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March 1, 2022

9 minutes

Segment Your Audiences to Increase Overall Revenue

This article was first published on Digital Content Next

Reader revenue is among news executives' top priorities. In fact, 79% of news executives who participated in The Journalism, Media, and Technology Trends and Predictions 2022 by the Reuters Institute for the Study of Journalism, said that revenue from initiatives like subscriptions and memberships will be among their key income priorities. As reader revenue gains popularity, it’s critical to assess the approach publishers take towards subscriber acquisition and revenue maximization.

Current approach towards reader revenue

In its simplest form, revenue calculation has two components: price and volume. Until now, the focus has largely been on maximizing subscriber volume as quickly as possible. This has resulted in publishers offering heavy price discounts to attract and acquire subscribers. Another tactic has been using excruciating cancellation policies to retain subscribers.

The outcome of such growth tactics may be acceptable, but they aren’t particularly attractive. Even the largest publishers barely manage to capture 1-3% of their total audience before plateauing in the second year.

What about churn? A study by Nieman Labs identified that the top reason for churn was “money” in different forms:

  • Promotional rates expired
  • Irritated that subscriptions auto-renewed
  • News organizations weren’t transparent about price
  • Lack of funds/budget
  • Already have multiple subscriptions

Evidently, the tactics used for quick subscriber growth are also the main reason for churn. As Nicholas Thompson, chief executive at The Atlantic put it during the 2022 DCN Next:Summit, “You can get to a million subs pretty easily: You can massively discount, right? However, if you set a goal solely on subscribers, it can move you in some harmful ways.” This means that there is an opportunity to maximize revenue by shifting focus to differentiated offerings for mutually exclusive audience segments. Let’s find out how.

Consider a segmented approach to reader revenue

In addition to money-related reasons, people also cancel their subscriptions because of a lack of value. They take out a subscription but are unable to justify the ROI.  Many can barely consume all of the content offered. It’s a classic “too much information, too little time” scenario.

Consider the example of an airline. Every airline offers at least four different pricing options for its flyers: economy, premium economy, business, and first-class. Based on their willingness to pay, spending power, comfort, need, and other factors, flyers select the most suitable class for themselves.

SaaS is another place where the segmentation of buyer personas is well understood. SaaS companies ensure pricing is different for small and medium businesses, and enterprise businesses. Then, within that, it usually follows a tiered pricing model based on the number of users or usage volume. The key lies in offering the right value to the right customer.

For most publishers who are reader revenue-focused, they typically only think about subscribers (1% of the audience) and prospective subscribers (99% of the audience) and keep recycling prospective subscribers onto metered paywalls or registration walls at best.  However, clearly identifying and segmenting never-subscribers will help publishers monetize this large user base much better.

Segment #1: The stalkers

We call the first segment of never-subscribers The Stalkers. They have no loyalty to any publisher and consume content from multiple sites without ever subscribing. Subscription models follow a winner-takes-most dynamic with the top few publishers capturing a majority. The median number of news subscriptions in the US is two. This means that a subscriber for one publisher will always be a never-subscriber for another publisher.

No matter how often publishers target this segment with introductory offers, free trials, or any other growth hack, they will not convert. So, ads are the optimal way to monetize this segment.

Segment #2: The daters

This segment of never-subscribers is made up of light readers we call The Daters. They could be open to subscribing but are scared to commit. They need to be convinced of the value or ROI they get from their subscription. So, even if prompted to subscribe with a paywall, they will not immediately go through with it (at least the first few times).

For this segment, publishers can explore a pay-per-content monetization model or voluntary contributions Maybe during the first three visits, this segment can be shown a subscription paywall. But, after that threshold, every time a casual visitor/light reader declines a subscription paywall, a pay-per-article paywall can immediately be shown. By doing so, publishers can eliminate any risk of subscription cannibalization.

Also, in addition to capturing first-party data, publishers will gain incremental revenue. Daters can then be nurtured towards a subscription with high-quality, relevant, and personalized content. Instead of offering an all-you-can-eat subscription, Daters could be offered a personalized micro-bundle based on their reading preferences.

This segment is also perfect for voluntary contributions. They already appreciate the content enough to keep revisiting. So before committing to a subscription, they may be amenable to your creative encouragement, even if they won’t subscribe.

Segment #3: The lovers

Finally, the third segment refers to the subscribers. We call them The Lovers. They trust their relationship with the publisher and hence the publisher's focus is on retention and creating hooks for daily engagement.

Unfortunately, a study by Medill Spiegel Research Center (SRC) has shown that 49% of subscribers never visit their paid publisher subscriptions even once a month. These are essentially zombie or sleeper subscribers who are highly likely to churn. When they churn, rather than showing them a generic subscription paywall yet again, publishers must treat them like The Daters segment, and engage and nurture them with pay-per-content or voluntary contributions.

Transitioning from volume to value

“I think that this is one of the follies of the industry – this volume chase. [We look at it from] a revenue standpoint, versus a ‘we are chasing this volume number’. There are all kinds of terrible things that you can do to your long-term viability and sustainability that will drive that volume number,” according to Kati Erwert, Senior Vice President of product, marketing, and public service at Seattle Times.

Revisiting audience segmentation, analyzing first party data, aspiring towards high quality content, and exploring innovative revenue models for different segments can help redefine value to those segments. By offering more value, volume will eventually follow. And if a greater value is delivered, publishers can command higher subscription prices. So then revenue becomes a value-game and not necessarily a volume-game..

Abhishek Dadoo

Abhishek is a seasoned business leader and technology product manager. He has worked in management consulting with PwC and Altman Solon in Boston, USA before moving to Singapore permanently. In Singapore he has held roles in market development with Ericsson and DHL before branching out to start his own venture, Shoffr, a digital marketing solution that provides online to offline attribution for digital marketers. In 2019, Abhishek sold Shoffr to Affle, a publicly listed ad-tech company in India.

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