We don’t often see CEO’s of major magazine companies talking intelligently and aggressively about their plans for the web. So its refreshing to read the interview with Ann Moore, CEO of Time Inc, on the Paid Content blog. She voices the fear which chills publishers when they look at the economics of web advertising, and lays out her approach here:
Here is the strategy. First, build the best of product. Differentiate it. Second, build the big audience and by that I mean you need partnerships with everyone. Then third, worry about monetizing it, but you got to have a big audience to make money on the web because the CPMs are low. I have said this publicly: The magazine model is a beautiful model because you got high margins; two revenue streams, the consumer pays and the advertiser pays; beautiful cash flow, you get the money up front. The average reader of Sports Illustrated delivers about $118 to the bottom line in Time Inc. The average very engaged user of SI.com can generate about $5 in advertising contribution. I need many more online viewers to equal one magazine reader. That is why you have to go for big volume and that is why you got to have partnerships. You do not do exclusives with anybody.
The abyss which terrifies mainstream newspaper and magazine publishers is that contrast between $5 from ads-only web users (“very engaged” users), and $118 from the ads+subs in print audience. Even if the audience is expanded 20-fold by the web, the revenues are treading water. Ann Moore seems to be driving her major magazine properties towards an ads-only, no-subscriptions web strategy. That may be right for Sports Illustrated and People magazine, but for many magazines that appeal to more specialist audiences a digital subscriptions strategy does work, its already working for magazines in our shop, and will be a key part of the right digital strategy for a consumer title. Most magazines appeal to niche markets — which is the reason for their success in advertising. It is hard to make hard and fast rules here, but one would guess that a completely open web strategy funded solely by ads may well be a fruitful strategy for a magazine with over 1 million circulation. It is unlikely to be a productive strategy for many magazines with a circulation of less than 100,000 print copies. Over 95% of the magazine titles published, in this global industry, have circulations of less than 100,000 in their print editions.
Message to circulation directors: think digital and look for a subscription strategy which can support users who subscribe to different magazines.
