Coronavirus Impact: Why news platforms need to look beyond ad revenue to subscription

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Updated: Jun 16, 2020 10:06 AM

Despite a rise in userbase, ad revenue is expected to decline by 30-40% in FY21

According to industry experts, the loss of advertising revenue in the digital space is primarily because of the high volume of inventory besides the lack of user data. According to industry experts, the loss of advertising revenue in the digital space is primarily because of the high volume of inventory besides the lack of user data.

With work-from-home being the new normal, people now consume more content online including news. Picture this: according to research company Comscore, visits to websites and mobile apps saw an increase of 61% in March when compared to February 2020. Similarly, consumption of news on the digital space has seen a 14% increase as opposed to the pre-Covid era (Jan 13 – Feb 2, 2020), as per Nielsen report. “The rise in downloads on short-format news apps have emerged from mainly newspaper readers who are now choosing to opt for digital news wherein they can get more of local as well as personalised news,” Raju Vanapala, CEO and founder, Way2News, told BrandWagon Online. Way2News, a hyperlocal news app claims to have witnessed a 200% rise in downloads during lockdown on the platform.

Similarly, Inshorts claimed to have registered a 300% rise in download to three lakh a day. However, for independent news platforms, the rise in userbase is yet to translate into advertising dollars. According to industry estimates, independent news apps are looking at 30%-40% dip in advertising revenue in FY21 as opposed FY20 “Overall, we are witnessing a dip in advertising revenue with many companies reserving advertising money. However, due to the rise in userbase and time spent, there are some companies who are leveraging this rise and spending more on our platform,” Azhar Iqubal, co-founder and CEO, Inshorts, said. As for time spent, these platforms witnessed 50% -100% rise as time spent on the platform increased from 15-20 minutes to 24-30 minutes.

According to industry experts, the loss of advertising revenue in the digital space is primarily because of the high volume of inventory besides the lack of user data. “Publishers are focused so much on the content that they do not make use of new technology wherein they can monetise an ad with specific targeting, delivering value to the advertiser which is superior,” Vivek Bhargav, CEO, Dan Performance Group, Dentsu Aegis Network, explained. Further, the lack of first-party data also plays a crucial role in understanding user behaviour. This is also why analysts point out that news platforms now need to build a subscription model. While legacy papers have already begun to charge consumers for e-paper subscriptions, independent publishers are yet to roll-out the service.

According to Ficci-EY online news subscribers grew between December 2018 and 2019 to reach around 300 million across mobile and desktop users of news sites, portals and aggregators. As per the report, customer lifetime value equations will not balance costs and revenues unless a viable subscription model is developed. “It’s a given fact that subscription is a far more resilient model when the economy is down. However, the subscription model hasn’t worked out that well for the digital news genre and this is primarily because publishers are used to operating with a product which works on a one-size-fits-all model,” Ashish Pherwani, partner and media and entertainment leader, EY India, said. For the subscription model to work in a better and more efficient manner publishers will have to customise news and provide better recommendations to its userbase. This will require at least 10%-20% of current subscribers to turn into paying customers. Currently, news platforms are offering varied price points’ annual packs at a heavy discounts to turn the tide in their favour.

Read Also: Coronavirus Impact: Why film production firms continue to struggle to resume shoot despite relaxation of norms

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