Why 2016 will be a watershed year for digital publishing

In many ways 2015 was a mixed bag for digital publishers. New business models, opportunities in video and longform content, and the renaissance of podcasting kept forward looking execs busy. Yet at the same time companies had to deal with the ongoing issue of the rise of ad blocking software, and the impact it was starting to have on their revenues.

So how will 2016 shape up? There has already been a series of articles which have looked at how the industry might fare this year. And once again pundits are suggesting that 2016 could be another interim year with much for the industry to mull over.

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One of the most interesting perspectives came from Erica Berger, who has been a journalist for many years and is probably best known for her work for The Economist. In an article on Medium (the blogging platform owned by Twitter) called Peak Content, she argues that the amount of content that is being produced is overwhelming. Not just for readers, who struggle to contend with so many stories pushed at them from so many channels, but also too for newspaper newsrooms.

She says, “walk into a newsroom today, and team after team is optimising the rapidity at which they create content in addition to focusing on creating the catchiest headline and most powerful ways to share the piece across all networks. Sometimes, editorial teams are even changing the headline to the same piece over time to increase its reach. It’s a race for attention, and even though it should be a marathon, it feels like a set of multiple sprints in real time, let alone each day. 

Berger’s themes have been picked up by a number of other media commentators. Digital media consultant Kevin Anderson also penned a story in which he argues that there is now simply not enough advertising revenue to sustain the level of content output. He encourages publishers to prepare for what he thinks may be difficult year ahead. Anderson advocates increased strategic focus and concentrating on innovating in the commercial side of publishing.

Content fatigue? Traffic slowdown?

So are Berger and Anderson’s predictions accurate. Are we suffering from content fatigue? And how will this impact on publishers? Are we about to witness a significant shift from commoditised content to high end longform podcasts and video? We spoke to four key industry execs who shared their views.

“The one thing we’ve learned from digital over the last 20 years is that it’s very hard to predict the future. What is popular and successful now perhaps won’t be so in five years’ time,” argues James Hewes who is the publishing director of Gulf News Magazines in Dubai.

Yet on the issue of slowed growth Hewes thinks that readers are simply finding new places to go.

“I don’t think you can say that growth in digital markets has peaked, I think we’re still only at the beginning. The fact that the largest players in the market right now are experiencing a slow-down growth probably simply means that audiences are going elsewhere, perhaps to a series of emerging publishers that will become the next big thing.”

Duncan Edwards, president and CEO of Hearst Magazines International, believes that is isn’t just emerging publishers who will see traffic growth, but those with more established brands too. He argues that the experience and the commercial nous of established content producing companies will see them “assume a clear leadership position in most sectors measured by audience and engagement.”

Edwards does accept that the new breed of content producers may have hit a traffic ceiling. He argues “maybe for the pureplays, their particular approach to content has reached a natural peak.”

Gulf News’ Hewes also thinks that the slowdown in traffic growth needs to seen in the context of overall attitudes to the internet, and that publishers aren’t just competing with other publishers for traffic.

“Overall internet traffic continues to grow, it’s only traffic to these sites that may be slowing. I think the growth in online video is definitely one factor, when you look at the massive investment that somebody like Netflix is putting into original programming, it’s easy to see that this might be an alternative for consumers.”

Hearst’s Edwards thinks that the new breed of companies may need to change their approach:

I am not convinced that all of the newer digital only companies have really clear editorial voices and points of view. In the end, the old skills of journalism, creating engaging content with a distinct and differentiated voice, are what made companies like Hearst successful for decades and are what is keeping them successful again today in this new digital environment.”

Changing strategy of social platforms

Some publishers believe that the reason for the traffic slowdown is because they are getting less referrals from social platforms like Facebook and Twitter. With innovations like Apple News and Facebook Instant Stories social platforms are attempting to keep readers on their own pages and not send them off to third party sites. 

Tom Bureau, the chief executive of Immediate Media believes that the change of strategy from the likes of Facebook and Apple is now impacting on publishers:

“Social channels, which have been the main driver of easy traffic over the past 5 years are now becoming much harder to harness,” he argues. “The obvious answer is that platforms like Facebook and Apple are now looking to keep content and users on their platforms and directly monetise. The biggest problem here is the change of strategy from FaceBook, but Apple News also promises to be a big story over the next couple of years.”

Hewes of Gulf News also believes that publishers need to be monitoring Facebook’s moves very closely.

“I suspect that Snapchat will remain quite a niche opportunity, simply owing to the perception of the format it offers. Anything Facebook does is clearly going to have a massive advantage simply because of their reach, so I expect that will be an interesting experiment in the short term.”

One side issue for publishers is how they will measure the reach on the social channels.

“Growth will have to measured completely differently, as these platforms change from referrers to full destinations,” says Bureau of Immediate Media. “It’s not clear what the commercial model is. So this is a tectonic shift.”

So where then should publishers look for new traffic. Hewes thinks that that answer is for publishers to expand the horizons a little. Burda has already made significant inroads into Africa, and Hewes has already pinpointed another major new territory.

“I suspect that real growth will come from markets and languages that are currently underserved by traditional publishers. If you look at a market like Indonesia, which has incredibly high social media usage and mobile internet penetration, you have to ask whether we really take a market like that seriously enough?”

Ultimately as analysts Peter Kreisky, media industry strategist and senior advisor argues, “when the lure of the new wears off, new services appear and fill mindspace there’s bound to be some consolidation and reconfiguration.”

Commercial issues

It seems that for the moment many publishers are adopting a wait and see approach to traffic and the commercial implications of any possible slump. Significantly more pressing for many publishers in 2015 was the rise of ad blocking software. A report in the summer by Pagefair and Adobe concluded that as many as 20% of Britons, and even more Germans, never see a display ad. 

There does seem to be optimism emerging from publishers, who are either reporting that ad blocking software isn’t affecting their bottom line, or are optimistic that an industry-wide solution to the problem is on its way.

Duncan Edwards of Hearst argues that ad blocking “is certainly an important issue, but not as important for Hearst as it may be to others. Clearly creating great content is not free and publishers need to be paid either by consumers or by advertisers or the content will not be created.”

Meanwhile Hewes of Gulf News believes that publishers not only need to be working together, but they need to keep investing in technology to ensure that they can respond to the ad blocking software upgrades.

“I think that solution is already emerging, he says. “The work that Axel Springer has done on Bild, to deny access to people using ad blockers unless they turn them off, suggests the start of a sort of ‘arms race’ between publishers and ad blockers. It reinforces the need for publishers to make their own investments in technology, to ensure they stay ahead of the curve, but provided they do so I think ad blocking can be contained as an issue.”

High quality content

One issue that both Berger and Anderson focused on in their articles was the commoditisation of news creation. Too much content inevitably confuses readers and leaves them jaded. This has lead some publishers to focus on premium content. There is quite clearly a podcasting revival, largely sparked by Serial, going on in the US. Meanwhile, barely a week goes by without a company stressing that that it is significantly accelerating its video output.

Bureau thinks that the key issue for publishers is to ensure everything they produce is high quality. 

“I think the thesis I have seen argued recently – that there is just too much mediocre content on the web – feels quite compelling. High value content where you can demonstrate deep engagement, that people love, will always build brands and opportunity. The question is does your brand really do this.”

Interestingly Hewes sees analogies of the current state of publishing with television a decade or so ago.

“Funnily enough, digital media seems to be replicating the path of commercial television in the 1990s. There are a number of mass-audience players seeking to monetise content through advertising, driven by audience volume (albeit at lower CPMs than was ever the case for TV). Then there are the ‘cable’ players, like Netflix, who are producing content that people are prepared to pay for and which don’t rely on advertising.”

Acquisitions and partnerships 

If the predictions of a downturn in advertising revenue turns out to be true, it is likely that there will be serious consequences for the new breed of venture funded startups. They may find themselves in a position where money is starting to run short, especially if revenues aren’t growing at the rate they had predicted several years ago.

Anderson points out that one side effect of this could be that we see a rationalisation of the content world with legacy publishers taking advantage of the drop in valuations and making significant purchases. The rumour mill is already in full swing to the point that earlier in the week News International posted a statement that they had no intention of buying Twitter!

Hewes thinks that more established publishers have bigger concerns and different strategies, and that shopping for pureplays is low on their to do list.

“My perception is that most mainstream publishers are moving away from purely content plays and looking towards transactional platforms as their future. I therefore wouldn’t expect to see a rush of deals in this space just because of a short-term slowdown. The market remains very fragmented so I think you could see some form of consolidation but I don’t necessarily think it will be traditional publishers that are at the forefront of this.”

Bureau also wonders if this will be a watershed year, where some of the new breed of digital companies permanently establish themselves as they develop real sustainable businesses, while others wither away.

He argues “continued significant valuations will be driven by sustainable growth, so if growth stagnates, these businesses will be more affordable. The real issue is whether these brands have real businesses and are, when it comes down to it, deeply relevant to their audiences. So the move into real journalism, including high value investigations, and the provision of valuable services will be very important.”

Edwards from Hearst thinks that the shake up will once again benefit established companies.

“At Hearst, we are interested in building long term sustainable and profitable businesses. My guess is that in the content business the so called ‘legacy’ companies will end up as the market leaders.”

Meanwhile Kreisky sees opportunities for publishers in partnering with the more successful new wave of publishers.

“Buzzfeed, Politico, Business Insider, Vox and HuffPo are expanding internationally as fast as they can to gain first-mover advantage over local wannabes. This could produce opportunities for partnering.”

Inevitably it is difficult to draw conclusions, but it does appear that for publishers 2016 will be a year of change.

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