Tablets are one of the great growth stories of the past two years. Apple, in typical ‘market defining’ style, created a product that was something in between the laptop and the phone. And they are incredibly popular – almost a quarter of the UK population now own tablets, and in both Spain and Australia that figure jumps to almost a third.
At launch, Apple made a decisive decision to attack the publishing market, launching in 2010 with their Newsstand product. Newsstand was designed to be the central hub for tablet magazine users – and for many ailing publishing companies in the late 2000s, tablets were seen as a glimmer of hope against the decline of print publishing.
The model was simple: Apple would take 30% of revenue, in exchange for hosting what was probably the premier platform for publishers to work with. Publishing houses would enjoy the same reach they previously did in traditional Newsstand distribution, whilst Apple would enjoy a (somewhat similar) healthy cut to what the old newsagencies did.
Both Hearst and Conde Nast aggressively pushed their glossy titles onto tablets, each recording vast subscriptions. Hearst claimed figures of around 500,000 in 2011, Conde Nast came in second at around 355,000. On paper, this market seemed promising.
Then came the great News International experiment: the Daily, a tablet app that would deliver your daily slice of information. News had hoped to get around 500,000 subscribers very quickly – this was the break even number – but the project ran into problems quickly, and was abandoned in 2012.
A breakdown of Hearst and Conde Nast showed similar problems within their audiences. It wasn’t that people didn’t read magazines on tablets, but that the model hadn’t been cracked yet. Every survey and piece of data was showing that people consumed media through these devices. So where was it going wrong?
Something not talked about in tablet publishing much is the monstrous challenge of acquisition. Looking into stats, the attrition rates of digital magazines are actually substantially lower for subscriptions than that of print – likely because re-subscribing is a press of a button, rather than filling out and posting a form. Once you’re engaged, it’s a much easier process.
But thinking about the environment of the tablet itself is where the problems come in for user acquisition. In reality, there isn’t really a great way to do it. On the app store, publishers are competing against games, social media apps, utility apps and a myriad of other random (and often crappy) applications created by every developer and their dog.
This was a big problem with the Daily: whilst it held subscribers, it had real trouble in actually getting those subscribers in the first place. The fact that attrition is low tells you it isn’t a bad product: just in terms of carving out and establishing it’s market, it is a huge ask.
Even on the Newsstand there is extraordinary choice – every publisher is available, which contrasts against the simplicity of a purchasing decision. The range of choice actually forces indecision, which as any good retailer will tell you, is a bad thing when cultivating impulse buying. Covers, and content, are not displayed nearly as prominently on Newsstand, which further hinders the attractive content sets which previously made magazines sell well through the newsagency.
These figures are reflected in Conde Nast – who recently released more data around the growth of their tablet departments. The subscriber base isn’t shrinking, nor has it platueaed in any sense. It’s simply a really, really slow process to get people to commit to a purchase in digital.
And this seems to be the case not just in the publishing world – apps in general, particularly on smartphones, increasingly have become free. Angry Birds, that monster hit of a game created by Rovio, makes more money from it’s free version (read: advertisers) than it does from it’s paid version. They put this down to a simple fact: it’s hard to get people to pay for apps on impulse buys. The discovery just isn’t there.
Looking at the sales trends, this seems to hold true across most application builds – there is a far slower, but more accumulative build across sales trends (not just in the tablet market). Unlike the magazine market, it seems to be far more difficult to gain traction outside of actual downloads as a promotion.
This isn’t surprising in many ways – slightly ironically, neither Google Play nor the App Store have a fantastic search function, nor do they have a great method of discovery. In many ways, you’re relying on users to execute your product promotion plans.
And this is reflected in the magazines doing well on tablets – the New Yorker (now 55,000 paid subscriptions) and Wired (50% of advertising revenue now comes from tablets) both cannabilised their existing print audiences, bundling digital with print, in order to boost this critical mass of users. And in Q1 2013 this strategy by Conde Nast finally appears to be working – acquisitions are slowly but surely getting to a point where these are becoming viable products in their own right.
And at Heast similar things are happening – President David Carey announced in 2012 that the company was well on the way to the million subscription mark, with around 800,000 monthly digital subscribers in the US alone. This figure, as with the minutiae of the trend previously, is exponentially ramping up.
The most interesting part of this, however, is the admission by Carey that 80% of users are new to Hearst products – this indicates again that discovery is going to be critical to getting these tablet magazines the audiences they need.
Instinct tells us, though, that this figure may be skewed somewhat – as Conde Nast and Time Inc seem to think. Both have adopted a ‘bundle-first’ model which attempts to eliminate print subscriptions – compared to the Hearst and Bonnier model of completely separating the products.
One thing is clear: tablet publishing is finally starting to come into it’s own. But the market is not as obvious, nor are the marketing skills required to succeed in it, the same. Companies that are nailing this market are doing a few things right – they are leveraging their brands, offering added value on the digital editions, and working out how to use their brands as aircraft carriers for digital products.
Carey seems to agree with these challenges: “If your magazines land in the upper carousel of Newsstand, you sell a lot of product. If you’re nowhere on that page, you’re not going to do as well.”
Ultimately, iPad magazines need to recognize that Newsstand marketing no longer works. So what will work? In traditional newsagency models, despite what publishers may think, people were able to ‘skim’ content as they saw it. You could pick up a magazine, have a flick through, and purchase if you wanted.
Currently publishers are preventing this on iPad. But there is a lot of evidence to say that strong, freemium models that complement a premium model that offers value could be the way forward. Take Spotify, one of the largest music delivery services in the world.
Spotify has 15 million users with around 4.2 million of these paying monthly subscription fees of at least $10 a month – something that publishers would be very happy to take as a fee if they could. As a conversion rate, that is staggering, with 28% conversion rates, despite having the freemium offering that should, in publishing terms, ‘cannibalise their audience’.
What’s increasingly obvious is that freemium can drive affinity and engagement with a brand, and therefore the willingness of an audience to pay for the product. And there are some great examples of freemium brands leading the way in customer acquisition – Shortlist, the king of freemium in the UK, is nailing this market in email with their Mr Hyde and Emerald Street newsletters.
They have grown to reportedly be successful businesses in their own right, and realistically, they’ll continue to be. But the opportunity is in the brand loyalty, affinity and ultimately the value to the audience that those ‘freemium’ models prove.
And this is a model that was reinforced in the newsagency model – people could skim content before they bought. These days, when confronted with a range of choice at the Newsstand, it becomes tough to know what you’re buying, why you’re buying it, and the contrast against all the other products becomes too much for consumers.
As a final aside, I’ll say this: the iPad magazines that have experienced the most growth are, for the most part, at the top of the chain. National Geographic, already a huge digital subscriber base in the US, experienced over 200%+ growth in 2011 to 150,000+ subscriptions. Wired magazine had similar high growth off an already comparatively high user base, as did the New Yorker.
This is telling us one key fact: the iPad magazine market is still very nascent. Marketing strategies that cultivate impulse buys and brand trust are crucial, and aren’t being done well. But once magazines begin to hit their critical mass on iPads, they experience stunning growth – and this is exciting for the industry.
But for now, far more work has to be done. And the start of that is creating strong, brand focused marketing strategies that develop the value of the brand in digital markets. Make no mistake – the iPad magazine is going to be valuable. It’s just a question of how you crack it.
The Information Generation 