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How Putting Up Paywalls Can Actually Boost Ad Revenues

Tim Cross  06 July, 2021

Credit: Marco Verch – source

For digital publishers, paid subscriptions are often framed as an alternative revenue stream to advertising. Some publishers do choose to completely cut advertising for paid subscribers, since removing advertising can be a significant incentive to subscribe. And even for publishers which continue to run ads, there tends to be an expectation from consumers that ad loads will be relatively light in a paid product.

But those VideoWeek spoke with said introducing paid subscriptions can actually boost a publisher’s ad business, rather than inhibiting it.

Crucially, paid subscribers are logged in. Publishers can collect a lot of valuable data on readers when they sign up for a subscription, which will often include their name, gender, date of birth, email address and home address. Some might choose to collect even more detailed information, for example covering employment and interests. And publishers can also track which articles and videos a user engages with, helping to build a profile of what each user is interested in.

This data is becoming even more valuable as online identifiers become more scarce thanks to privacy moves from the tech giants and from regulators.

The Financial Times’ global advertising director Laura Milsted says that the FT’s subscription business has been a strong performer over the past five years. But this growth has also supported the FT’s ad business, “as subscriber inventory is so much more valuable and secure given the demise of third-party cookies”.

Paid subscriptions aren’t the only way to get users logged on. Companies like Reach and Guardian News & Media have had a big push over the past year to get users logged on, but without asking them to pay for content.

But publishers say that inventory for paid subscribers specifically is more valuable than inventory for logged-in non-paid users.

Craig Kostelic, chief business officer for US advertising revenue and head of global advertising solutions at publisher group Condé Nast, said that paid subscriber data is the foundation of Spire, its audience targeting platform.

For a publisher like Condé Nast, with multiple magazines covering specific interests, it’s valuable to know not just which content they’re interested in, but also which content they’re willing to pay for.

“The decisions consumers make with their wallets give marketers incredible insight into someone’s prioritized interests and passion points,” said Kostelic. “That’s much more powerful than just a demographic data point when it comes to building a relationship with a consumer.”

But even for standalone publications like the FT, just knowing that someone is a subscriber is a valuable datapoint in and of itself. Paid subscribers will likely have a different profile from a marketer’s point of view than non-paid readers. For example, they might be assumed to have more disposable income, or a more keen interest in financial markets.

“The link between the profile of our paid-for subscribers and the value of our FT audience to a broad range of advertisers and sectors is certainly helping to power our digital ads growth,” said the FT’s Milsted.

There are still trade-offs between subscription and ad revenues.

If a publisher puts all their content behind a paywall for example, they will reach a smaller audience. And as mentioned earlier, most publishers find they have to cut ad load for subscribers, reducing the number of impressions available.

“We work hand-in-hand with our subscriptions team to balance the needs of our paywall initiatives with the needs of our commercial business,” said Condé Nast’s Kostelic. “As such, we are constantly testing and iterating various degrees of content access and ad density to balance both of those needs.”

But this scarcity has its upsides too. Research from Comscore shows that scarcity can drive up CPMs, since supply decreases but demand stays the same, which raises prices. And subscriptions can in effect generate this scarcity, reducing the opportunities to reach high-value paid subscribers, and raising CPMs in the process.

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