Back on September 21st we kicked off our 2015 sign up drive for Prime, TPM’s membership program. Between us, we had a hopelessly optimistic goal. We wanted to sign up 3000 new subscribers by the end of the calendar year. That seemed like such a tall order that I refrained from making the goal public – not good to announce a goal you’re not going to meet. But so far, we’ve done reasonably well. We’ve got almost six weeks left in 2015 and we’re currently at 2022 new subscribers. You get your biggest rush of sign ups at the beginning of a drive. So it’s still a pretty tall proposition. But it’s definitely possible.
So first I want to thank all of you who’ve signed up. We’re in a transitional period in the digital publishing industry. Lots of publishers are trying to build a ‘direct financial relationship’ with their readers, as the phrase has it – in other words, trying to get them to pay money to the site. So I thought I’d take a moment to explain not so much why we’re doing this but why it’s a trend for the industry in general.
This is a challenge for all publishers because they’re trying to get people to do something they’re not used to doing and haven’t needed to do in the past. I know because with every other site beside this one, I’m the reader just like you are. So here’s the backstory on what’s going on.
The Defining Reality of Digital Publishing
The fundamental reality of digital publishing is an oversupply of publications. This fact has defined digital publishing pretty much from the beginning; and I’m proud to say that TPM has been around almost since the beginning. Digital publishing is just a bit more than 20 years old and TPM’s been around for 15 years of it.
The reasons for this oversupply are pretty straightforward – the very low cost of entry into the space. In the pre-Internet era, the costs of entry for getting into newspaper publishing or television were massive. Magazine was publishing required less capital. But the costs were still substantial.
That basic fact of oversupply causes two critical follow-on realities. First, to the extent you’re publishing something more or less the same as the next site, any attempt to charge readers will drive them to that next site. Second, to the extent your audience is more or less the same as the next site’s audience, you’ll always be in a weak position when it comes to negotiating prices with advertisers.
Have you noticed that ads keep getting more and more intrusive (and yes, I know this definitely applies to TPM too)? Don’t blame the publishers – or even the advertisers, for that matter. Advertisers, understandably, want as much visibility as they can get for as little cost as possible. And publishers, because of the over-supply of publishers, are hard pressed to hold the line. The oversupply of publications has put publishers at a distinct disadvantage versus advertisers in digital publishing. That means declining ad rates and ever more intrusive ads.
What’s changed in the last 4 to 5 years is the inroads social media sites have made into the paid advertising space. Much as Craigslist virtually destroyed the classified ads business that local newspapers owned, a site like Facebook can deliver ads more efficiently and cheaply than most traditional advertisers. Critically, they can operate at a scale that all but a few news publishers can’t match and the targets of the ads (you) are actually creating the content. So Silicon Valley type scale and growth are possible in a publishing space that has never been able to scale the same way. Luckily publishers are still very much in the game, for a number of reasons. But it’s this trend which has led several others in convincing publisher that at least part of their revenue must come from readers.
It wasn’t always like this. But it’s important to understand why. You can’t get into a conversation about journalism these days without some droning on about the golden age of journalism. How did newspapers have more for foreign bureaus all over the world, lots of investigative reporters, money for legions of reporters to spend weeks or even months on stories that not that many readers would ever read and still generate ample profits? Simple. The newspaper business was dominated by geographical monopolies or near monopolies. As monopolies, they could command monopoly rates. If you were a major advertiser in the LA area in the 70s and 80s when I was a kid growing up on the outskirts of the LA sprawl you basically had to advertise in The Los Angeles Times. That’s what the ‘good old days’ were based on – monopolies. Take out the geographical monopolies, which defined print journalism, and you radically change the economics of the business. All the mumbojumbo about the interwebs and digital this and digital that pale in comparison to this simple fact: monopolies are far more profitable than non-monopolies.
Pity the Poor Publishers (Kidding, Not Really)
So what options do publishers have?
One option is scale. In many ways this has been the solution of choice (or really, hope) for most publishers. A site like The Huffington Post is so large that its costs, relative to potential ad revenue, get driven down substantially. More important though is that advertisers like scale. Scale creates one-stop shopping for advertisers. It also creates something the ad business calls “reach” – how many people, how deep into the population can the ads on a particular site reach. Both these factors allow a Huffington Post or New York Times to basically tell advertisers, “Look, you sort of have to advertise with us. You need to be on our pages. We and only a few other publications dominate the space.”
Don’t get me wrong. I’m not saying ad dollars are there for the taking for the mega-publications. But this key leg up in the hunt for ad dollars is a critical part of their business model.
And what do you do if you don’t have scale? Funny you should ask!
One options is to join various advertising networks and accept dramatically lower ad rates. That’s not a particularly appetizing choice. To avoid that, uniqueness and scarcity are the viable options. And they’ve been at the core of TPM’s business strategies for the last four or five years. In short, we’re unique and you’re unique. Or if it not quite unique, at least scarce enough that there’s ready an infinite supply of either of us.
On the us front, the proposition is fairly simple. We’re betting that TPM isn’t quite like any other site. Yes, many sites cover similar stories. But we hope there’s a critical mass of readers who think TPM has some unique value to them which they cannot replicate by just moving on to the next site. This is particularly challenging if we are, in essence, trying to have our cake and eat it too: trying to get a small subsection of readers to pay to join while not blocking non-paying readers from viewing the site.
There are a couple reasons we’ve chosen this route. First, I believe it’s the best financial decision for the company. But the more driving reason goes to the reason the publication exists in the first place. I don’t know if it would work or not. But let’s say hypothetically we put up a paywall and managed to get enough subscriptions to fund the entire site. In many ways, that would make my life a lot less stressful. But it would also radically diminish the site’s impact on the national political conversation. So the site might be more profitable and stable and I might be calmer. But the site’s whole reason for existing would be undermined. That makes no sense.
We’re planning on adding a number of new features and exclusive content to Prime in 2016. And the pitch for Prime is that if you’re really into TPM we’ll give you a better reading experience, with helpful features, many fewer ads and a faster site. But at the end of the day, we’re not asking you to choose between not reading TPM and paying a subscription fee. So that is a particular, nuanced kind of pitch which depends not only on you getting something additional for your money but readers having a specific kind of attachment to and belief in the value of the site.
So far, so good. We’re now to over 8,000 subscribers. Google says we have between 3 and 4 million readers a month. So that’s only a minuscule subsection of our readership. But in terms of publishing economics we don’t need more than a small subsection to subscribe. Over the next year or more, with more prodding and more inducements/features, I’d like to get that number closer to 20,000. But that combination – a few tens of thousands of subscribers and a few million readers – is actually quite workable in publishing terms.
Now, a small digression. There was another equally important reason we launched Prime almost three years ago now. The interests of our core readers aren’t necessarily the same as our broader readership. And there are some kinds of journalism that are difficult to manage financially in an ad supported model. A deep dive look at minimum wage policy or a live chat with a revered policy expert probably won’t drive the kind of audience numbers that are needed to cover the expenses of production in an ad supporter model. But these are things are core readers want us to do and are interested in and they are things we want to do. Prime opens up a separate revenue stream where these efforts to can make sense in publishing terms.
Next to the other aspect of uniqueness and scarcity: you. There’s an arch line people have about site’s like Facebook and Google. ‘If you’re not paying for the service, you’re not the customer. You’re the product.’ It’s a somewhat Orwellian message. But it goes to the heart of all ad supported media. And it definitely applies to us as well, though hopefully without all the sinister connotations.
So if you don’t have scale or ‘reach’, you need to have something special about your audience. And it so happens we have that. TPM’s audience is highly educated, fairly affluent, extremely politics- and news-literate and most of you come from the center-left band of the political spectrum. That means our readers tend to be influential in their social circles and in the society at large. Many of you are involved in government or politics or public policy in some way. And they (you) also have a longstanding relationship with this site. You’re not just following a link you found on Facebook. Even in today’s social media dominated media space, our readers overwhelmingly come to the site through the front page. All of those factors make our audience a choice one for many kinds of advertisers. And that fact has been key to allowing us to navigate an increasingly challenging advertising environment, even as we’ve worked to diversify TPM’s sources of revenue.
So That’s The Story, Folks
This post ended up being quite a lot longer than I originally anticipated. But I’ve asked you enough to sign up for Prime that I wanted to explain some of the context for why it is so important. All of the factors I explained above apply to the publishing industry at large. But TPM is a small, independent publisher. There’s no one backstopping us – no foundation or corporation or generous billionaire behind us. It’s just us. So we need to be careful and extremely focused on the trends affecting the industry so we can have time to react to them. Prime has played a huge role in allowing us to sustain and strengthen this operation over the last three years. But it’s not just that it provides a margin that lets us balance the books. It also provides a critical stability. Individual advertisers are fickle. It’s seldom a matter of trying to affect what we publish. It’s just that they advertise one year and then the next year they don’t. The same goes for the unpredictable trends affecting the industry as a whole. Our readers aren’t as fickle. There’s no guarantees. And we don’t expect one. But a regular reader who subscribes this year will probably resubscribe next year. That gives us a measure of financial stability, predictability and ability to plan ahead that is truly priceless.
It sounds like pablum but it’s true. Our most loyal and regular readers have a relationship with us that is neither transactional nor ephemeral. That is both personally gratifying and financially critical. If you’re a regular reader of TPM, if this site provides value you really can’t or don’t get anywhere else, we really need you to sign up and become a member. As I’ve said a bunch of times, you get a lot of cool stuff and most visibly you get a cleaner, less ad cluttered and faster version of the site. But most of all, we need you to sign up because we hope you believe what we do is special. And your membership is critical to the health, survival and vitality of TPM. Got a sec? Please sign up now. And thank you.