Debates are surfacing on the transition strategies to digital publishing such as paywalls and social media. Strategies are usually characterized as a response to the democratization of distribution that increased competition and lowered barriers to entry, but there is a more fundamental disruption that occurred – the basis of monetization has changed. Digital has shifted monetization from distribution of the media to consumption of the media, which is not only a disruption, but a drop-off.
In the print revenue model, a publisher could monetize delivery of advertisements by sending them in the mail and claiming impressions based on circulation and pass-alongs. In the digital revenue model, a publisher can monetize delivery of advertisements only when a visitor consumes a page view. So how does that impact a publisher’s revenue model?
The following infographic illustrates this drop-off by comparing the monetizable impressions for a magazine with a print circulation of 100,000 versus a 100,000 member digital audience. In print, monetizable advertising impressions are calculated based on circulation, pass-along, number of issues and advertisements per issue. For digital, the monetizable advertising impressions are calculated based on the ads per page view and the consumption patterns of the audience as profiled in previous research:
- Audience members have very different consumption patterns between fans and occasional readers.
- Cover-to-cover reading is rare online.
- Digital pass-alongs (a.k.a., fly-bys) consume a minority of the page views (< 20%) even though they make up a large portion of the visitors.
In this model the print circulation generates 273M ad impressions, where as the digital audience generates 155M ad impressions for the year. This represents a 47% drop-off in ad impressions to sell subsequently reducing the revenue capacity of the magazine by the same amount.
The Implication
The monetization shift from media distribution to media consumption dramatically lowers monetizable impressions and revenue capacity – the digital drop-off. Just as digital music wiped out the margins for album sales and pushed artist revenue to concerts, digital is shifting media revenue from advertising to other streams. Whether it is subscriptions, ecommerce, or events, the lost revenue capacity in advertising will have to be backfilled by other revenue streams.
