Opinion

Publishers, be friends, not enemies with Facebook – it’s your future

Media houses struggling with low-margin advertising and poor returns on subscription models need to embrace the social aggregators with their own sophisticated digital strategy, argues DTS' Marcelo Silva

Facebook recently announced its plans to introduce metered paywalls to its ‘Instant Article’ offering, in a move to appease its disgruntled news publishers who have long complained out the poor revenue returns offered by the social network.

However, the real test now lies with consumers; whether they will embrace this new option or simply vote with their wallets and seek their news fix from the multitudes of free sites in the ecosystem.

Either way, the challenges that  magazine and news industries are facing are unlikely to go away anytime soon despite Facebook’s best efforts.

Most industry incumbents, who predate the digital era, make the common error of trying to dictate how digital disruption is executed, before they truly understand all the threats and opportunities. And part of this stems from them not placing their digitally-minded customers at the heart of their strategy.  

Publishing organisations need to reconsider their approach to transformation. Here are five tips to help regain some sense of control over this digital strategy:

Don’t force old business models onto consumers and digital platforms

The rapid decline of magazines is an example of an industry that struggles with digital disruption. Before the internet, magazines were very profitable with revenue-per-page yields extremely high. From a consumer perspective, magazines were aspirational, authoritative and a trusted source, regardless of your interests. Overall, they were great value for money.

However, in the space of a decade, the internet began to disrupt these lucrative models, which for years seemed impenetrable. This timing coincided with the launch of the iPhone and the proliferation of mobile devices. Consumers’ habits quickly changed, coupled with the advent of social media where the rise of free timely news became the format-of-choice for consumers, despite some questionable editorial practices, including clickbait titles and copycat journalism.

Many magazine and news publishers have been guilty of leading with an internally focused strategy and forcing that on the customer. As a result, there are many examples of unsuccessful attempts to monetise digital platforms. Not even a paywall on one of the world’s top publishers The Wall Street Journal seemed to be able to stem the tide of editorial layoffs – an issue that continues to dog the journalism industry all over the world.

To succeed, publishers need to become comfortable with the a paradigm where consumers are now in total control of the way organisations do business and ‘digital’ has been thrust to the heart of a customer-first strategy. A digital strategy needs to be built on the foundation of meeting consumers’ needs and wants.

Ensure your distribution strategy is a blend of on and off network elements.

This notion is extremely difficult to embrace for organisations that pre-date the technology boom because they have traditionally dictated or owned the entire distribution chain.

The rise of the online aggregators – Facebook and Google – profoundly changed the online user experience, especially relating to how content surfaced online. Aggregators deep link users to specific articles and bypass the publisher’s homepage. In some instances, homepages are lucky to receive five-to-10 per cent of all visits, in contrast to 10 years ago when they were the front door to everyone’s online experiences.

Moreover, users typically ‘bounce’ or leave a publisher’s web site after spending 30-to- 50 seconds on a page and typically tap or click on the back button – and usually go straight back to Facebook or  Google. The chart below shows the dominance and power of Facebook and Google when controlling distribution to magazines and news publishers.

The step-change in consumer behaviour has forced publishing brands to relinquish distribution control, causing anxiety and fostering mistrust between publishers and the online aggregators, despite publishers carrying advertising from these platforms and earning revenues from ad programs like Adsense. They have become ‘frenemies’. However, for a digital strategy to succeed, publishers need to embrace the change and account for this new distribution model.

Focus on the ‘why’  element of your business and not the ‘how’ 

To make up lost ground and to win the hearts and minds of digital consumers, magazine publishers invested millions in digital magazines – sold via the Apple App Store and Google Play. This is a prime example of a disrupted incumbent forcing an old business model onto a digital platform. The lack of consumer take-up, along with the underwhelming sales figures, clearly demonstrated that this was never going to be the silver bullet the magazine industry was hoping for.

At the core of the problem, the value proposition was missing the mark with consumers preferring the free experience provided by the online aggregators. Of note, the overall online aggregators’ experience is well curated, providing convenience and consolidation. A one-stop-shop, if you like, underpinned by a very sophisticated data strategy.

Leadership is key

Executives that can successfully manage the transition from traditional business models to new ones are worth their weight in gold. The reinvention of business models is a complex process, fraught with danger, and culturally can run up against resistance from risk-adverse boards and company executives.

Research shows that more than 50 per cent of digital transformation projects are driven by the chief executives or managing directors. So the spotlight is on senior leaders to come up with solutions to ensure the longevity of the businesses .

The Facebook experiment could be a deciding factor – and no doubt Google won’t be too far behind with its own solution.

Marcelo Silva is the Singapore-based founder of Digital Transformation Scores

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