Advertising Models vs. Subscription Models
Newspapers, magazines, newsletters and websites can generate revenue in a variety of ways, with paid advertising and subscriptions two of the most common methods. Each has its benefits but each also impacts the other, requiring you to choose one method over the other as your primary revenue source. Understanding the ins and outs of each will help you decide whether to use one or the other or a combination of both.
With an advertiser-based model, you provide content for free, hoping to sell advertising to businesses that want to reach your audience. Advertisers become allies in helping you develop your target audience and content. If you have a strong enough mailing list or website traffic statistics, you won’t need to discount your advertising or offer giveaways and specials to advertisers. Mailing your publication free or letting Web surfers access your content without a fee results in more readers and visitors than you would get if you went with a subscription method, with larger audiences obviously more attractive to advertisers. Going with an advertiser-based model incurs costs for salespeople, marketing materials and client service. The more readers you have, the more money you can make from pay-per-click ads you place on a website.
When you charge for your content, you lose casual readers and visitors, as well as those who are interested, but don’t get around to subscribing. When you use a subscription model, the quality of your readers is higher, because they have shown they are interested enough in your content to pay for it. While you generate revenue from paid subscriptions, your lower circulation or visitor numbers will probably cause you to lose advertisers or have to lower your rates. Some subscription-based models use a free, qualified-subscription method. For example, a magazine for plumbers might make its publication available only to licensed plumbers, who must prove they qualify. Purchasing lists, soliciting paid subscriptions and maintaining that circulation can be extremely expensive for large print publications, with some circulation directors making six-figure salaries.
Regardless of what method you use to distribute your content, you will increase your chances of selling advertising if you have your publication or site audited. When an independent third-party verifies the quantity and quality of your audience, advertisers have more faith in your claims. For example, a magazine audit might show how many average copies you mailed per issue, how many were direct requests for subscription, how many were paid and how many were mailed. You might not need to pay for an independent audit of your website if Alexa or Quantcast provide stats on your site or if you can share your internal website traffic statistics with advertisers. Print publishers often use numbers verified by the U.S. Postal Service, Business Publications Audit or Audit Bureau of Circulations.
Many publishers know intuitively, or based on discussions with advertisers, whether or not a subscription-based model will work better than an advertiser-based model. Many are afraid to try going the subscription route, because a conversion to that model can almost wipe out advertising revenue; if enough people don’t subscribe to make up for the loss, it’s almost impossible to revert to the previous model in time to lure advertisers back. This is especially true as you’re essentially announcing no one felt your content was worth paying for. You will have to survey your readers or visitors and your advertisers to determine which model will work best for you and possibly conduct limited subscription tests.
The best way to determine which model will work best for you is to test the marketplace. If you have a website, start by adding premium content that only subscribers can access. Give the general public a 30-day pass before closing it to subscribers. If no one subscribes, you haven’t driven away your traffic base. If you have a print publication, conduct focus groups and surveys to determine what percentage of your readers might pay and what price they’ll pay. Use this new circulation number to ask advertisers if they would prefer to get in front of paid subscribers and what they would be willing to pay.