From a business perspective, the Financial Times is one of the most successful traditional newspapers in the world in the transition to digital.
The specifics — generously shared by FT managing director Rob Grimshaw — are instructive for any publisher, media manager or executive. There are a number of ways to quantify the FT’s success. An impressive 46 percent of the publication’s revenue comes from the digital side, more than any other U.K. national newspaper, according to a recent Enders Research presentation. (The FT later told me the newspaper earns about 35 percent of its revenue from selling content and advertising, digitally. That would still put it atop the Enders list.)
Profits from digital operations pay about 75 percent of the FT’s editorial costs, said Grimshaw, who oversees FT.com’s business, as well as print subscriptions and the company’s event business.
By contrast, The New York Times said last week that less than half that proportion — 20 percent of its $390.4 million in revenue — came from digital subscriptions, products and advertising last quarter.
Grimshaw, in a conversation with my media management classes and during a follow-up lunch, laid out eight key pointers in their process.
1. Content is King
The FT, as a targeted financial newspaper, could not compete against the trillion page views per month that Facebook has, or even the billions of Yahoo and its ilk, Grimshaw said.
“There are only a couple million people in the world who are genuinely relevant to our proposition,” Grimshaw said.
That reality reinforced the FT’s belief that they had to go for a “content-led rather than volume-led” business, to create “unique, differentiated content,” in which the FT’s take on a story, its analysis and even opinion, can be “of real consequence,” he said.
“We have some stuff you can’t find anywhere else no matter how hard you look,” stuff that’s not easily available through other means to consumers who have “100 choices” on their smartphone for games, social media, and much more, Grimshaw said.
The FT’s journalism has to be so good, in fact, that people are willing to pay for it, Grimshaw said, noting that 60 percent of FT.com’s revenues come from subscriptions.
Top-notch journalism and editing are crucial.
“We as a news publisher have to create a proposition which is so compelling that out of all those choices they decide to come to us,” he said.
Yet, even free areas of the site, such as the Alphaville blog, are fact checked and carefully edited.
“The standards, the values, the principles behind what we do journalistically don’t vary just because something is on a blog rather than on the core website,” he said.
2. Carefully Protect the Value of the Core Product
Many newspapers, and the news industry in general, are still paying the price for having made their entire library of content available for free.
Content may want to be free, but journalists, editors and a lot of other people working for the company need to be paid.
“The decision we took was always that you have to pay more for digital,” Grimshaw said. “We felt if we bundled in the digital [for free, as many print publications including The New York Times do], you’re effectively sending a signal to the reader that digital is not worth that much … Long-term, we felt that would be a huge headache” as people moved to digital.
In fact, digital can be said to be more valuable than print, Grimshaw said, because there’s more available, such as interactivity, added data, rich archives, and more frequent updates.
In the U.S., the FT charges more for digital, $6.25 per week, than print, which costs $5.75 per week. They give only a 50-cent weekly discount to people who subscribe to both.
The publication has about 435,000 digital subscribers, while the newspaper has about 230,000, a spokesperson said, down from a peak of about 450,000 a few years ago. That means the total number of subscribers to the Financial Times has grown, overall.
3. Focus on Costs, As Well As Benefits
While Grimshaw and his team believe in producing the best journalism possible in as many ways as they can, they also have limited resources and have to make choices.
Unlike some news organizations, for example, the FT has not yet gone full-bore into video.
“It’s expensive to produce,” Grimshaw said, and “we had concerns about whether video would generate (financial) returns” on the investment.
While the cost of making video is coming down — smartphones now are as good as professional equipment once was, Grimshaw notes — the difficulty and time required to produce them at high quality, and to generate high numbers of views are also limiting factors.
Without that quality, video becomes as commoditized as print has, he said. And, by implication, the advertising rates will be low, and get lower over time.
It’s difficult, too, to have video that’s exclusive enough to justify the benefits to subscribers of putting it behind the pay wall.
4. Advertising, Alone, Is Not Enough
If you’re trying to support your media operation on ad revenue, here are some figures from Grimshaw that help illustrate the hurdle you’ve chosen.
While the IAB recently said that digital ad spending surpassed what’s spent on TV advertising, only a very small slice of Web traffic — perhaps 1.5 percent of pageviews — is for news sites, Grimshaw said.
“That’s all news sites — BuzzFeed, The New York Times, Huffington Post, BBC, everything,” he said. “That’s actually not very much real estate to work with.”
Against such competition, and new entrants constantly joining the market, Grimshaw’s team saw continual downward pressure on the rates advertisers would pay.
“The supply is almost infinite. The price is likely to tend toward zero,” he said. Just to keep revenues flat, “you have to grow pageviews at a massive rate,” at least doubling annually, which is hard for anyone, but especially for targeted niche news publishers like the Financial Times.
“Even the biggest publishers are only into the low single-digit billions in pageviews per month, which means they are essentially 1,000 times smaller than Facebook,” he said.
5. Carefully Manage Advertising Inventory
It’s fairly common for publishers to get the most money they can on ad deals, but to not carefully analyze how much each of their ad spots is worth, and where they can maximize revenues on a page.
The FT, though, segments advertising depending on who’s consuming it. Ads to subscribers, which for the FT includes a higher than usual proportion of high-income internationally minded executives, can command a very high $80, $90 or $100 per thousand ads placed, Grimshaw said.
Even for less desirable spots, the FT can get a respectable $10 per thousand ads, he said.
The majority of unpaid visitors are among the 6.5 million who have registered, and so more information is known about them and their interests as they consume the eight free articles they can access per month. That helps ad targeting and increases the rates.
There is some traffic from people who come to the homepage or section fronts, which they can view without registering. Grimshaw likens them to window shoppers, who pass by at a mall but may someday go in to buy something.
For the more commoditized traffic, the rates advertisers are willing to pay — often via advertising networks or exchanges — can get much lower than $10 per thousand, at which point it makes more sense to run ads that sell the FT’s own products.
“There are chunks of traffic we don’t sell, because what we’d earn from ads would be less than what we earn by running house promotions,” Grimshaw said.
6. Think Strategically. Then Keep Evolving
Because of the Web, the FT for the first time started selling directly to their customers, becoming a “direct Internet retail business,” instead of going through intermediaries like newsstands or distributors, Grimshaw said.
“Print is to a large extent a distribution business model. Getting the news from A to B is a task in itself,” Grimshaw said. “Many regional newspapers needed just to make sure people could see the news being put out by Reuters or AP whatever.”
But with essentially free, ubiquitous distribution on the Web, building a business built on wire stories is not viable.
It’s “very different [compared] to the model we honed over 100 years,” Grimshaw said.
It also has had to adjust to changing news consumption patterns, and be comfortable with the idea that people consume what, when and where they want, rather than more typically following the narrative journalists have assembled for them.
For baby boomers, “the model of consumption was the package: buy a single edition of a newspaper, read it, and then you’ve read the news.”
But, “the paradigm for the millennial is the stream … They feel very comfortable with the notion that you can never read all the news,” and will dip into and out of it, he said.
That logic, in part, led to the FT decision to allow a specific number of articles per month rather than choose specific content that was allowed outside the paywall. As Grimshaw said, “One reader’s gold dust is another’s irrelevancy.”
The company’s “transformation” is not complete, Grimshaw said, and may never be, but has run the gamut, from the newsroom — hiring more digitally oriented journalists, some of whom are social media mavericks — to making technology more prominent, and rethinking sales and marketing.
7. Use Data!
The FT’s marketing changes are one good illustration of the FT’s evolution.
Five years ago, they were placing ads on other websites, doing email promotions, emailing their entire newsletter database, and generally behaving in a “naive and unsophisticated way,” Grimshaw said. “The response rates would be miniscule.”
Over time, the team learned to identify patterns that indicated which visitors to digital products were most likely to subscribe to the FT. Recency and frequency of visits to the website, for example, “are powerful indicators of interest in subscription,” Grimshaw said.
The FT also figured out how to more clearly understand which registered newsletter subscribers were most likely to become paying subscribers, and send them specific offers that weren’t sent to everyone. That created three big benefits that Grimshaw enumerated:
- “We’re sending out a lot less email so the cost goes down.”
- “The conversion rate goes way up.”
- “We’re not spamming our entire database. We’re sending out a few thousand emails, instead of a few million.”
The use of data is so important to the FT, in fact, that it was a key reason the company decided to forgo its iPad app in Apple’s iOS system in favor of its own optimized, Web-based one.
Both chief editor Lionel Barber and Grimshaw have referred to the need to harvest and understand who registrants were, and how they were consuming the FT — data which Apple does not easily share.
8. Be Open-Minded. Listen Better
Grimshaw also acknowledged that there are continued challenges, that the FT has to continue to transform in order to succeed.
For example, while “we do have a surprising reach in social media,” Grimshaw said, with nearly 2 million followers to its main Twitter account, the FT “doesn’t do enough” listening to its community.
“I think that’s to our detriment … There’s not nearly as much interaction between readers and journalists as we’d like to see,” he said.
Instead of the “tablets of stone” style of journalism, in which the authoritative publication delivers received wisdom, today “the opinions of the readers are often as prominent and important to the overall proposition as the contribution from the journalists. From our perspective that’s a work in process.”
“The future is about a much more interactive and diffuse model,” he said.
Conclusion: Lessons for Any Publisher
How much of a lesson, really, can most publishers glean from the FT’s learnings?
They, after all, have an unusual advantage as a leading international financial publication whose community is what Grimshaw calls “cash rich and time poor.”
“For much of the FT’s audience, the money genuinely isn’t any object,” he added. “If they think it’s good they will buy it, or if it’s useful.”
But that did not protect them from the grim days of 2001 at the end of the first dot-com boom.
“When the bubble burst, our advertising revenues collapsed, we swung into loss, and the operation was in some level of chaos for a couple of years,” he said.
“There was great determination we should never find ourselves in that condition again, and that however uncomfortable it was, that we would deal with disruption we could see in the market ahead of time and be bold about that.”
That’s a lesson worth learning for anyone trying to survive in media today.
Update: This story has been altered with updated numbers supplied by the Financial Times.
An award-winning journalist and MBA, Dorian Benkoil (@dbenk) is founder of The MediaThon, a hack-a-thon for media makers, and Teeming Media, a digital media management consultancy focused on helping publishers make media more effective. He developed and executed sales and marketing strategies for PBS MediaShift.