Audience growth is the key to revenue growth

Earlier today, in response from a comment by David Johnson on this post bemoaning the lack of a clear revenue model to OnBeing, I wrote:

We simply must, must grow audience much more dramatically than we are if we expect to make money, so the fact that there is no clear revenue model with OnBeing doesn’t bother me. It’s an important experiment in audience growth.

Having talked with Rob about this recently, I think that’s always been his approach, and it’s now an approach I endorse: Think audience first.

Let’s face it, the smartest, most innovative advertising programs in the world are doomed to fail without audience.

Ironically, at about the same time, Curley was leaving a comment on Melissa Worden’s blog:

As for Patrick’s question as to how we’re going to monetize “onBeing,” I’m going to say something that I’ve never said in my 10 years as an online journalist: I don’t care how it’s monetized.

Radical words.

In my organization, I’m glad there are smart people who are charged with pushing online revenue growth. I will do everything to support them. But these days, I’ve become a bit of a zealot about audience growth. I sincerely believe that sites are not growing fast enough, are too small now, and need to do much, much better if we are going to generate sufficient revenue to support quality journalism. The urgency of the matter is even greater because newspaper companies have spent the past decade or so putting the cart before the horse, worrying more about revenue than audience.

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16 thoughts on “Audience growth is the key to revenue growth

  1. You know one thing that I’ve noticed as some folks have quoted what I said on Melissa’s blog, is that it feels like some people think I don’t want these projects to make money — which couldn’t be more incorrect.

    When several of my peers were leaving the newspaper industry in the late 90s to jump to dot-coms, I stayed with newspapers, and I did that for a reason. I believe in the power of newspapers, and I hope I can be at least a small part of our industry’s evolution.

    And that means making more and more money online, and in other new-media driven ways.

    I want to build things that attract local audiences so that local advertisers will want to be a part of what we’re doing.

    Don’t misconstrue what I meant in my post on Melissa’s blog.

    One of my points was to ask why online journalists (at least at many newspapers), often are expected to build web-exclusive content, dream up innovative new things, grow audience, *and* come up with the revenue model?

    All that being said, in my post on Melissa’s blog, I did give three options for making money on something like “onBeing.”

    Clearly, the second of those three options is the one I would lean toward, and here’s why: I think it would do a much better job of giving the advertiser something unique that could catch a viewer’s attention more than a standard IAB unit would, and you could sell it for a flat-fee instead of CPM, meaning you would actually make much more money on it.

    To me, that approach works on a lot of different levels.

    One of the reasons the new-media staffs at the smaller newspapers I worked at were bigger than other newspapers of similar size was that I always have been cognizant of the revenue and how it related to what I was building.

    It didn’t take me long to figure out that if the money is coming in, then I got more people to help build cool sh*t!

    But sometimes I really wish I could just worry about the journalism and figure out how to make new connections with our audience.

  2. Newspapers have never worried about building an audience before expecting revenue. Newspapers want the revenue first.

    “Special” sections always originate in the ad department. Sure a handful of newspapers will run an ad-free section to try to win a prize.

    Look at all the “youth” oriented sections that are being folded up because of lack of revenue.

    Biz sections are being combined with other sections because of lack of revenue.

    The only exception to this is TV pubs. And those don’t get killed because editors are afraid. (somebody blogged about this)

    So to expect newspaper companies to suddenly embrace “if you build it, they will come” is way off the mark.

    Rob, please start building stuff that advertisers want and/or need – that is also cool shit.

    That’s how to benefit newspapers.

  3. Mark,

    I think we have built things that advertisers want and/or need, that also have benefited the newspapers we’ve worked at.

    If you’d like to talk about those, just give me a call — 703.469.2500.

  4. Mark, just because “newspapers have never worried about building audience before expecting revenue” before doesn’t mean it was the right strategy then. It certainly doesn’t mean it’s the right strategy now. There’s a world of difference between starting a new vertical magazine and trying to get the web right.

    We need audience to make money.

    And I don’t want to be misunderstood as saying Rob doesn’t know how to make money. I think he’s shown that he has, but the big lesson of Rob’s work is that audience growth (or I think he’d say great content) has always been key. My comments were more a reflection on me. I think I’ve spent too much of my career worrying about feeding the bottom line rather than building a viable audience.

  5. Actually … I have blogged on this before :-)

    Of your local DMA, at least 12 percent of the adults should be visiting your site on a daily basis.

    Another way of looking at it, is this is probably about 25 percent of your print circulation.

    Of the local daily unique measurement, I’ve never been able to find a local paper this side of the WaPo with more than 4 percent.

    I’ve based the 12 percent number on some media theory I read once that 12 to 15 percent of a potential audience is the magic number for real revenue growth. But even so, the average paper’s 2 to 4 percent number seems subpar on its face.

  6. UPDATE: Rich Gorden adds to the discussion:

    And data on online usage of news sites suggests Owens is right to focus on audience growth first. The typical user of a newspaper site visits once a day or less frequently, and views only a few pages. Depending on the site, in the space of a month, a typical user might spend 10 or 20 or 30 minutes on the site. With metrics like these, a winning business model will be hard to find. We need more innovation and experimentation like OnBeing.

  7. I’m curious whether anyone knows what the penetration in their market is without paying for actual market research.

    Unless you know of some formula for determining that XX percent of monthly uniques are real people, market penetration can’t be gleaned from regular Web stats. Right?

    I’m asking all this because I’d like to figure out where my own site stands with regard to your test. According to our Omniture stats, the audience grew 51 percent in 2006 over 2005. The market grew much slower. But unless I can determine how many of that 51 percent are local and real people, then any growth rate in online audience is not relevant to market penetration. And I’d like to find a way to calculate that without paying someone.

    (As an aside, I’d love to pay someone. But that’s out of my control.)

  8. Lucas, this is an imprecise science.

    It helps if you have a registration site. You can determine then what percentage of your registered audience is local.

    This gives you some basis for deciding, roughly, what percentage of your daily uniques are local. You can then divide this number into your DMA population.

    In Ventura, we also had market studies, which I was able to use to confirm that the math above worked roughly to about the same as the self-reported surveys (we had a couple of different ones).

    Another confirming stat (again, rough, but helpful) is to look at the web logs for those stats that give you geographic information on your users, such as IP address or time zone info. Again, just gives a rough approximation as to if your math is right.

    Absent site registration, or surveys, estimate your local audience to be about 45 to 50 percent of your daily uniques.

    The ideal scenario is to get your registration data and feed it into Omniture or HBX (which I’m told can be done, but I’ve never seen it in action). That would give you much more precise local traffic numbers.

  9. traffic is not always a good thing, quoth the cowboy who rides herd over a server ranch. but monetizible traffic is always a good thing, though.

    speaking as someone who has pulled off some seriously crazy cool sh*t, it was a lot easier to do it when i used someone else’s credit cards to rent the RVs, buy the gear, and pay for the bandwidth. the old tcpalmers blew minds when we launched the interactive morning zoo ‘fighting monday’ back in the 90s, but the cost of the live real video streaming that went with the chat and phone bank was a budget killer. the product was a decade too early. and although we got pounded with traffic when onnow gave us the link love, we couldn’t pay for the traffic because advertisers didn’t see any value being there. no dough, no show.

    getting audience and serving that audience costs money, so it is important to manage growth smartly so you can make enough to cover the cost of it. you can get audience pretty fast: just hang up the ‘free beer’ sign. unfortunately, someone still has to pay for the beer.

  10. Well, Dave, both you and I know the profits were there to pay for that, just not from online. And now, just about every metro newspaper site is generating sufficient revenue to pay for cool shit.

  11. Rob, I remember you saying that Mr. Simons guidance at Lawrence was to not lose money. Maybe we have a symantic difference. I’m thinking profit, others apparently are thinking revenue.
    Did make a profit? Direct revenue minus direct expenses (forget overhead) how about,

    Howard: it’s engrained in the culture of newspaper owners that any new project must show a profit (as defined above.)

    So building cool shit isn’t a sustainable goal. It has to be cool shit that adds to the bottom line fairly quickly.

  12. Forgot to mention, Borrell and Associates did a web audit on our site five years ago and helped us have the guts to charge a bunch of money for online only ads.
    I don’t know what they charge now, but from the looks of their site, they have a lot more data to pull conclusions from.

    Also, Howard, WaPo local? that was a joke, right?
    We’re are 25,000 Sunday circ daily. Last week we averaged 9,500 visits a day as defined by Urchin.
    Last month we had 296,000 visitors total. Can you extrapolate anything from those numbers?

  13. I’ll say it one more time, Mark. Just because a newspaper executive says it, demands it or wants it, doesn’t make it the best business practice. You can keep repeating yourself, and I’ll keep repeating myself, if you like.

    BTW: That’s what Wall Street has been telling newspaper executives. That’s why there is no longer a Knight-Ridder. Lack of vision for growing audience and building a sustainable business.

    Also, assuming your uniques are about half local … you’re daily online audience is about less than 20 percent of your Sunday circulation. Can you verify that? Also, what’s the population of your DMA and what is your market penetration … um, what’s your site?

    WaPo’s local market reach, as measured by the 30-day reach question, has been #1 for a long time (among newspapers measured by Media Audit), and somewhere in the neighborhood of 30 percent. I haven’t seen the stat for a year at least, however. So I don’t know where it’s at.

  14. Well, I guess I got on your last nerve, so we can continue this at Inland in Tuscon! In front of those key executives we’re talking about. Will you ask them if they are willing to not see any contribution to the bottom line for 18 months in order to build audience?

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