state of the industry: monetizing the digital revolution

State of the Industry: Monetizing the Digital Revolution

Malcolm NetburnChairman and CEO CDS Global [@mnetburn]

About CDS Global

600 millionoutbound transactions

processed annually

208 millionemails

deployed annually 150 million

customersmanaged annually

7 millioninbound calls

answered annually

4.5 millioninbound emails

annually

198 millioninbound transactionsprocessed annually

2,500employees

globally

$7 billionprocessed for

clients annually

Access the New Report:

Monetizing the Digital Revolution, 3rd Edition

• The third edition of the report is available on www.cds-global.com.

• Digital media benchmarks, insights and analysis.

http://www.cds-global.com/

Key Insights & Findings1) Continued Strong Digital Revenue Growth is Expected for 2013, Especially

for Consumer Publishers Consumer media companies and publishers forecast 23% top-line growth for

digital gross revenue in 2013 up from 17% growth last year.

2) Digital’s Share of Total Revenue Climbed from 12% Industry-wide in 2010 to 20% in 2012

3) Advertising is the Largest Digital Revenue Source, but its Total Share is Declining

Advertising’s share of total digital revenue across the industry decreased from 40.8% to 38.8% in the past year.

Key Insights & Findings, continued 4) The Top Two Digital Revenue Streams Account for Only Half of Total

Revenue Website advertising and e-newsletters/sponsored emails provide a total of 55% of all digital revenue. There are a number of other revenue streams that individually account for 1% to 5% of total digital revenues but added together are significant.

5)Paid Digital Subscriptions are Growing Quickly for Consumer Publishers Paid digital subscriptions increased by a significant 26% on average for consumer publishers last year. Also, overall both consumer and business-to-business media companies say that 9% of their print subscribers / readership migrated to digital in 2012.

6) Nearly Half of the Industry has Developed an iPad App 49% of media companies and publishers, including both consumer and business-to-business sectors, have developed at least one iPad App.

Top Goals & Strategies

All Consumer B2B

1) Increase digital and online profits 70% 70% 72%

2) Increase online, digital circulation and subscriptions 60% 65% 59%

3) Drive top-line digital revenue growth 56% 51% 63%

4) Develop digital edition(s) for e-reader/tablets 41% 45% 38%

5) Re-design website 41% 40% 43%

6) Experiment with various evolving technologies 41% 40% 40%

Digital’s Percentage of Total Gross Revenue 2012 & 2017 Forecast

All Media Companies & Publishers

Consumer Only

Business-to-Business Only

13%

20%

24%40%

46%

49%

2012 2017

Digital Gross Revenue Growth Rates 2012

17.7%

13.7%

11.7%


Consumer Only


Digital Gross Revenue Growth Rates 2013 Forecast

23.2%

17.2%

14.2%


Consumer Only


Digital Revenue Breakout by Revenue Stream

Top 5 Revenue Streams % of Total (Out of 100%) All Consumer B2B

1) Website advertising/sponsorships 38.8% 38.1% 40.8%

2) E-newsletter, content email ads/sponsorship 16.4% 7.4% 22.2%

3) Digital edition subs/single copies 6.5% 13.7% 2.4%

4) Publication (book or report) sales: print 5.3% 8.9% 2.5%

5) Digital content, information, data sales 4.2% 1.4% 3.7%

Other Digital Revenue Steams: eCommerce, web stores, online shopping environments; Website content subs/user fees; Online video advertising, sponsorships or other related-revenues; Online subscription ordering/processing; Virtual events/webinars/webcasts; Online education/learning; Subscriptions/sales of apps for digital devices; Publication (book or report) sales: digital; Online memberships; Content licensing to other organizations/media companies; E-newsletter, content email subs; Coupons; SMS/text messaging marketing/advertising sales; Other /Misc.

Are Digital Strategies Fully Developed?

Digital Customer Relationship Function Outsourcing

Outsourced Both In- House & Outsourced In-House NA

eCommerce, web stores 21% 17% 35% 28%

Online subscriptions and ordering 20% 21% 54% 6%

Subscriber database 20% 16% 61% 2%

Mobile page optimization 19% 14% 40% 27%

List management or prospect database 17% 29% 48% 6%

Online acquisition page development 13% 16% 55% 16%

Online customer care 12% 14% 59% 15%

Online acquisition page design 10% 18% 56% 16%

Transactional e-mails 8% 15% 56% 20%

Intelligent up- and cross-selling 6% 12% 39% 43%

Promotional e-mails 3% 13% 83% 1%

Who’s Driving the Most Industry Change?

All Consumer B2B

1) Technology Device Makers 50% 48% 50%

2) Readers/Subscribers/Content Users 49% 52% 45%

3) Social Media Sites 42% 46% 41%

4) Publishers and Media Companies 36% 39% 34%

5) Advertisers 36% 34% 36%

ConclusionThere is Still No Industry Consensus on Key Digital Strategies or Business Models •There is no agreement on the best strategy, approach and model to take as a media company and publisher.

•The industry is still rapidly evolving due to technological change.

•There is more agreement that the main goals for digital initiatives and efforts are to drive revenue and profitability, and increase online and multiplatform readership. Still, there is no agreement on the best ways to do this.

Driving Digital GrowthKey Finding of the Study

23% top-line growth is

forecasted for digital gross revenue in 2013

17% increasefrom 2012

5 Quick Steps to Drive Digital Growth

1. Optimized Customer Acquisition Pages

2. Mobile-Optimized Customer Care

3. Gated Content & Pay Walls

4. Tablet Customer Service

5. Consolidated Digital Reporting

1. Optimized Customer Acquisition Pages


67% of users are more likely to purchase a product from a mobile-friendly site

− “think with Google” trending study


• All companies with an online presence should optimize their Web pages for mobile access

• Mobile includes all devices

3. Gated Content & Pay Walls


2013 has been coined as the year of the tablet

according to PC Magazine

Source: Will 2013 Be the Year of the Tablet? Article by Tim Bajarin @bajarin

http://twitter.com/


• Publishers must be prepared to handle technical customer service inquiries related to digital editions

• Scientific American has seen recent success with technical customer service

5. Consolidated Digital Reporting• Growing market of digital content • Rising number of digital newsstands• Many digital editions are being sold by third-party

digital storefronts • Lack of traditional publication-marketing data focus

5. Consolidated Digital Reporting

To Conclude

1. Optimized Customer Acquisition Pages2. Mobile-Optimized Customer Care3. Gated Content & Pay Walls4. Tablet Customer Service5. Consolidated Digital Reporting

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We are in a period ofWe are in a period of

Creative DestructionCreative Destruction

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Over the next 10 years, one of the main effects of the great publishing realignment will be the deep-rooted change experienced by the magazine industry: from primarily a print-oriented business to one where digital products will represent the largest share of a smaller periodical industry.

Publishing’sGreat Realignment2007-2020(magazine industryrevenue in billions of $)

Big Picture Technology Changes That Affect Digital Media

• Connectivity• Mobile Computing• The Social Web

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Connectivity•1/3 of the world population now online•Like electricity – always available, always on, instantaneous in its effect•Content and services on demand 24/7, 365 – on any device

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Connectivity – The Numbers•Internet users

– 2.4 billion – Number of Internet users worldwide– 1.1 billion – Number of Internet users in Asia– 519 million – Number of Internet users in Europe– 274 million – Number of Internet users in North America– 255 million – Number of Internet users in Latin America / Caribbean– 167 million – Number of Internet users in Africa– 90 million – Number of Internet users in the Middle East– 24.3 million – Number of Internet users in Oceania / Australia– 565 million – Number of Internet users in China, more than

any other country in the world– 42.1% – Internet penetration in China

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Mobile Computing•Tablets will surpass desktop within two years•Tablets with high resolution, color, portability are both the highest risk to publishing and equally the greatest opportunity

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Mobile Users Eclipse Desktop Users in Two Years

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Global Mobile vs. Desktop Internet User Projection, 2007-2015


Social Interaction•Facebook – used by 1 of every 10 people; average U.S. user spends 16 minutes a day

•YouTube – September 2012 users spent an average of 6.3 hours viewing and sharing content

•Yelp, Foursquare and Twitter, along with the obvious impact of Facebook and YouTube, have enormous implications for your brand

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• Three megatrends – connectivity, true mobile computing and dominance of the social Web – are profound in impact, and influence everything we choose to create, sell, share or consume

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Some Other American Viewpoints

− Justin Smith, The Atlantic

− Malcolm Netburn

The Atlantic: Deliberately Disruptive Lessons “Disruptive, Open-minded and Bold”

“We imagined ourselves as a venture-capital-backed start-up in Silicon Valley whose mission was to attack and disrupt The Atlantic.”

− Justin SmithPresidentDecember 2010

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The Atlantic: Deliberately Disruptive Lessons “Disruptive, Open-minded and Bold”

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The Atlantic: Deliberately Disruptive Lessons

1. New media is high-growth and demands companies act fast– Build for emerging market forecasts and opportunities– Fail often, quickly, cheaply– Industry-leading incumbents at risk – typically wait for

safe, predictable circumstances

2. Future of media unclear to everyone – Instinct, not previous methods for measurement, must

lead the change

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3. Explosion of mobile devices will drive demand for mobile-rich content– By end of year, likely to be 24 times as many mobile

devices as PCs– Between 2011 and 2016, mobile cloud traffic

will grow 28-fold

4. Media must tap growing demand for widespread, unlimited access to content– Converging distribution systems– Xbox 360, Apple TV

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5. As content narrows, media must focus on niche– Media is becoming fragmented by proliferation of

content platforms– Consumers control type, location and frequency of content– “Nichification”

6. Exploit unbundling of content– Bundled experience becoming archaic– Lessons of digital music – individual songs unbundled

from whole albums– Issue-based format not conducive to digitally

ingested content41


7. New consumers’ insatiable appetite for socially optimized, real-time content– “Unique, personalized social spheres”– Shareability and real-time access must be part of the inception

and design, not an “added feature”– Unbundled means “the unfinishable, infinite scroll”

8. Influence of social networks on consumer buying behavior– Social sites generating significant consumer traffic– Consumers incented to share discounts with peers,

seek community advice, rate purchase experiences– Yelp, LivingSocial, Foursquare, Facebook

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9. Global Connecting– Building a “boundaryless environment”

10. As digital proliferates, exceptional user experience (UX) becomes a priority– Experience, not content, may be king– Human factors and interactions will equal quality of

content in consumer satisfaction and loyalty

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Malcolm Netburn’s Thoughts

• Managing complexity is terrifying – but crucial– Atomized content– Smaller clusters of consumers– Device proliferation

• Experimentation is essential – especially for an industry that has not had to do that

• For advertising-based companies, moving to a consumer-centric revenue model will require change in culture, people, approaches and expectations

• Big is not always better– Smaller companies like America’s Test Kitchen (Chris Kimball)

and August Home Publishing (Don Peschke) are innovating in ways that large publishers are just beginning to implement

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Malcolm Netburn’s Thoughts

• The future is about risks and intuitions. Again, not strengths of the modern-day media company

• E-editions suited for a consumer experience on tablet devices likely to be our future

• Beware of the subscription model, as it is under duress. Micropayments, bundled media and multi-device access leading to a Netflix (per month) model

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The Digital Revolution is now.Let’s make some money!

Questions?

state of the industry: monetizing the digital revolution

Technology

deliberately

key insights

optimized

tablet customer

gated content

media companies

digital revolution

consumer b2b1