with the release of iOS9.
The NBR has been busy in recent months trying to provide more reasons for readers to prise open their wallets. Scott said not being able to access content when online subscribers were away from the office was a bugbear for many. So it created a $90-a-year smartphone subscription and offered all employees who worked for companies with an SME or Corporate IP subscription a free six-month sub. It then offered its smartphone-only subscription free to anyone until August 31 and it says close to 7,000 have signed up.
In March, Scott said he hoped to increase digital revenue to $1.3 million by the end of the year and, if it manages to convert 10-15 percent of the free triallists to paid subscribers, he hopes to go into the 2016 year with well over 4,000 online member subscribers. In the long term, he says it has a target of 10,000 subscribers.
Scott has a radio background, both in sales and as a host, and the company has invested heavily in digital radio recently, building a new studio, hiring newsreaders (often reading stories that are behind the paywall) and getting its growing stable of journalists (and others) to speak about stories. With podcasting and ondemand audio on the rise, it also recently upgraded the service with the customisable MyNBR Radio, "a world-first on-demand, streaming audio service featuring instant access to audio versions of articles, interviews and panel discussions".
"NBR Radio and MyNBR Radio are being enhanced all the time, including upgrades over the past week for faster access from mobile phones and support for pause, fast-forward and rewind through the new 'phat scrubber,'" the story said.
So the NBR's increasing reliance on reader revenue looks like a win-win.