With over 120 customers and more than $3.3 billion under analysis, we get to have a big-picture perspective here at Scout Analytics. We collaborate with our customers continuously on new strategies for accelerating recurring revenue growth, and that’s helped us identify certain trends emerging across industries—common themes that show the potential for tipping-point dynamics. Below are the top 5 trends which we predict will hit a tipping point and start to take hold more broadly in 2014: #1: Pay-per-use will drive market growth When Salesforce.com launched its per-user per-month subscription model, the pricing wasn’t aimed at big enterprises already implementing Siebel or other on-premises software packages. The new model was aimed at the unserved SMB customer segment—and this created huge [...]
Profit is More Important than Monthly Unique Visitors
Do publishers measure what matters for digital? If profit is the goal, then monthly unique visitors and page views are not relevant performance indicators. What matters most for profit is revenue capacity and contribution from the loyal, profitable audience. When a Fly-by is worth less than $0.20 and a Fan is worth 250 times more, it’s hard for publishers to make profitable revenue off Fly-bys. Unfortunately, few publishers put a monetary value on their audience members or develop strategies to build and reward loyalty that yields profits. The monetary value of an audience member is defined as the combination of advertising and direct revenue (e.g., subscriptions, events, e-commerce, etc.). However, analyzing the relationship between loyalty and advertising revenue demonstrates the [...]
Engagement Rate is the Margin Squeeze in Digital Advertising
Engagement rate, the percentage of the audiences that consumes a particular piece of editorial content, creates the biggest squeeze on digital advertising profits. The advertising profit contribution of media is defined by the advertising revenue produced from page views minus the costs to create the content and sell the advertising. Unlike print media that uses circulation and pass-along rate to define sellable inventory of page views, digital media uses audience size and engagement rate. While pass-along rate acts as a page view multiplier on circulation, engagement rate is a page view filter on audience size. The consequence is that engagement rate puts a squeeze of advertising profit margins. To illustrate this point, the infographic below benchmarks advertising profit contribution of [...]
Counting Page Views? Don’t Call It A Business Model!
Measuring the number of page views as a key performance indicator (KPI), is a growing practice among publishers. In fact, editorial and development teams are increasingly being rewarded for boosting page views, with some publishers even shaping their entire site just to generate page views. That is not a business model! Let me prove it with an extreme example. Any publisher can deploy bots to generate page views for their site. No advertiser will pay for those page views, because the page views have no advertising value. While page views could be used as a KPI by the editorial team to generate more content for bot consumption, no revenue is coming through the door to keep them employed. The right metric for publishers [...]
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