Opinions on exactly why Facebook made this move vary, but one theme is consistent — Facebook is re-focusing on its users as engagement metrics have not been trending well. Mark Zuckerberg posted that Facebook would begin issuing its users’ surveys regarding the quality of news sources.
Facebook’s stock price has been on a tear, up roughly 50 percent from last year. But the announcement single-handedly drove a temporary 5 percent dip. Why would an organization this influential and rich in capital do this? Maybe it’s because Facebook, possibly more than any company on the planet, understands the power of loyal attentiveness.
Or, they understand the vast potential of reliably exploiting subscribed audience behavior.
A subscription implies that the perceived value of what’s anticipated is so high that the subscriber willingly offers an exchange of value in advance. That could be money, but could also be data or simply unwavering attention. Subscription behavior is on the rise as consumers of products, services and media are establishing their preferences and excluding the rest. This is not some trivial, growing trend. Subscription is becoming a mandatory marketing strategy.
In the attention economy, three fundamental shifts are having a massive impact on audience and consumer behavior, and they’re setting the stage for the next wave of challenges for marketing. Technology has:
- Completely disrupted how media (content) gets distributed to the audience and monetized. Audiences are more willing to pay for direct access to premium, high-quality content, rather than settle for free programming that has historically been subsidized by advertising.
- Disrupted how commerce takes place, supplementing and replacing a good portion of the shopping experience with content that makes shopping virtual, more personal, informative and efficient.
- Firmly established data as a new asset class. While data’s value is appreciating, it is collectively those direct connections to the audience, or the means of capturing that data in real-time, that is potentially appreciating even faster.
While it would appear that technology is at the center of these shifts, it is merely the catalyst. Content is the common theme here. These disruptions will continue shifting control over media consumption to the audience. Publishers of all kinds continue to fight for attention by creating more content just as the value of these efforts diminishes; however, the game is changing.
The quantity game is becoming the quality game, and only the best content purveyors, whether marketers or media companies, who have earned subscribed audiences, will thrive in the attention economy.
The Economics of Attention
Digital publishing’s lower capital costs together with free access for readers helped drive audience demand and established digital as the primary distribution medium. Digital content production volume was heavily influenced by search engine algorithms. The model was predictably elastic — create more content, build bigger audiences and generate more revenue.
However, the internet doesn’t work the way it once did. It’s no longer “build it, and they will come.” Publishers have grown dangerously dependent on significant traffic from Google and Facebook, just as these companies continue to optimize their experiences to changing user preferences. If they play nice with these behemoths, they can continue tapping into this revenue stream. But this revenue stream is diminishing.
Facebook and Google are claiming the lion’s share of digital advertising revenue, and by some reports capturing up to 90 percent of its growth. To make matters worse, over the last few years, programmatic, real-time bidding has put downward pressure on CPM values, forcing digital publishing to offset falling prices with even more supply.
This growing glut may be the final tsunami of content to come. The content volume game is proving to be an unsustainable business model. Per the Bureau of Labor Statistics (BLS), employment in the internet publishing and broadcasting sector has essentially doubled since 2010. These dynamics are creating a crisis in digital publishing — too much infrastructure chasing diminishing margins. Some are calling for a “full-blown crash.”
A New, Thriving Model
These disruptions are forcing change and some publishers have decided to reclaim their independence in monetization. The means of accessing real-time data is determining who generates the highest revenue from digital publishing. The New York Times, The Financial Times, The Washington Post and The Wall Street Journal, to name a few, are following Netflix’s lead and paving the way for other digital publishers to transform how they generate revenue. In 2010, advertising made up roughly half of The New York Times’ revenue. In 2018, they will only generate around 30 percent of their revenue from advertising.
But in Q3 of 2017, their digital subscription revenue rose 46 percent, year-over-year.
This shift is freeing up publishers from having to produce such high volumes of content and enabling them to focus on quality, the distribution experience and direct monetization with the audience. What’s good for deeper engagement on NYTimes.com is good for their subscription business. As Jeff Bezos said last June in an interview about Amazon’s approach to their Washington Post business: “We attempt to be customer-centric, which in the case of The Post means reader-centric.”
The Poynter Institute is referencing this shift as the “service era” of journalism, where the journalism will be paid for by readers, for readers. The Atlantic’s How to survive the media apocalypse further endorses this path forward, advising that digital media should embrace the rise in reader subscriptions and effectively pivot on monetization strategies.
More publishing businesses are embracing loyal reader attention as having far greater potential value than advertising revenue. And they are content with being smaller companies if it means establishing more sustainable businesses. As this shift continues, more niche media companies will emerge offering smaller, highly passionate and focused audiences much greater utility and the option to buy the best content direct without disruptive ads.
The Evolution of E-Merchandising
The shift in commerce adds another dimension to this. One of the more disruptive events in 2017 was Amazon’s acquisition of Whole Foods, which coincided with a stream of retailer closings. Last year saw a record number of retailers closing their doors with over 6,400 store locations shutting down. The shopping mall is under assault as mall closings are projected to hit 20–25 percent over the next five years, further spurring online sales to grow from 17 percent today to 35 percent of total retail sales by 2030. As some big box merchants and grocers scramble to follow Amazon’s lead, and as fewer brick and mortar outlets remain available, the industry will continue reconditioning consumers to shop online instead.
Large and small retailers are following suit, increasing their focus on driving shoppers to their own online shopping experiences, offering similar, important features like free shipping and returns. This is further incentivizing shoppers to stay home. But merchandise still needs to be merchandised. Many niche retailers and brands are focused on getting shoppers to stay subscribed to their merchandising content, going beyond product shots and features, placing products in compelling contexts, even stories, and utilizing traditional email and apps as fundamental parts of the shopping experience.
Apps are proving their effective merchandising potential. Mobile users are spending upwards of 86 percent of their time “in-app” versus web browsers. As mobile e-commerce grows, more retailers and brands are launching apps that offer more engaging shopping experiences. According to POQ, an app commerce platform, apps have outperformed mobile web-based shopping by some 40 percent as measured by conversion.
As merchants condition customers to use e-commerce services, expect more media companies to pivot their focus to becoming affiliate models, creating experiences that more effectively merchandise. This would explain why media companies like Hearst are experimenting with affiliate e-commerce. Their Best Products platform has become “the private publisher’s laboratory” focused on testing the ability to drive alternative forms of revenue.
Audiences Expect More, Without Distraction
These macro-economic trends are reconditioning audience expectations and consumer behavior. In the age of information and super-mobility, every engagement is an opportunity to establish a relationship with a specific individual’s needs. Increased niche publishing and e-merchandising will spur increased proliferation of new experiences that will create ‘fresher’ data streams, offering more value to media and marketing companies.
It’s a rejuvenation of the power of the press. Maintaining real-time, exclusive access to user preferences based on their consumption habits is the key to unlock a number of new “cognitive” services, that could generate new sources of revenue.
What should be clear to marketers and media companies alike is that the marginalization of attention is not a sustainable business model. The more they can interact with audiences, the more data wealth they will acquire.
The Ramifications for Marketing
The potential ramifications for both media and marketing are quite interesting.
This has the real potential for driving down the volume of premium digital advertising inventory as the best publishers continue to tailor their experiences to their audience and for direct monetization. As supply falls against increasing demand, this will certainly introduce some inflationary pricing pressure for premium digital advertising.
That’s great for the media and not so great for the advertiser.
This will likely increase the barriers to both entry and sustainability for brands looking to leverage publishing programs to drive engagement. Brands will also need to be much more focused on creating quality experiences to compete for attention. As the barriers to publishing rise so too will the barriers to continued access to first-party data, particularly around high-value, niche audiences.
As the publishing community and the tech giants grow less dependent on each other, this may close off data ecosystems as platforms do less audience sharing — very different from the way the web functioned 10 years ago.
Marketing and media organizations will put greater focus on niche audiences, which will lead to even greater disruption as niche media outlets create new experiences, or data wells, that redefine markets.
Ultimately, content will play an ever more critical role in defining these experiences. The media and the marketer’s utilization of content as a strategic business asset will converge further as both look to sustain consumer attention for direct monetization.
In an attention-based economy, table stakes for all forms of business communications will include establishing some basic share of relationship with the audience. Businesses of all kinds should be developing strategies that are focused on driving subscription.