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 assumptions about value were correct and some were incorrect. Interestingly, every publisher finds new value propositions they never considered by simply observing who uses what and why. The newly discovered value propositions and the validated assumptions allows them to decide what is commodity and should be underwritten by advertisers and what is differentiated and can be further monetized with transaction, subscription, and event revenues.
So what are the value propositions that these publishers find? It turns out four themes emerge.
Make Money. This value proposition is the easiest one to monetize. If an audience member uses a publisher’s media or information for financial gain, he or she will pay unless it can be had for free elsewhere. For example, some audience members may consume information to stay current while others may consume information to source business leads. Generally, the former is difficult to monetize but the latter is not.
Save Time. If a publisher’s offering can save time, they provide an audience member with more discretionary time. How much time do they save? For whom? How often? A simple example can be analysis of political candidates along with aggregation of public voting records. Understanding the demographics of the audience is critical to dialing in the value of their discretionary time (e.g., a publisher can charge more to save time of high net-worth individuals versus college students).
Stay Connected. Is the audience a unique collection of members? Do they have influence amongst each other? If so, the desire to stay connected can be monetized, and events are a classic means to do so.
Be Entertained. It is interesting to note that in the debate about News Corp. paywalls, the very individuals declaring failure of The Times paywall are less certain about failure of the News of the World paywall. The “gossip” and “scoops” nature of the News of the World provides its audience with unique entertainment that cannot be found elsewhere.
A publisher with a commodity offering is generating profits off low margins. Their business model is predicated on extreme scale which is always tenuous. Very few publishers will succeed in this model. A publisher with a differentiated value proposition can generate profits off high margins. Their business model is predicated on audience loyalty and multiple revenue streams.
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