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Device-Specific Revenue Models For Newspapers

Posted by Dan Vigil on June 16, 2010

Subscription fees or advertising? That seems to be the question at most content organizations these days.
As online ad revenue has continued to disappoint (at least when compared to print revenue), media companies are leaning away from free offerings and looking for subscription revenue in their digital offerings. It may have been a mistake to offer content for free on the web 20 years ago and it’s definitely worthwhile exploring payment models, but consideration should be made to the way that content is delivered.

Subscription and advertising revenue models are not the same on all devices. The trick is to find the right blend of subscription and advertising dollars and that may be more dependent on the type of device that content is delivered on than anything else.

With the continued growth and popularity of tablet and e-reader technology, new digital subscription and ad revenue models are emerging. The features and capabilities of various devices as well as the audiences that they attract, effect the value proposition of both content and advertising.

In general, smaller, more portable devices may provide less content capability and more advertising capability. Larger devices may provide greater content capabilities and less advertising capabilities. Based on these relationships, we’re starting to see device specific business and revenue models emerge. Smaller devices are commanding more advertising revenue and less subscription revenue, and vice versa for larger devices.

The following device features and capabilities may have an effect on subscription and advertising revenue models:

1.Share of Voice:
Limited display real estate (300 x 200 pixels on the high end), limits the number of available ad positions that can be displayed on hand held devices, this results in a greater share of voice for advertisers on small devices. Most hand-held devices only display one ad on the screen which results in an exclusive opportunity for many advertisers commanding higher CPM’s on the advertising side. Standard websites displayed on desktop monitors typically contain 3 to 4 ad positions, often buried within online content resulting in a lower share of voice for larger devices.

2. Location-Based Targeting:
One of the major advantages of advertising on portable devices is that you can engage consumers in specific geographies and at specific times. Restaurants can display coupons at lunch time to visitors within a 5 mile radius etc. IP addresses can be identified on larger more stationary devices, but location cannot generally be determined within the same tolerance levels that it can on mobile devices. Location based advertising and services are poised for substantial growth in the next 36 months (Juniper research predicts that revenue from all location-based services will rise from $3 billion in 2009 to $12.7 billion in 2014.)

3. Audience:
Consumers who engage in mobile activity are arguably a more desirable audience for advertisers than web site only visitors. This group of early technology adopters is known to be made up of educated, high income earners. They are also a highly active group by definition since they are accessing information on their mobile devices. Desktop computers, on the other hand, are becoming more common place. As bandwidth and hardware costs decrease, the demographic profile of web site visitors is becoming more representative of the general population in some areas. Once again, we see smaller devices gaining on the ad revenue side.

4. Content Display Areas:
Whereas a smaller display area helps with share of voice, it limits the amount of content that can be displayed. Portable devices are not ideal for displaying full feature stories or enterprise reporting. The likelihood of readers moving beyond headlines and short summaries decreases as the display size decreases. Desktops and tablets, on the other hand, provide more opportunities for content and make it easier to share larger volumes of content on a regular basis. It may be easier to demand higher subscription fees from larger devices as there is a greater perceived value for the content they provide access to.

5. Mobility:
Ideal for news alerts and updates, smaller devices are less effective for delivering complete content. While users will pay for convenience and delivery, they may not perceive as much value from a subscription to alert based information than they would from more complete content delivered via the web.

6. Functionality:
As device size and processing power increase, functionality increases. The ability to print, copy, share, and view more of the story behind the story is second nature for desktop computers and tablets. Even the iPad provides access to third party utilities that allow users to print. The New York Times: Times Reader 2.0 is a good example of how some media companies are starting to employ subscription revenue models on larger devices. At $4.62 a week, this desktop-installed application provides increased functionality and interactivity that’s not yet possible on mobile devices and tablets. At the same time NYT offers ad-supported iPhone and iPad applications that allow access to content without paying a subscription fee.

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