Wednesday, April 15, 2009

Publishers keep faith with online but are they wise to do so?

THE UK's major web publishers are predicting average growth in digital revenues of 16% this year, according to the Association of Online Publishers' 2009 census. Trade bodies are expected to be optimistic but aren't these predictions from the association's 50 members wildly unrealistic?
AOP chair Alison Reay doesn't think so. "In the survey, AOP members, which include Guardian Media Group, IPC Media and the Channel 4, showed a big increase in efforts to make money from the web as 63% also revealed plans to increase investment in their digital business this year."
"Audience first, revenue later" has been the mantra for web businesses for the past decade, but when so many firms are consolidating and focusing on their most reliable, core operations, is it sensible to keep ploughing money into online?
Reay says: "If you take several of those digital revenue streams - e-commerce and subscriptions, for example - they are business models that can be proved. Consumers are more confident about buying online, are spending more time online, buying more flights and insurance online - those deals work and they do generate revenue. What we have seen is that there will be growth in 2009 - especially in video, commercial content, multimedia deals and in sponsorship."
Display ads sold on a cost-per-thousand (CPM) basis are still the most common charging model, used by 89% of AOP publishers compared with 73% two years ago. Commercial sponsorship rose from 76% to 84% during the same period. Use of cost-per-click, which garners revenue for each ad clicked on, has risen from 43% of publishers last year to half this year.
For the first time publishers were asked whether they charge for access - 39% of them said they used subscriptions in some form, with a recent fashion for dating sites and crosswords. Subscriptions are key because they show publishers moving away from a reliance on advertising, and attempting to diversify their income.
Does this mean that, with the bleak economic situation continuing to pile on the pressure, sites are starting to charge for access to editorial? Though rumours of sites introducing paywalls continue, Reay says there was no indication of that in this survey but adds that "every publisher will consider trying different interest areas, like Fantasy Football, paid-for dating, or crosswords".
Perhaps another surprising trend is that 51% of publishers said their commitment to invest in training - usually one of the first victims of cutbacks - had not changed. A further 40% said they are actually increasing their training budgets while only 9% have reduced them. Publishers had indicated they want to re-skill existing staff rather than recruit new people, said Reay, adding that they are prioritising skills in audience development, advertising sales and technology.
While many journalism training courses are still focused on preparing students for the newspaper, magazine and broadcast industries, the real demand is for new digital editorial and production roles including search engine optimisation, community management and user-experience design.
The trend for integrating offline and online teams in both commercial and editorial is continuing with 65% of publishers planning to combine previously independent teams during the year, the majority in advertising. Reay, who is also digital and multimedia director at the Telegraph Media Group, calls predictions that most national newspapers will fold grossly pessimistic.
But Dan Cryan, Screen Digest's senior analyst, disagrees. "Haven't they noticed there's an advertising recession going on? Of course you have to diversify into digital - you'd be mad not to. But the problem with subscriptions for things like dating is that someone will come along and offer the same service for free. Look what happened with Friends Reunited."


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