“Ten years ago, display advertising made up 58 per cent of digital publisher revenue and subscriptions only 7 per cent. Subscriptions now account for 22 per cent of total revenue; with display advertising having shrunk to 42 per cent.” The Association of Online Publishers’ (AOP) report on the state of UK digital publishing revenue includes key takeaways for Australian publishers.
The UK’s Association of Online Publishers (AOP) and Deloitte have released a report on the performance of the UK’s digital publishing revenues for their Q1 2020 period (January to March 2020).
While the report is specific to digital publishers in the UK, the areas of growth are interesting to note for Australian media businesses looking to further monetise their digital platforms, or to offset declining digital display advertising revenue.
The quarterly Digital Publishers Revenue Index (DPRI) is based on a survey of 21 UK digital publishers comprising 15 B2C publishers and six B2B publishers. The aim of the report is to provide an overview of revenue levels across multiple channels and platforms – as well as insight into publisher sentiment – and to benchmark these findings against previous quarters.
Digital revenue growth areas
The latest DPRI found that digital publishing revenues in the UK fell less than expected to £117.1 million (A$211.8 million), a 2.3 per cent decline against Q1 2019 (January to March 2019).
AOP said that during the first three months of the year, income from subscriptions grew strongly by 19.3 per cent, however this failed to offset significant declines in recruitment and display advertising, which fell by 22.5 per cent and 12.8 per cent respectively.
Just over half (53 per cent) of publishers reported revenue growth over the January to March period, the same proportion that did so in Q4 2019 (October to December 2019).
29 per cent of publishers citied rises in excess of 25 per cent year-on-year, up from 24 per cent that reported this level of growth in the previous quarter.
On a 12-month rolling basis, subscriptions and miscellaneous revenues performed strongly, growing by 18.8 per cent and 25.9 per cent respectively, while online video revenue grew by 10.7 per cent and sponsorship experienced a slight increase of 3.2 per cent.
Growth in these areas however failed to offset the substantial reduction in revenue from display advertising formats — down by 17.1 per cent year-on-year, amounting to a £41.2 million (A$74.5 million) decrease.
Overall, digital revenue fell by 4.0 per cent on a 12-month rolling basis.
The difference between B2B and B2C digital publishing revenues
B2B revenue remained flat in the year to March 2020, falling by 0.1 per cent to £80.2 million (A$145 million).
Despite downturns across multiple revenue segments, balance was maintained by increases in sponsorship (10.9 per cent), online video (10.6 per cent) and subscription (2.3 per cent) income.
In contrast, significant growth for B2C subscription (32.7 per cent) revenues failed to offset other categories, with total B2C revenues declining by 2.6 per cent between March 2019 and March 2020 to £395.4 million (A$715.2 million) .
A future focus on non-advertising digital revenue
AOP said that a survey of its board members (completed in May-June) on the year ahead found an increase in optimism among publishers since the previous quarter (based on a survey completed during February-March).
However, AOP found that most publishers remain pessimistic about the industry and the impact of COVID-19: “Publisher confidence in the financial prospects of their own companies rebounded more strongly than their confidence in the industry as a whole.”
AOP said that a growing number of its board members are prioritising non-advertising revenue growth and cost reduction strategies.
According to the DPRI, 89 per cent of publishers cited non-advertising revenue growth as a high priority for the next 12 months, up from 78 per cent who said the same in Q2 2019.
Meanwhile, 78 per cent of publishers identified cost reduction as a high priority for the next 12 months, up from 44 per cent who were focussing on this area in Q2 2019.
The AOP found that none of the publishers surveyed reported seeing expansion by acquisition as a strategic priority over the next 12 months, reflecting their need to focus on existing business operations.
Adapting to change
AOP Managing Director Richard Reeves said “After a turbulent 2019, the latest DPRI data demonstrates the challenges to revenue in early 2020 wasn’t as severe as had been expected. While COVID-19 disruption will inevitably impact revenues as we move through the year, the overall decline in Q1 2020 was relatively slight with multiple areas of growth.
“Subscriptions in particular were already playing an increasingly essential role in the monetisation of online content and look set to become even more vital as publishers adapt to the new landscape.Richard Reeves, Managing Director, AOP
“Ten years ago, display advertising made up 58 per cent of digital publisher revenue and subscriptions only 7 per cent. Subscriptions now account for 22 per cent of total revenue; with display advertising having shrunk to 42 per cent.
“As income from display continues to decline, the shift towards subscriptions and other diverse revenue sources is only set to grow, accelerated in part by the pandemic. The publishers that adapt to this change will be the ones that have the most to gain when the storm passes.”
Dan Ison, Lead Partner for Telecommunications, Media and Entertainment at Deloitte, commented: “Over the past decade, the industry has worked creatively to diversify, building strong teams in subscription, online content, sponsorship and more.
“To withstand pressures of the pandemic, this diversification should provide publishers with the flexibility to launch new methods for content creation and delivery, enabling them to reach new audiences and stay ahead of the competition.
“Purse strings may be tight, but sustained growth in subscriptions…demonstrates that consumers are ready and willing to invest in quality content.”
About the Association of Online Publishers
The AOP is an industry body representing digital publishing companies that create original, branded, quality content. AOP champions the interests of media owners from diverse backgrounds including newspaper and magazine publishing, TV and radio broadcasting, and pure online media.