May 17, 2004
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Just four years ago, when ContentBiz held its first Selling Subscriptions Summit, the entire industry was around $100 million in size. According to data comScore and the Online Publisher's Association (OPA) released at this year's Summit, the industry is $1.56 billion strong.
And that doesn't even include most b-to-b vertical sites, any x-rated content, or online subscriptions sold via non-site mechanisms (such as call centers and desktop applications.) So, the industry is certainly well over $2.5 billion. And, several of this year's attendees were accounting for $100 million or more in sales each.
However, in the general scheme of things, $2.5 billion is still a pretty small number. We've come a long way baby ... and we look forward to doubling in size over the next few years.
Where will the extra sales come from? OPA says only 11.1% of consumers purchased paid content online last year. Since 22-30% of consumers buy other things online, OPA figures publishers can continue to convert this larger pool of ecommerce users into newbie content buyers.
But there's a fly in the ointment.
Most highly profitable content companies -- both online and off -- don't make their profits from new users. Profits are all about increasing lifetime value and average repeat order size. OPA's report had some bad news there -- "Spending per consumer has varied less than $3 in the last 10 quarters of this analysis. Growth in customer acquisition is clearly driving paid content revenue growth."
So, the challenge for 2004 is not only how to convert more frees into paids, but how to get the average paids to buy more from you.
Here's a summary of the top advice from Summit speakers on that account:
Biggest boost to bottom line -- tweak credit card processing
Most sites - except for the very high ticket b-to-b ones - rely on reoccurring billing to autorenew accounts. The good news is, speakers said (outside of trial conversions) their voluntary paid cancel rates ranged from 5-10% generally. So once you've got a subscriber on board, you should expect a renewal rate that would make any offline publisher faint with joy.
Except for one thing -- cards gone bad.
On average 10% of all authorizations fail due to everything from expired or cancelled cards to accounts over limit. The good news is, roughly 70% of these failures are "soft bounces" and can be saved if you leap through enough hoops. Every subscription site should have a staffer focused on this leap-hooping. In addition, some are investing in specialist vendors to save more accounts.
More saved accounts will make your bottom line vastly more profitable.
But, speakers warned of two problems to watch out for:
Watch out #1: According to speaker Bill Baird of Baird Direct, the FTC is more likely to investigate consumer fraud claims that arise from credit card pass-longs (ie. if you accept orders on behalf of a partner site which then charges them directly.) This partially explains why some aggregators such as Real and payment processing firms such as PayPal won't hand over account information to publishers.
Watch out #2: Debit card use is growing rapidly in the US. CyberSource's Charley Chell said consumers are using their debit cards more now that banks are pushing them as a credit card substitute. While this may seem like good news -- consumers are less likely to switch debit cards so accounts stay live longer -- according to The Economist's Paul Rossi debit cards could hurt you.
Turns out The Economist's UK online subscribers are more likely to use debit cards than US subscribers are. This has hurt the site's UK autorenew income. And, if The Economist's demographic can't be counted on to have a fat-enough bank account to cover charges when renewal time comes around, imagine how hard it would be for others....
Constantly test your brains out -- even stuff you think is not worth testing
"We always have 50-60 different test cells active at any one time," said AmericanGreetings.com's Josef Mandelbaum. And he wasn't alone. Speakers recommended these tests:
- Changing which content is free and which is paid
- Offering a large-type "geezer-setting" for your site
- Tweaking order forms and check-out process
- Offering gifts with order as well as gift subscriptions
- Price testing (actual results will *never* match what focus groups
and surveyed users tell you)
Several speakers, including CNN, Highbeam Research, Backstage.com, and Audible, showed before-and-after screenshots of tested landing pages and/or home pages. The common result? The simpler design won: less writing, fewer search boxes, super-clear "what this is" tagline, and bigger click buttons made the difference. A few specific results:
o CNN discovered an Flash-based sales page didn't work even though they were selling subscriptions to streamed video content.
o Highbeam Research found the big green click button worked better than a big red one on their home page.
o Audible grew conversions by adding more photos of happy people and removing extraneous navigation paths.
Andrew Jedynack, General Manager of Weatherbug, noted the most important thing for any test is to be able to measure results based on initial traffic channel, acquisition cost, lifetime value and demographic profile. "Isolate your preferred customer set."
Since he knows which slices of Weatherbug's 30 million free users are most likely to convert, he can focus outreach efforts on getting more free users just like them.
Specific tactics: telemarketing, email, search
Several speakers and attendees made a point of mentioning that beefing up your call center both in terms of staff training and promoting the number heavily even on the free area of your site and email, is the way to go.
"Our call center represents 2% of expenses and 55% of sales revenue," said Heather Bresnahan of TradingMarkets.com. The eDiets speaker
also noted their own toll-free 800 number is heavily promoted on their campaign landing pages -- and eDiets is famous for continually testing landing pages to see what works.
Email remains a strong marketing tactic both for conversion and retention. Audible's Shoshana Zilberberg presented a rich media emailed postcard that converted free sign-ups to paying buyers at a rate 250% above average this April. "It was phenomenal." Now she plans to roll the campaign out carefully once per quarter, so as "not to squash" results.
Several speakers noted it's critical to segment your email campaign creative for various niche audiences. For example, TheLadders' marketing team have tweaked the focus of their free job listing newsletters to match the demographic. CEO Marc Cendalla explained sales titles want to know about potential income, financial execs want to hear about ROI, and marketers want to achieve dreams.
BackStage.com's marketing team split out their casting newsletter by region -- so recipients don't have to wade through non-relevant information.
You can also use email to enhance lifetime value. For example, AmericanGreetings.com has tested a five-step email campaign to new buyers, sending them a series of welcome messages over 60-days to engage them in returning to the site. This increased engagement, they've found, leads to slightly higher retention down the road.
Nearly everyone at the Summit was investing in search marketing, but as James Preissler of Majestic Research noted, search PPC costs can be "volatile." For example, when one subscription site using pay per click ended up in an insane bidding war against a direct competitor for the three days prior to the end of First Quarter 2004, the price for their most coveted term skyrocketed from $2 to $75 per click.
Kathryn Joy of New England Journal of Medicine admitted, "I was terrified," when she convinced her organization to invest six figures in search engine optimization (SEO.) Luckily it's paying off. "Search marketing is fun!" she gleefully told the crowd. "Plus, it's not just an acquisition strategy, it's a retention strategy. You have to remain visible, be where your customers are."
Content sites have specific challenges with search -- you can't rely on dynamically-generated pages to be spidered, and you have to bridge the church-and-state divide to convince editor to put keywords proactively into headlines and stories. SEO must be "baked in" not added to a content site as an afterthought.
One final note - when budgeting, don't assume search clicks will convert the same way traffic from other sources does. "For us, search traffic tends to convert 30% less than traffic from other linking," says Joy.
Top two ways partnerships = profits
Partnership tactic #1. Brand names & logos
The importance of brand name in raising conversions has been an acknowledged truth since day one of online subscription sales. (Think WSJ.com and ConsumerReports.org.)
This year we saw many more sites jumping on the marketing-with-brands bandwagon via partnerships. Example, all of eDiet's landing pages feature the logos of branded diet plans such as Atkins. Highbeam Research's search results (a critical stage in their conversion process) display the logos of the original information providers such as NPR and FOX News. AmericanGreetings.com has worked deals with brands such as Nickelodeon to promote famous character branded cards.
Partnership tactic #2. Sell via aggregators
The Summit speaker with the biggest paid subscription base was CNN.com. They've got more than six million paids.
How? CNN.com's subscriptions are sold via partnerships with AOL Broadband, Real, and Roadrunner, among others. Naturally CNN only gets a small slice of each sub, but it's a numbers game. You raise the price just 10 cents per month per user and that's $7.2 million more revenues per year. Plus, General Manager David Payne made everyone jealous when he said, "Churn and credit card problems ... those are the issues of our partners."
You can also slice your database to sell one-off items (ie. non-subscription) through partnerships. For example, Audible offers pay-per-listen selections through a partnership with Apple's iTunes. "We're selling a lot of them. I can't say how many, but it's incredible."
What's next? Our take on the future
"No one told me it would be this hard," said AmericanGreetings.com's Mandelbaum. The first year the company's sites switched from free to paid, they sold 1.6 million subscriptions. In year two, total subscriptions hit 2.2 million. In year three, "We signed up over a million new people, but grew net 200-300,000 over the year. The problem is churn."
Mandelbaum's experience is a lesson for all of us. Once you've converted the low hanging fruit (turned big fans into buyers), reached out via every medium you can afford to drive fresh traffic, and done the obvious marketing optimization, your future growth is hard, hard, hard work.
For the next year we expect to see sites testing out-of-the-box ideas to grab more share of the market -- including heavier offline media spending (NetFlix is already investing significantly in TV), desktop applications to circumvent email while building loyalty (watch for one from CNN.com), and loads of wireless and PDA offerings despite the fact that hardly anyone's making money in US mobile yet.