Nieman Foundation at Harvard
[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]
Back in 2002, the Financial Times took a radically different path than most of its news publishing peers: It decided to charge its online readers to access its content. Flash forward eight years, and the FT model — a metered model — is the one many publishers are eying and beginning to test. The New York Times plans on debuting its metered model early next year; the Times Company-owned Worcester Telegram went metered this past week. Journalism Online is now powering MediaNews’ metering tests in York, Pennsylvania and Chico, California.
We can see the FT lineage in the Journalism Online Press+ pay solution. “The FT pioneered use of the meter as an elegant approach to freemium for news publishers — letting casual visitors continue to sample a selected number of articles per month while asking the most engaged readers to pay for unlimited access,” Journalism Online co-founder Gordon Crovitz explains. “In this way, the FT has been a pioneer.”
In the eight years since 2002, the FT has persevered through thicker and thinner markets. Now, it is one of the few companies showing advertising and circulation revenue growth and building a seemingly stable and successful model for the next decade. Its recent financial performance, most of which was released as part of its parent Pearson’s half-yearly report:
That’s an impressive report. It contrasts with the experience of most news publishers, who are struggling to stave off continuing year-over-year losses in both ad and circulation revenue — and are finding themselves too dependent on ad revenue as the ad marketplace morphs away from traditional media.
We can parse a number of reasons for the FT’s upward trajectory. In the end, though, I think that FT.com managing director Rob Grimshaw sums it up best, and in a way that should make all news publishers pause and re-think.
“Where we’ve found inspiration is Internet retail, not publishing,” he told me last week. “We’re becoming a direct Internet retailer and we have to have expertise to do that. When you do that with publishing, it looks like a different business.”
Internet retailing — think Amazon — seems like a very different business than publishing. In the endlessly measurable digital age, though, the parallels are striking. It’s not in what you are selling — books, electronics, or news stories — it’s what you know about your customers, their habits and wants.
In February, I produced a report for Outsell, a global publishing industry research and advisory company, about the FT. I called it “Five Things to Learn from FT.com,” and my greatest learning was that analytics, the smart gaining of knowledge from data, was at the heart of the company’s successes and plans. If we look at the emerging newsonomics under the FT business, we see how analytics are driving both of the FT’s two basic business lines, reader revenue and advertising revenue.
Reader revenue now accounts for more than half of the publisher’s income. While there are many moving parts under it, the FT’s pricing of its subscriptions, its targeting of markets, its tweaking of offers, and its valuing of paying customers are all increasingly done on the basis of analytics — not on the gut calls that have long fueled news company decision-making.
Much of it is “propensity modeling,” fancy words to say: What’s the likely reaction of what percentage of people if we offer them this, that way? The modeling grows out of the analytics, now put together by a team of nine people at the FT — up two from a year ago. The group is relatively new, and it’s one that Grimshaw says has produced a night-and-day difference for an outlet that, like most of its fellow news companies, used to “hold and manage” data, rather than using it to drive the business.
The FT has been able to gauge consumer behavior well enough that its subscriber volume and pricing have risen. Even though the site allows fewer unregistered clicks than it did a year ago, Grimshaw says page views overall have gone up — the result of the paying customers using the product more.
In addition, the FT has taken a new tack in the enterprise licensing of its content. Two years ago, it began to reclaim its syndication business. It still works with third parties to deliver the contract, but directly contracts and licenses more than 1,000 companies for its usage. The direct licensing does help a bit in pricing and margin, says the FT’s Caspar de Bono, who directs the B2B business, but the direct pipeline of customer-usage data it provides is the bigger win. Analyzing that data helps the FT improve its products and its delivery — and increasingly gives the content licensees themselves a view into the content’s usage and value for their workforces.
Advertising, too, is benefiting from the research work. The more knowledge the FT can share about its audiences, their habits and preferences, the better advertisers can target their messages. In addition, analytics support the FT’s eight-member Strategic Sales team as it customizes marketing approaches for firms and their agencies. Grimshaw says that by early 2011, advertisers themselves will get some access to FT audience data.
It’s all a work in progress, but one that is coming closer to offering a virtuous circle of business results. It’s a model — an Amazon model for the news world — that bears attention from months-old online news start-ups and venerable, nineteenth century brands alike.
