At what point does churn rate inhibit growth and profit in a digital media business model? Both in the information services and SaaS industries, a churn rate over twenty percent is problematic for the business model. In both of these industries, sustainable profits exist at around ten percent churn. In controlled circulation of print media, a twenty percent churn rate would have been difficult to sustain. In digital media, the lifetime value of audience members is a key success factor to creating a profitable business model. This research note begins to explore the dynamics of the lifetime value of a digital audience. In September of 2011, Scout Research began tracking several audiences on B2B publisher sites to understand the lifetime value of the [...]
Click-through rates: the metric for missed expectations
Click-through rate (CTR) is often used to describe the advertising performance on a publisher’s site. CTR for an ad is defined as the number of clicks on an ad divided by the number of times the ad is shown (impressions), expressed as a percentage. If the ad sales team for a publisher claims 1 million monthly unique visitors with 4 million page views and a CTR of 0.2% (or 8,000 click-throughs), the buyer might think those click-throughs are all distributed across the million unique users to yield 8,000 unique conversions. The buyer and the seller are wrong. Here’s the problem: CTR doesn’t take into account audience engagement, not to mention the fact that other advertisers are competing for the click-through [...]
Publisher vs. Advertiser Priorities: Loyalty vs. Scale
Posted by: Matt Shanahan In the debate about business models for digital publishers, the cost of audience impressions is often underestimated. The expense to create a sellable inventory of impressions requires more than content production, it also includes the cost of audience development, which can greatly exceed the cost of content production. The classic example of this content vs. audience cost dynamic is “The Blair Witch Project” movie. “The Blair Witch Project,” whose final production budget was somewhere between $500,000 and $750,000, cost over $25,000,000 to market. As the competition for audience impressions increases, the sophistication and cost of acquiring audience impressions is also increasing. This leads publishers to decide whether the return on investment from acquiring more fly-by impressions is greater than the [...]
The 4 Audience Value Propositions
Posted by: Matt Shanahan The ARPU equation has two sources of revenue: the advertiser and the audience. A lot is known and discussed about what advertisers want (e.g., quality, targeting, re-targeting, etc.), but there is a dearth of conversation around value propositions for the audience. What conversation does exist focuses mainly on convenience and ubiquity of access to media and information rather than the value of its consumption. To expand ARPU beyond advertiser revenue, a publisher has to create a differentiated value proposition of consumption for audience members. Surprisingly, few publishers have a good grasp on their differentiated value proposition, and even fewer have the data to prove it. The publishers with which we work normally discover some of their [...]
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