Inside the Design Studio: What’s in a Revenue Model?
Design • August 23rd, 2018
Part two of a series
Each year, more consumers lose patience with the ‘attention tax.’ As marketers, publishers and platforms find increasingly clever, directed, and even intrusive ways to target users online, the ‘free content for ads’ bargain feels like less and less of a deal.
In fact, a recent Deloitte survey found 80% of Americans use at least one form of ad-blocking technology, and 31% of all Americans block ads on PCs, tablets, and mobile. Of this group the highly desired 18-34 market blocks ads the most, and on four or more devices. And recent PageFair survey shows a full 40% of Americans blocking ads on laptops.
Experts predict that sooner rather than later, consumers will assert even more control over the marketing dynamic. For example, Doc Searles’ Intention Economy compellingly argues for a near-future time when digital users call the shots with full control over the flow of their own personal data, who gets to see it, and what they will pay for goods and services — a digital economy when demand will directly and seamlessly drive supply.
The current online ad model not only annoys consumers on an ever increasing basis–it compromises editorial integrity. As architects, writers, and visual and UX designers fulfil their revenue-driven directives to maximize clicks and pageviews, they often feel compelled to prioritize the sensational over the substantial. This sacrifices long term audience loyalty and relationships for short term financial wins. It also endangers–at least in the area of news content–the historical role of journalists as watchdogs over democratic processes.
Problem is, ads have kept online publishers’ lights on since the dawn of digital. And social media platforms encroach on this revenue now as well. So what’s a beleaguered content producer supposed to do?
Leaders from Beyond’s design team discussed this pressing issue–and the larger, related question of how design DNA shapes the ethics of business models–at General Assembly’s recent educational panel series, ‘Inside the Design Studio.’
As consumers push back on traditional ads, publishers and marketers have turned to branded content–or native advertising–as their alternative of choice. This cooperative effort between brand and publisher packages the brand’s messaging in a highly contextual way–e.g. as a visual, article, video or other form of media that fits in with the style and tone of the surrounding editorial content. A new emarketer survey reveals this fast growing sector will make up 60% of all US digital display spending in 2018, and that it significantly impacts buyer behavior. But is native just a band-aid for advertising fatigue, or a long-term fix?
According to Beyond’s Director of Content, Ben Martin, native has some significant upsides. It serves as an interesting alternative to display in that it looks and feels like content from the rest of a site, and therefore a delivers a more enjoyable, uninterrupted visit to ad-fatigued users. “There are plenty of great native content executions that, regardless of whether they were paid for or not, stand alone as engaging, informative, and overall great content,” he explained. “However there’s a fine line to tread in terms of maintaining that seamless experience, while also clearly communicating any sponsorship of content.”
Emma Netland, UX Designer at Beyond, supported his point of view. “If it’s ok in the analog world, it’s ok in the digital one,” she stated. “Try not to be sneaky. Let your user know where they are going. Be transparent and give them a choice.” In Emma’s opinion, Facebook ads–which clearly label themselves as such despite the fact they may blend in with a feed–are a good example of getting it right.
And studies published in the Harvard Business Review in 2017 further back up her position. Researchers have found a clear interconnection between increased marketer transparency in digital advertising, heightened customer trust, and a rise in purchase intent.
Conversely, however, a recent Contently survey highlighted the risk brands take if they forego a direct and honest approach: the study revealed over half of consumers could not immediately recognize native advertising as such, and that significant backlash to brands occurred when users realized they had been ‘duped.’
Pivot towards your audience
Some digital ad formats engage better than others. And honesty helps. But is there a more long term alternative revenue model for content producers? One that doesn’t run a risk of alienating their most important asset–their audience?
Matt Basford’s spontaneous poll at the General Assembly event pointed to a promising solution. The majority of attendees expressed a clear preference for Netflix (a media subscription model) over YouTube (a free content for advertising model). And this sentiment extends way beyond a seminar in New York. The previously cited Deloitte research shows 65% percent of Americans pay for at least one media subscription. And 47% say the absence of ads is a reason they do so.
How a site is monetized does tend to affect the quality of the user experience. And the difference goes deeper than the absence of ads. As Emma Netland pointed out at the GA event, designers design towards a metric. If the goal becomes cultivating long term relationships with subscribing audiences, rather than increasing page views and clicks to please advertisers, manipulative UX patterns go down–and product quality and creativity go up. Advantages include heightened multimedia experiences, recommendations that go beyond personalization to discovery, increased interaction with users and premium customer service, and creative exploration with the support of a loyal user base. In hybrid and subscription models, ‘caring’ for users becomes a differentiator, and drives retention and future customer preferences.
Subscription models also boost bottom lines. Currently, Netflix holds Wall Street’s top spot as the world’s most valuable media company. In the past year, The New York Times subscription earnings topped $1 billion, and that channel presently makes up more than 60% of publication’s total revenue. Free mobile games have moved to ad-free formats and focused resources on improved user experience — to the tune of a $35 million revenue lift (via in app purchases) for Candy Crush, and similar gains across the sector. Spotify has hit an all time high with 100 million active users last quarter. YouTube and Pandora have just launched ad-free, subscription-based models. And the list goes on and on.
Ad-supported free content won’t disappear tomorrow. But trends suggest a hybrid, if not subscription-based, future. As they navigate a shifting landscape, designing to delight loyal users is the savvy content producer’s sure bet.