The four business models for the content industry and the KPIs you should never use

Categories Analytics, Insights

Last month we started a new series about content analytics. In the first article, ‘Social Media in the age of free, unlimited information. Do people really want to be lied to?’, I presented the reasoning behind companies’ and publications’ decisions to choose flawed KPIs to measure their achievements and to track their performance. This next series will present the business models a company operating in the content industry can use to monetize its content.

There are several possible content-specific business models for the digital world. The list is not complete, there are countless ways to make money, but these are the most common business models I’ve encountered or worked with:

Free content, supported by ads

If we take a look at free content websites, they make money from impressions. They give free access to users, don’t charge a dime for anything found on their website, but rather rely on knowing their audience and selling the “users profiles” to advertisers. If you use programmatic advertising, provided you have some knowledge about your viewers, you can still have a viable business model through profiling and segmentation.

“Fool me once, shame on you; fool me twice, shame on me”

But what happens if your promotional technique of choice is the so-called “clickbait” and the “polished lie” we’ve talked about earlier?  What happens when your users don’t get what they clicked for and they end up disappointed with misleading titles and poor information? They leave. You will have only one action on your website: the initial click. And after a few seconds, BAM! Away your precious user goes, sending your bounce rate sky-high. No more surfing through your website, no more 7-8 impressions per visit, no more inventory to sell. You can fool a user once, maybe twice. But the third time you’ll post something fishy, they’ll see your website as untrustworthy and they’ll second guess their willingness to click on your links. Also, Facebook is bragging with their shiny new anti-fake news algorithm, which will presumably  cleanse the newsfeed of the trending fake stories. So beware!  

The proportion of new versus returning users in your analytics reports of this particular business model depends on your content and how targeted it is, but also on your traffic sources. For example, if you’re a news website, a good indicator would be around 70+% returning users, who are loyal to your content. That way you can really know your audience, segment it and write about what they’re interested in. If you have more than 30%-40% new users, it means that you are not doing a very good job at convincing your viewers to return to your website (on a regular day, not when an unexpected event happens and you have a traffic spike), but also you don’t really know who visits you in terms of demographics, profile and so forth, so it’s harder to get a good CPM (cost per impression). However, if the content website is niched, targeted, and your traffic is mostly organic, than your proportion of new vs. returning users can be more evenly split. For example, a website that posts content about cooking recipes will have a very high degree of traffic coming from search engines. But that’s not bad at all, because you already know what type of people are interested in your articles, you do your segmentation via your content, so it’s still relatively easy to know your audience. However, if in this case the new users count trumps the returning users, it still means your articles or titles do not provide enough incentive for readers to come back.  

Subscription

The subscription based business model is highly common all across the Internet, for websites that use digital content, regardless of their type: newspapers, services, streaming content, gaming, magazines etc. They all have in common that they use some sort of paywall to monetize the content. They are differentiated by the way they implement the paywall: some ask you to pay as soon as you click on their content and you can’t view it unless you have a subscription, some apply it after a free trial, and some after you deplete your view count – let’s say they give you 5 free page views per day, on the 6th they will ask you to pay. Here’s a cool statistic: a report by the American Press Institute shows that most of the big newspapers in the US are using some form of digital subscription. According to the study, out of all 98 newspapers with a circulation of 50,000 or more, 77 use some sort of paywall – which means a staggering 78% percent of the big newspapers use a paywall. The same study found that “86 percent of newspapers with a daily circulation between 50-100,000 use a digital subscription plan and 64 percent of the newspapers with circulations over 250,000 do so.”

Selling content became increasingly difficult for newspapers and publishers, since you can almost always find the same article for free somewhere – either written by someone else or simply ripped off from your website. News agencies MUST rely on two vectors to boost their credibility and motivate people to pay: speed and quality. You have to be among the first to publish a story once it’s breaking and you need to have good, qualitative content, with in-depth analyses to make the users feel they get what they pay for. With free news aggregators such as Flipboard, subscription-based business models for news websites are under siege. Many content sites had to cut deals with these aggregators to be part of their ecosystem. For example, if we look at the New York Times, they’ve cut a deal with Flipboard: as a subscriber you have complete access to all NYT stories through Flipboard, while you can only read the top 10 stories as a non-subscriber. The downside is that the NYT has to share the revenue obtained via Flipboard with Flipboard.

In this case, it’s paramount to have an eye-catching proportion of returning users, since those are your subscribers. Unless the new users are your new customers, it means they landed on your page by clicking on something they were interested in, but left as soon as you asked them to pay for the content.

Freemium

Freemium is another popular business model among content companies. It provides several alternatives to monetize the content, providing both free and paid versions. For an article, you can only have the first paragraphs for free, and you have to pay for the rest, or you have a personal version of the site vs. a business version, with much more in-depth analyses and graphs and access to a wider database. This can extend to paying for an ad-free version of the site, to reading the content without the distraction of banners and advertising and so forth. Some content websites implemented microtransactions on-site, to get more revenue lines. For example, you can purchase some games directly from the article page – for example FarmVille, ad-free Angry Birds and so forth.  

When making the case for returning vs. new users, it’s a mix of the two previously presented models, since they have both free and paid content. But since your ultimate goal is to have a double conversion: to make the free-users click on the ads, but also to transform them into your subscribers and to get them to pay, quality is again paramount. If you managed to retain a user as a subscriber, you want to keep them coming to your website and continue to subscribe. So once again, we end up making the same argument: returning users are the end-game of the business.  

Affiliate & Content that help companies saves money

Affiliate, or content that makes the people buy into the brand, is another business model that started getting more and more attention with the explosion of e-commerce businesses. The content that promotes the products or services of a company can also be a revenue stream, not necessarily by itself, because more often than not, publishers will provide the content for free. And since you want people to buy into your brand and spend money on the specific item you put up for sale, ads are also selective. You don’t want them to buy that car that appears in an ad on your website, you want them to buy the sound system you are trying to sell with your article.

Most of the time, you won’t be able to convince a user to buy the first time they read about the product. In fact, approximately $4 trillion worth of merchandise were abandoned in online shopping carts in 2014 alone, according to a Business Insider study. Those were people that thought about buying a product, but weren’t fully convinced to complete the transaction.

To this category, I will add content that helps companies save money. For example, if you are a service company and you have a call-center for customer care, every employee is a cost for you. If you compile a list of frequently asked questions and articles that solve the most common problems of your customers, you are a lot more likely to save money, since a lot of the queries can be solved with an easy search. So voila, that’s some easy content that helps the company save money on the long run.

Conclusion

Maintaining a solid base of returning users is the best way to grow, both in terms of traffic and revenue. You will create a community, you will be able to rely on their constant interaction with your website and develop a loyal audience, which is vital for any content based business. Even if a high percentage of new users can be a strong indicator of a rapid growth, you should be quick to transform them into returning users to be sure you have a sustainable business. According to Kissmetrics, a study conducted on more than 18.000 e-commerce websites revealed that returning visitors dramatically outperform new visitors in terms of value for the website. The report showed that new visitors spend an average of 2 minutes and 31 seconds on-site, compared with 5 minutes 31 seconds for returning visitors, more than double. If we look at pageviews per visit, new visitors view an average of 3.88 pages per visit, while returning visitors look at 5.55 pages per visit. The difference is obvious.

So, websites that use clickbait titles, poor information, misleading tags and so forth, may gain a short or medium term traffic spike, maybe they’ll managAccording to Kissmetrics, a study conducted by creating content with a high virality potential, but that’s all a mirage, because you will lose your returning readers to a seemly broader audience of people who may or may not come back to your website ever again. In the long run, a content-driven business based on “polished lie” or poor quality content is nowhere near sustainable. Good quality is what drives people to come back.

But the real question is: What defines qualitative content and how do you measure it? I’ll answer this in the next article of the series 🙂 

 

Sebastian is a journalist and digital strategist with years of experience in the news industry, social media, content creation & management and web analytics.


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