What will news companies look like in 2018? How will they operate differently?
That future is coming into focus. While many publishers' vision is still quite blurry, it's the Financial Times that is clearest-eyed about its roadmap and its future. The FT's clarity first struck me when I sat down for an introductory talk with FT.com managing director Rob Grimshaw in London in fall 2009. His office, just off Southwark Bridge, offered a view of the Thames that forced you to think about the long history of newspapering in that city, a business then in a deep, deep recession along with the rest of the global economy.
Today, Grimshaw is headquartered in New York City. The U.S. is the home to the greatest number of FT subscribers and is its biggest market for growth, Grimshaw told me when we talked last week. At a time when so much of the news industry seems in flux, the FT has managed a steady-as-she-goes transition into the digital age arguably better than anyone else. While it occupies an enviable global business news niche, the ingredients of its relative success are ones that can be mixed and matched into all kinds of recipes - metro, regional, or local; daily or weekly; newspaper or magazine. It's not otherworldly magic that's happening at the FT. It's just ahead-of-the-pack thinking that has given it a headstart - and now gives it the ability to build second and third generations of its digital business. It is now where fast followers will be in two to five years.
Make no mistake: The FT hasn't quite cracked the code yet. It's profitable, but not by that much. In 2012, the FT Group, which includes the FT, Mergermarket, and 50 percent of The Economist, registered an 11 percent profit margin or £49 million. It is reducing and re-skilling its staff. Further, it's been subject to new "for sale" rumors, though John Fallon, the new CEO of parent company Pearson, has recently denied that likelihood. Fallon's recent take on how 2013 will turn is painfully familiar to all in the business: "We expect the FT Group to benefit from continued growth in digital and subscription revenues in 2013, but advertising to remain weak and volatile with profits reflecting further actions to accelerate the shift from print to digital."
All that said, given its digital transition, I believe it is far more likely to successfully cross over to the new age than other publishers.
Look beyond the product it creates, and look at how it creates it, and the lessons tumble out. I've been suggesting that publishers look to the FT since I wrote an Outsell report off that initial London visit, "5 Things to Learn from FT.com.". In the last two years, I've often heard the words "FT" when I've asked publishers large and small which models they are borrowing from. I think we can rightly call the FT a news company of the future.
Our most prime piece of evidence: The FT has crossed over ("The Newsonomics of Crossover"). Its most recent count showed more digital subscribers than print subscribers. That's a stunning stat.
More useful to others in the news business is how the FT has transformed much of the way it does business. This isn't a McKinsey in-and-out business-process restructuring exercise. It's a methodical rethinking and reorganizing of the way the business is done. In a talk with Grimshaw, he noted how much he had learned from and tried to adapt from Amazon as the prime Internet retailer, and those Amazon-like lessons about accumulating and working customer data appear to be getting deeper traction. Let's look at the updated newsonomics of a news company of the future (and pledge to check back then).
Make the company connectionWant to know the secret sauce of the FT's industry-leading crossover percentage? In Feburary, it offered these numbers: 286,000 print subscribers and 316,000 digital subscribers - the first newspaper to see digital surpass print. Of those 316,000 digital subs, though, 163,780 - or 51 percent of them - are subscriptions bought by companies for their employees. These are business-to-business sales, rather than business-to-consumer sales. Those are the fruit of another ahead-of-the-pack move by the FT. Under Caspar de Bono, FT Direct Licensing has built an first-of-its-kind direct business. Rather than leaving B2B customer sales relationships to aggregators like Lexis Nexis and News Corp.'s Factiva, the FT began converting corporate FT buyers to direct relationships in 2008. It sold those 163,000 digital subs through 2,787 separate annual licenses, up 40 percent from 2011. It also sells an additional 13,000 newspapers a day under these contracts for people who still like the feel of old-fashioned print. In addition, the FT has now extending its direct license business beyond companies to the education industry.
Does this understanding of how the FT achieved its milestone change our sense of its crossover success? Yes and no. The FT, given its audience, had a unique ability to sell corporate subscriptions directly - and it took advantage of it. For most daily newspaper companies, the direct corporate license business is a stretch. Still, the notion of such licenses or group purchases, discounted or not - behind a paywall product - should encourage local publishers to think of local businesses, school districts, government offices, and PTAs in a new way. If dailies' news and information are as critical locally as the FT's is to a global business clientele, why not test a new model? That's of course what Politico has done with its Pro product line ("Politico Pro grows to 1,000 subscribing orgs, moves into print"). Pro works several niches. Mr. and Ms. Publishers, what's your niche?
You can charge more for digital subs than print subsThe FT's premium digital sub goes for $450 in the US, $52 more than its print sub. Its regular digital sub is $350. Grimshaw says one-third of the digital subscribers take the premium package, which includes the iconic Lex column.
There is much learning in those numbers. Readers don't care about the publisher's cost of delivering content. It's obvious that as the FT gets more completely digital and can further cut back on those hard paper costs - which amount to around a third of daily expenses - digital circulation gets more and more profitable. (Perhaps this is what Mr. Buffett sees in newspapers' future.) The FT gets 87 percent of the price of its print edition for its basic digital edition - a pricing standard The Wall Street Journal has similarly applied, charging 83 percent of print for its digital sub. And that FT premium sub: It's priced at 113 percent of print.
Mobile monetization is finally happeningThirty-three percent of FT traffic is now mobile, a fairly common number among news publishers in North America and Europe, up from about 25 percent a year ago. Yet the share of digital ad money has been low, in low single digits. Grimshaw says the FT has now hit 10 percent of ad revenues being driven by mobile. Add in the value mobile contributes to those expensive digital subs, and we can see how mobile monetization is moving up in the world.
Becoming digital is apparently a one-way streetOnly 30,000 FT subscribers take print/digital bundles. That seems a surprising low number, and Grimshaw agrees. As readers adopt tablet and other digital reading, "they don't hover in the middle. Once people become digital subscribers, they cross over." All kinds of implications here for all-access subscriptions.
The reader as royaltyThe FT is working with Flipboard to allow FT subscribers to read its content in that app, following The New York Times' similar integration. "You paid for it - you decide how you want to read it," says Grimshaw, noting the "reader is the king in this now." The job of the FT and publishers generally: "Do the plumbing." As with the price/cost question of digital subscriptions, it's becoming blindingly clear that readers don't care about the mechanics of how they get their stuff, movies, music, TV or news - they just want it to be where they are, when they're there.
Tend the middle of the funnelSubscribers, of course, are the gold in this new business model. Yet news sites need a continuous discovery flow of would-be customers, poured into the top of their data-analysis funnels by Google, Facebook, and others. The great majority are one-and-done "readers." It's those who know the publisher brand but aren't yet ready to fork over several hundred dollars that bear the most attention. For the FT, that middle-of-the-funnel crowd now includes 4.8 million registered users; if you register, you get a little access beyond the FT's paywall. Readers among that group are the likeliest to become paying customers, and in the meantime can be monetized with better targeted advertising as well. It's an important point in an increasingly paywalled world: Build registration as well as subscribers.
Share effective ad measures more broadly with advertisersThe FT's Deep View is a proprietary reporting tool that offers data into advertising campaigns and how well they perform. During and after an online campaign, the technology allows the FT to tell advertisers who has seen or clicked on the campaign and the most effective placement and time of day for the ads. That learning then allows advertisers to re-assess and re-allocate mid-campaign.
Video revenue is ascendantGrimshaw will be leading a session at the upcoming NAA Media Exchange in Orlando next month on new revenue sources, including video. The FT says it video ad revenue rose about 40 percent last year.
Unique content - or a unique take on content others have as well - is what sellsThe FT is an essential read for those enmeshed in global business. Naturally, the FT is becoming a global product for the moneying classes. It's part real value, part au courant - just like the Rolexes it pitches its readers.
Data assets drive the businessThe data team has about 30 people, organized into three groups: Data Analytics & Campaigns, Data Product Development, and Data Technology. It's a team that's grown from about a dozen when the FT first started transforming its old-fashioned research group into a digital-forward team, and began hiring analysts from non-media consumer marketing backgrounds.
This is the group that has moved to the center of how FT managers make decisions. It's not seat-of-the-pants intuition; it's about ideas tested and the data that results that leads to new ideas about how to snare customers. How many of these capabilities do you find inside your news company:
As companies like The Washington Post has done, the FT recently restructured its data capability "to remove the distinction between digital/web analytics and everything else we do with data, because we found that the distinction wasn't valid any longer since everyone has to think about digital data." The FT merged its web analytics team and customer analytics group to form a single combined team, covering both print and digital.
Folks, we're not in news-company Kansas anymore.