March 22, 2007

How Paid Content Sites Can Profit Against Ad-Supported Ones

SUMMARY: The recent revival in online advertising has many Web publishers partying like it's 1999 all over again as they refocus on ad-supported content. So, what’s a paid content site, particularly in the B-to-B space, to do?

Our exclusive interview with Outsell Inc.'s Louise Garnett reveals that paid content providers can still grow, but only if they adapt to market trends shaping the industry. Garnett offers her top five insights, including how to address relevancy, pricing and what content is hot.

Recent growth in online advertising has Web publishers again rolling out free content meant to deliver big traffic numbers to advertisers. The trend may have some paid content providers, particular B-to-B publishers who staked their business models on expensive research reports or subscription-based data, feeling left out.

But the excitement over ad-supported models in the consumer content space has made it easy to overlook the performance of paid subscription sectors. “The hot spot is the advertising sector, but paid subscriptions are growing quite well,” says Louise Garnett, VP and Lead Analyst for information industry market research firm Outsell Inc.

According to a report released last fall by Outsell Inc., several paid content sectors’ 2001-05 compound annual growth rate exceeded the total information industry’s compound annual growth rate of 8%, including:

o Credit and financial information, 9.2%
o HR information, 14.1%
o Market research, reports and services, 12.6%

Achieving that growth, however, requires companies to focus on a handful of essential tactics dictated by the changing content landscape, Garnett says. Here are five of her insights into what’s working in paid content today.

-> Insight #1. Companies will pay for content related to high-risk, high-cost activities

Consumer-focused sites are moving toward ad-supported models because consumers are picky about paying for content online, says Garnett. So are business customers, but their willingness to pay for information correlates with the risk of the decision they’re making. This puts a premium on information areas, including:

o Research and analysis on enterprise technology systems
o Credit risk
o Legal and regulator issues

-> Insight #2. Relevancy is a key driver for subscription purchases

In the days before the Web, Garnett says, publishers could put out a newsletter or other product that met 25% of a subscriber’s needs and still keep readers. Today, so much more free information is available, offering such granularity, that subscribers aren’t willing to stick with content only partially useful to them.

Content providers are adopting several tactics to deal with the demand for relevancy:

- How-to or practical content that helps subscribers perform specific tasks. This includes took kits, document templates and job checklists that add value to a subscription.
- Content based on an individual subscriber’s role within a company.

This is an especially important tactic for companies with huge databases of aggregated information. They can carve out niches from those databases aimed at specific job descriptions or types of information. For example, Factiva offers content aimed at compliance officers, credit risk managers, executive search consultants, marketing, sales and PR professionals.

-> Insight #3. Customers want new packaging and pricing models

Content trends are pushing publishers toward more bite-sized information, delivered with greater frequency. At the same time, business customers still want analysis and context around their information -- they just want it more frequently. “If you’re putting out market reports once a year, that frequency isn’t fast enough.”

In addition to research reports, monthly or weekly publications, email newsletters and other regular content, publishers need to consider:

o Real-time data services, such as Onvia’s automatic updates of government RFP and bid information
o Customizable information interfaces, such as dashboards that allow clients to monitor a range of information and data
o Social networking or other peer-to-peer interaction that allow subscribers to share information with each other however and whenever they want

-> Insight #4. Customers want data-centric content

As the noise of opinion-based content grows online, content with an underpinning of real data is becoming increasingly valuable. “People want more facts, and they’re willing to pay for them.”

Here are a few examples of data-centric products:

- Reed Construction Data packs construction industry information into products ranging from construction lead services to market outlooks, buildings products cost databases.
- Hearst Business Media has specialties such as automotive data, with its Black Books, MOTOR Information Systems and Used Car Guides.
- IMS Health’s subscription-based PharmaQuery service is built around international pharmaceutical pricing and regulatory data.

Even publishers who don’t have a data network of their own can partner to create data-driven products. CIO Magazine and the American Productivity and Quality Center are partnering on an IT best practices benchmarking project that offers benefits to both companies. “CIO gives APQC them access to their readership, and in return they get aggregated information to put in the magazine,” Garnett says.

-> Insight #5. Audience measurement is crucial, but lacking

“Everyone wants to measure everything,” Garnett says. “ ‘Am I attracting the audience or not? How much attention do I have?’ ” The publishers who have the best handle on where potential subscribers are purchasing information and how they’re consuming it will have a better chance of staying on top of rapid changes in industry trends.

The problem is that while audience measurement techniques and third-party services are well established in the consumer content sector, B-to-B publishers have fewer resources at their disposal.

Garnett sees some services developing in specialty areas such as health information, but until B-to-B audience measurement capabilities are better established, publishers must stay on top of their own metrics and keep an eye on how new products or services are faring to help gauge how well they’re responding to industry trends and audience shifts.

Useful links related to this article

Outsell’s ‘Information Industry Outlook: FutureFacts 2007’ - a 40-page free report download (typical registration info required) detailing historical growth rates and marketing trends for different content industry segments:

Outsell Inc.:

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