Writing exclusively for ExchangeWire, Brian Lovett (pictured below), director of product, commerce, Sovrn, discusses how digital commerce can be used to effectively supplement revenue from display advertising amidst tumultuous times for media.
“Increasingly a successful digital media company will be one that can accumulate multiple revenue sources.”
In the 18 months since Columbia Journalism School’s Raju Narisetti made this statement, revenue diversification has been a top priority for publishers. A recent Reuters report indicates diversification strategies are beginning to pay off, with almost three-quarters of publishers confident about their prospects in 2020.
But media companies can’t afford to get complacent. Display advertising is, and will remain, a central source of revenue for the publishing industry. Yet with ongoing data regulation, an imminent end to third-party cookies, and the continued impact of ad blocking, they can’t rely on this business model alone. While many are successfully leveraging subscriptions to supplement ad revenue, there is only so much people are willing to pay for content, and increasing competition will limit the extent to which media companies can depend on direct reader revenue. Publishers must continue to diversify, exploring alternatives that complement existing business models. And commerce provides a valuable source of revenue just waiting to be tapped.
The digital commerce opportunity is immense. While traditional offline retail falls apart – with department stores such as Debenhams, Beales, House of Fraser, and possibly even John Lewis having to close physical stores – e-commerce is surging. Online spend in the UK alone is set to reach £75bn by 2024, accounting for almost a fifth of retail spend. This trend is reflected globally, with online’s share of retail expected to grow from 14% to 22% by 2023.
Whether intentional or otherwise, publishers already drive purchasing behaviour through the content they create. Whenever they talk about brands, solutions, or products, they inevitably generate reader interest and attention, effectively influencing buying decisions. While advertising allows publishers to receive a thin slice of the commercial value their content generates, commerce enables them to take advantage of that purchasing behaviour more directly and claim a greater revenue share.
There are a variety of commerce models for publishers to explore, including direct sales, branded storefronts, and native commerce, but whatever option they choose they need to bear in mind the three key principles of authenticity, value, and intention to ensure their commerce strategy is a success.
Authenticity: Deciding which brands and products to promote is critical for publishers looking to profit from the commerce opportunity. These must be consistent with the voice of the publication to work organically with non-commerce related content. They must be relevant to their unique audience; promoting something their readers will actually want to buy. Publishers must be open and honest with product recommendations, only endorsing products they have genuine experience with. Readers can easily distinguish between writers that are passionate and knowledgeable about their subject and those that are faking it, and promoting products they’ve never used will result in a loss of audience trust and ultimately readership.
Value: Success with any commerce model depends on providing real value for audiences. Unlike digital display advertising – which, to some extent, incentivises the thinning out of content to increase impressions – commerce encourages publishers to focus on long-form content that presents valuable information and in-depth opinions. Readers rely on expert authors to guide them in important purchase decisions. Take a cycling website, for instance. Readers are likely to be cycling enthusiasts who want to hear about the latest developments, but they will also value advice on what to buy. Cyclists invest a great deal in their hobby, from purchasing helmets and hydration packs to booking events and tours, so they appreciate expert guidance on where best to spend their hard-earned cash.
Intention: Some publishers worry that promoting products within articles – rather than using advertising that is detached from the editorial – will cheapen their content. These concerns often result in a half-hearted or stealthy approach to commerce. But writing an ambiguous piece that vaguely relates to a product and then adding a ‘buy now’ button at the end is never going to work. Ultimately publishers can’t earn revenue from commerce without positively discussing what to buy, and as long as they maintain authenticity and value this shouldn’t present an issue for their readers.
Publishers need to write with intention, creating persuasive, convincing and authoritative content specifically designed to help readers make buying decisions. They need to delve deep into measurement metrics, maximising revenue by acting on granular reporting into what is working and what isn’t. They need to minimise the number of steps from content to purchase to increase the chance of conversion, and use insight on buying behaviour to guide future content creation.
With the digital media landscape in a continual state of evolution, publishers need to supplement ad revenue with a variety of other business models to ensure sustainability and success. With online retail spend surging, and media content already driving much of that purchasing behaviour, commerce is the untapped revenue stream publishers can’t afford to ignore.