How are online subscription sites balancing their revenue sources? What conversion rate do they get on free trials? Is anyone seeing a measurable impact from Web 2.0?

A recent MarketingSherpa survey of more than 400 subscription marketers answered these questions and many more. Their responses offer an exclusive look at the state of the online subscriptions industry. When compared to a similar survey last year, their responses also highlight trends in areas, including revenue mix, adoption of emerging technologies and testing techniques.

Attendees at Sherpa’s Selling Online Subscriptions Summit earlier this month got a preview of this data from Research Director Stefan Tornquist. This article features 12 new data charts and benchmark figures, along with analysis and tips to help subscription marketers understand how the results affect them. (See hotlinks below for a PDF of all the charts.)

Analysis #1. Breakdown of Revenue Sources

Subscriptions and advertising are the prime revenue sources for B-to-B and consumer sites. This information reinforces anecdotal reports indicating that many sites are adopting a hybrid business model.

Hybrid models can capitalize on the growth of online advertising while retaining the annual revenues that subscriptions provide. But for all the recent enthusiasm about online advertising, we did not see as big an increase as anticipated for sites that take advantage of ad revenues.

In a similar survey last year, subscription sites projected their revenue mix out five years. The pink bar in the chart represents those five-year projections.

As you can see, marketers pegged advertising revenues for significant growth. But the big push for subscription sites to develop a stream of advertising revenue has not materialized. The 53% of B-to-B and consumer sites that said they generate advertising revenues this year is roughly the same percentage as 2007.

Chart 1. Revenue Sources for B-to-B & Consumer Sites


Analysis #2. Impact of Economic Downturn

The sluggish US economy has been the top business story of 2008 so far -- with subscription sites feeling the effects. Roughly two-thirds of B-to-B and consumer sites said the downturn is hurting them or is expected to hurt them soon.

The specific impacts? Here are the most common replies:
o Decline in new subscription sales
o Longer sales cycles for subscription and advertising
o Decline in subscription renewals
o Decline in advertising sales
o Decreased attendance at events

Chart 2. Is Economic Downturn Affecting B-to-B & Consumer Sites?


If you are feeling these effects, some of your marketing challenges are spelled out for you:

- Declining subscription sales dictate the need for adding other sources of revenue, such as repurposing existing content into new products and services.

- A longer sales cycle for subscriptions means you need to add new lead-nurturing techniques that help move prospects closer to a buying decision. B-to-B publishers and subscription services might include additional free content, such as new white papers or webinars, to create deeper engagement with prospects. Consumer publishers might consider expanding memberships by including a free, registered-member level that requires users to provide an email address for access to additional content.

- Tightening corporate budgets and rising transportation costs might call for a transition from in-person to virtual events.

NOTE: Subscription marketers should also look at the economic downturn as an opportunity. Consider ways to position your content or service as a valuable tool that will help your customers handle the sluggish economy. Be an expert or a trusted resource provider.

Analysis #3. Ranking Traffic Sources by Visitors’ Quality & Quantity

First, these charts need an explanation: Subscription-site marketers were asked to rank sources of traffic in two ways -- volume of visitors each delivers and the quality of those visitors (how likely are they to become paying customers).

The size of each bubble corresponds to the use of each channel. (The larger the bubble, the more respondents who said it’s a major source of traffic.) The farther right the bubble appears, the higher the quality ranking. The higher the bubble appears on the chart, the higher the volume of traffic it delivers.

Chart 3. Traffic to B-to-B Sites


Chart 4. Traffic to Consumer Sites


Both B-to-B and consumer sites ranked SEO highest for both quality and quantity of traffic.

While there’s no doubt about the value of good visibility on search engines for key terms, this result comes with a caveat: Only a certain percentage of prospects respond directly to print ads, email messages or other communication.

Other prospects may notice your marketing material but choose to visit your site at a later date -- often typing your company name into a search engine. In these cases, what appears to be direct-to-site traffic from a search engine is actually being generated by some of your previous marketing activities.

This caveat is another reminder that a mix of marketing tactics is essential to generating the volume and quality of leads you need to maintain a subscription site.

Also, pay close attention to the tactics in red. These marketing channels received a wide variation in quality and quantity rankings in our survey. On average, techniques like co-registration and rented email lists received lower scores, but some marketers reported strong results from these channels. Likewise, there were some marketers who reported great success with viral marketing.

You must compare these benchmarks to your own marketing practices. Some techniques may be more (or less) productive for you, depending on your product and industry sector.

Analysis #4. Use of Emerging Content Distribution Channels

There is plenty of buzz about using blogs, podcasts, RSS and other emerging content distribution channels. But how many subscription sites are using them? We uncovered an interesting trend from last year to this year.

Chart 5. Emerging Channels That B-to-B Sites Are Using


Chart 6. Emerging Channels That Consumer Sites Are Using


Consumer marketers typically adopt emerging technologies faster. But we saw the biggest jump in usage for these technologies among B-to-B publishers this year:
o RSS feeds are offered on 55% of sites
o Blog use has reached 50% - an 8% increase
o Video clip use jumped 13% - likely driven by an upswing in video advertising
o Podcast use jumped 5%

In comparison, use of RSS feeds, blogs and podcasts by consumer sites stayed flat this year -- with the consumer sector trailing the B-to-B market in use of RSS and podcasts among this survey group.

Analysis #5. Measuring Impact of Web 2.0

Subscription sites are adopting Web 2.0 technologies. But questions remain about the ROI of social networking, UGC, and the like. What is the effect from their Web 2.0 initiatives?

A majority of respondents said they have no idea of the impact of specific initiatives. They are either still experimenting or aren’t measuring ROI. Or they just aren’t clear yet.

Chart 7. Web 2.0 Features That Get Most Impact - B-to-B


Chart 8. Web 2.0 Features That Get Most Impact - Consumer


This void reduced the sample size for this chart considerably. But directional data shows that subscription sites are reporting significant impact from Web 2.0 elements that are relatively easy to incorporate, such as:
o Blog-style tagging and external bookmarking links
o Commenting on articles and blog posts
o Uploading user-generated photos and videos

Easy-to-incorporate features like these can be good entry points for sites still trying to determine a Web 2.0 strategy. You can test interactivity with your audience and develop techniques for measuring impact because they don’t require a large investment of time and resources like creating a social network or developing a Facebook application do.

Analysis #6. Free Trial Starts & Conversions

Free trials are a common subscription marketing tactic. How successful are sites at signing up visitors for a free trial and then converting them to paying customers?

You must take into account that trial sign-up and conversion rates can vary significantly based on: volume of traffic; nature of the product or content being offered; price point; other market factors like competition from free sources.

Chart 9. Average Trial Conversions for B-to-B & Consumer

On average:
- Both B-to-B and consumer sites achieve a 10% trial signup rate.
- Consumer publishers reported a higher average conversion rate (27%) than B-to-B publishers (13%).

The difference in conversion rates may reflect a higher degree of effectiveness by consumer marketers. B-to-B publishers seeking a boost in their conversion rates might look to marketing tactics from the consumer world that could translate well for their audience.

On the other hand, the lower conversion rate may not be a significant problem. B-to-B publishers and services typically can charge a higher subscription rate for premium content. This allows them to make a profit with a lower volume of customers than a mass-market, low-price consumer publisher.

Analysis #7. Role of Group Subscriptions

More B-to-B sites (62%) said they offer group subscriptions or site licenses to accommodate multiple users within an organization. What is surprising, though, is that consumer sites said group subs make up a higher percentage of their total subscriptions (44% vs. 38% for B-to-B sites).

Chart 10. Group Subscriptions as % of Total


For both sectors, one of the benefits of a group subscription is longer customer lifetimes:
o Group subscribers remain as customers for an average of 45.3 months
o Individual subscribers remain a customer for an average of 34.8 months

Analysis #8. Tests that Deliver Best ROI

Testing is essential to optimize your subscription marketing strategy. But which tests? Our survey group identified the tests from the past 12 months they considered very successful or somewhat successful for best ROI.

Chart 11. What Tests Get Best ROI - B-to-B?


Chart 12. What Tests Get Best ROI - Consumer?


- B-to-B sites reported the greatest success with SEO strategies.
The tactic makes sense. Our research shows that 88% of business purchase decisions start with a Google search. Well-optimized B-to-B sites will show up during those searches and stand out as a potential source of information or services for buyers.

- Consumer sites gave the highest marks to multivariate testing of pages.
The technique allows sites to optimize layout, headlines, body copy, buttons and other page elements. Optimizing as many pages of your site as possible is essential these days with the rise of search activity, social bookmarking and other content distribution channels. This means that many potential subscribers are not landing on your homepage during their initial visit.

- B-to-B and consumer sites both saw success with email list cleansing.
The process analyzes user behavior, such as open rates, clicks or purchases, to purge those who haven’t engaged with your company in recent months. List cleansing allows you to focus your marketing messages on the audience that is most receptive and interested in your outreach.

FINAL NOTE: Any one of the tests listed in the chart is worth conducting – not just the top three. Each had a positive impact and delivered some degree of ROI. But more important, conducting multiple tests can help establish a culture of testing within your organization. That culture will help you maximize your marketing strategies, site architecture, and new product development, and give you a stronger base for success.

Useful links related to this article

Click here to download a PDF of the 12 charts

Sherpa’s 2008 Subscription Summit Wrap-up Notes: Marketers Share Tests & Best Practices to Boost Conversions, Retention & Profits:
http://www.marketingsherpa.com/article.php?ident=30587