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Join Our Research Team at DMA 2014
Sep 19, 2001
Case Study

Variety.com Almost Triples Ad Sales While Growing Paid Online Subscribers

SUMMARY: This Case study falls under the heading of "kids don't try this at home" because mixing the ad sales and subscriber-only content business models online is something that only a very few, exceptionally well branded and positioned publications can manage. Also, unless you have fresh, must-read, editorial on a daily basis, or an unusually strong direct marketer on staff, free trials are also risky. That said, enjoy! (What could be more fun than the entertainment biz daily?)
CHALLENGE

Variety.com, the online sister to Variety magazine, has sold subscriptions to its online content from the day it first launched in 1997. Henry Shapiro, VP and General Manager, says, "We trusted our instincts. If people pay for it in print, they should pay for it online."

To combat possible print subscription cannibalization, Variety.com's subscriptions were at a higher price point than print subscriptions. As of last year, dot-com subscriptions were $396 (or $180 for people who already bought print) while print were $239 for the Daily and $219 for the Weekly.

At the same time, the online ad sales team needed serious industry eyeballs to sell against, so about 50% of the content on Variety.com was left open for free access. But, as Editor Travis Smith admits, "The rules by which we decided free and paid were a little complex. Not everybody, not even at the paper, understood whether a story should be selected to be free or not." Which hurt online subscription sales because visitors weren't clear on exactly what type of additional content they'd get for their money.

That coupled with the fact that so much content was free and the high subscription price tag, turned subscribing into pretty much a 'why bother' proposition.

But Shapiro foresaw a much larger worldwide market for online subscriptions, if he could just work out the business model. He says, "Our research showed there are 2-2.5 million people worldwide who work in the entertainment business. Unless those people live in either LA or New York, they can't get Daily Variety when it comes out. And if they can't afford the $239 print subscription, they can't get it anyway. So, Variety.com could be a terrific way to meet that demand as a channel of distribution."

CAMPAIGN

With the support of his whole team, Shapiro re-launched Variety.com in March 2001, with four radical changes:

1. Subscription pricing plummeted to just $59 year.

2. All print subscribers get free access to the paid site.

3. 95% of the content on the site was put behind the "paid only" barrier.

4. The site went from offering a single free email newsletter featuring headlines, to a total of 10 free newsletters with hotlinked headlines on niche topics such as "TV" and "Music."

Also, shortly prior to these site changes, Variety's online and print ad sales forces merged into a single sales force responsible for both media.

Shapiro knew he was taking some serious risks. What if cheaper online subscriptions caused print circulation to shrivel up? What if site traffic dropped substantially enough to hurt ad sales? What if few people converted to paid subscriptions? He took a series of steps to combat these risks.

In order to raise online subscriptions and sustain page views, Shapiro decided to "stimulate sampling" by placing a prominent 30-day, free trial offer in the top left corner of the site. Shapiro says, "We wanted to make sure the message was right up front and very clear. I think the product itself is the best effort to convert people to paid, so I wanted to remove barriers to sampling. I have an old fashioned direct mail background, and the beauty of the Web is you don't go bankrupt with a soft offer the way you do in print."

The free trial offer also appears whenever a non-subscriber tries to access a paid-only article. In both cases, the registration form only requires name, email, zip code and country. Shapiro explains, "The pathway is very intuitive. It requires a minimum of information necessary for us to process the order. We're not asking for excessive demographic information -- job title is it and that's not mandatory." Individual visitors can only take advantage of the free trial offer once every six months.

After trials are activated, Variety.com's prominent trial offer box turns into a daily personal countdown. Shapiro says, "You see 'your 30-day free trial expires in 30 days', '29 days', etc. 'Click here to subscribe'." Variety.com also emails trials a conversion series consisting of an order acknowledgement-at-birth with an upsell offer, two more pre-expire efforts, and one post- expire "welcome back" effort. In addition, trials continue to receive whatever free email newsletters they requested forever (or until they unsubscribe.) The newsletters feature hotlinked headlines of paid-only content, constantly reminding them of editorial reasons to convert.

In addition, Variety.com's marketing team placed free trial offer space ads in related trade magazines such as Broadcasting & Cable, and on related sites such as the Screen Actors' Guild site.

On the ad sales front, Shapiro says, "Sales people were hesitant to take on something new, possibly because they thought it was going to cannibalize print sales, and there's always hesitancy to learn something new." Shapiro invested in sales force training with Laredo Group. He also personally went out on a lot of sales calls with each member of the team, "so they could hear me talk about it, and that helps them talk about it."

Many advertisers and their agencies were not used to integrated media buys, or to thinking about how online could bring unique value to campaigns. Shapiro had the names of several good interactive agencies on tap for any customers who needed them. The sales team was also primed with sample ads and ideas for hesitant customers. He says, "We can show programming samples, provide additional content about a subject, do streaming media, complete cast and crew listings, or, if you're an advertiser engaged in a 'For Your Consideration' campaign for Emmies or Oscars, you can see how online complements the buy."

Last but not least, Shapiro continued to focus on selling media buys on a per month basis, rather than by CPM. He explains, "Generally consumer advertisers ask for impressions. The B-to-B advertisers in the industry are interested in our delivery of the highly qualified audience. So, their analysis is more on a time basis than an impressions basis. It's access to an audience."

Since many of these ads are fairly heavy in file size, Shapiro was careful to set sales limits in order to make sure visitors could still download the site quickly. He says, "We're very mindful of protecting the user experience. We put strict frequency caps on high impact units such as pop-ups, superstitials, interstitials, and we don't sell pop-unders." He adds, "All of the pop-ups and superstitials must have a stop button."



RESULTS

Variety.com continues to get an audited viewership of 200-250,000 unique visitors per month generating 2.2 million pageviews a month, indicating that viewers who'd previously surfed for free had converted to subscriptions in order to continue in-depth site use. Shapiro was happily shocked. He says, "I was surprised the traffic didn't drop. We were prepared for that to happen and it didn't."

Plus, ad sales surged. Shapiro says, "We are up this year on online ad sales. Our revenue is close to triple this year what we did last year." He practically salivates at the thought of how well the sales force could do in a stronger economy.

Paid subscribers didn't mind the ads. In fact, in this marketplace the ads are perceived as valuable. Travis Smith explains this with an analogy, "How many people would continue to subscribe to Vogue if there were no ads in the publication?"

While some free trial subscribers convert during their term, the majority who convert do so shortly after their terms end. Shapiro says, "The best response rate we have for the conversion to paid is that slammed door on day 31!"

The extra email newsletters have proven very popular. Visitors who choose to opt-in, chose an average of 1.5 newsletters indicating that their interests are specialized and so the niche newsletters appeal to them more than the single general one did in the past. Prior to March 2001, the single newsletter had about 24,000 opt-ins. Now Variety.com has 40,000 unique newsletter opt-ins who represent 60,000 subscriptions to the ten options.

The free trial offers in related print publications and on SAG's site have also done well. Shapiro remarks dryly, "We're very fortunate that branding is not an issue."

Last but not least, Variety's fears of print subscription cannibalization proved to be almost entirely unfounded. Shapiro says, "We've seen negligible signs of migration from print to online. People who like to read print aren't canceling and taking the $59 online subscription. We're watching it very carefully, believe me!" He explains, "My thinking is that the experiences are fundamentally different. People were worried that VCRs would cannibalize theatrical. It didn't. There's something very tactile and lasting about the experience of print."

In fact, the site continues to be a highly successful marketing platform for print subscription sales. Shapiro says, "There's a significant amount of print sales from the site."

In total, not counting print subscription sales which are tallied under a different balance sheet, currently about 25% of Variety.com's revenues are subscription-based and 75% are ad sales.

Useful links related to this article:

Variety.com
http://www.variety.com


Laredo Group
http://www.laredogroup.com

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