03/19/2012
(An interesting excerpt about tablets from Pew's State of the News Media 2012 report: http://bit.ly/A22x8q)
TABLET ECONOMICS
Within mobile, tablets may operate entirely differently than smartphones. Many publishers believe that display advertising within tablet apps will be create a much stronger digital advertising market. Such ads offer a richer visual experience; they also enable advertisers to add, if they choose, interactive features.
Publishers intensified efforts to bring out tablet-based apps throughout 2011. In August, for example, Time Inc. announced that it would put out tablet versions of all 21 of its publications by year-end; at that point, only its four biggest titles – People, Time, Fortune and Sports Illustrated – had apps. Hearst made a similar announcement.
One critical question for news organizations has been whether the popularity of apps would allow them to start charging money for digital content that many had been giving away free on the web.
The issue is part of a larger debate over efforts to create paywalls to charge for content. The New York Times’ success with its pay wall, begun in early 2011, has encouraged others to experiment. In February, Gannett announced the most ambitious efforts to date. It will charge subscriptions for all of 80 of its local news sites; only flagship USA Today will be exempt. (For more on pay walls, see the Newspaper chapter of the State of the Media Report.)
Getting people to pay for content still appears to be a challenge, however, even on the tablet. Apps for the top 25 sites tallied by Nielsen, for example, were all free to download for the iPad, some for Android. Two out of the 25 apps, however, require subscriptions to see more than a limited amount of content.
According to PEJ’s summer 2011 tablet survey, just 14% of tablet news users had paid directly for news content on their tablets. Another 23%, though, have a subscription to a print newspaper or magazine that they say includes digital access. Thus, the portion of these early tablet news users who have paid either directly or indirectly for news on their tablet may be closer to a third. That is a much higher number than previous research has found more broadly of people paying for digital content.
About one-third of respondents surveyed in September and October 2011 by Nielson said they had downloaded a news app within the prior 30 days, and 19% of them said they had paid for one.24
News organizations are also counting on mobile ads to bring in new revenue. Here, they are entering an ever-more complex ecosystem in which they must frequently work with platform owners such as Apple, Google, Amazon and others. While that can significantly expand their potential audience, it often comes at the cost of shared revenues and more limited access to data about their customers. Alternatively, news organizations can also sell ads directly on their mobile browsers and keep more of the revenue themselves.
There are pros and cons to each approach. To sell ads on their mobile apps, for example, news organizations must give some of the revenue to the platform owner. Apple takes 40% of the revenue for ads sold within iPad and iPhone apps, for example, while Google takes a 30% cut of the price of an app sold on Android devices.
When a news organization sells ads through its mobile browser, on the other hand, it does not have to share any revenue with the platform companies. However, if the ads are sold through a digital ad network, as is common, the network would take a cut. The lower quality of browser ads also means that publishers typically cannot charge as much for them as for ads inside an app.
Moreover, readers who favor apps over the browser consume news much more avidly. In its fall 2011 study of tablet users, PEJ characterized those who rely mainly on apps as “power news users.” Some 81% consume news daily, versus 63% of tablet owners who mainly use the browser. The power users spend more than twice as much time consuming news as do browser users, and they are more than three times as likely to get news from new sources.
Just as important, those who go through apps tend to be wealthier and more educated. They are also far more likely to have paid for news: 27% of app users have paid for news, versus just 5% of browser users. In other words, they are exactly the audience many news organizations and advertisers want.
Developing all of these options costs money and requires diverse technical know-how. Creating apps and content for a multitude of platforms also risks stretching already strapped newsrooms even thinner. And they raise a series of questions every news organization has to answer when moving into the mobile space. First, do we need an app? Second, can we afford to move into both the Android and Apple markets – along with smaller ones such as Amazon’s Kindle, the BlackBerry or Windows mobile? Given the amount of browser usage on tablets, do we need mobile versions of our regular website in addition to apps? Some, without the financial or technical wherewithal to do it all, will focus simply on building scaled-down versions of their websites.
These are simply the opening questions. There are many more that follow that make the move into mobile a complicated one. But news organizations that want to survive, never mind thrive, in the rapidly evolving news ecosystem have little choice but to tackle them head-on.
Two numbers symbolize the intensifying challenge and opportunity the digital world poses for the news industry: In 2011, social media giant Facebook grew to 133 million active users from 117 million in the U.S.1 And in the final months of the year, tablet ownership in the U.S. nearly doubled, to 18...
