How LEAP Helps Publishers Find and Know Their Audiences, Person by Person
LEAP Media Solutions thinks daily newspapers and other local news publishers need to get personal with their audiences. The Raleigh, N.C.-based media analytics and marketing company, which was recently acquired by BlueVenn, shows its client publishers who their customers—present and potential—are and breaks them down one by one.
LEAP describes itself as a full-service marketing solutions provider that leverages world-class technology to support audience engagement and revenue growth based on proven best practices. Among its solutions is the Targeted Growth Model, a proprietary analytical scoring system that classifies customers five ways, from “high value” to “low value,” and estimates what it will cost publishers to reach each one. The model also evaluates the potential lifetime value of customers once acquired, as shown here and here.
The data that LEAP assembles can show a newspaper that some of its long-gone print subscribers might be prime customers for new digital subscriptions. The data can even show a publisher that some people in its market with whom it never had a relationship might be among its best prospects for digital subscriptions. With its national audience database that consists of every adult consumer in the United States, LEAP can reach those potential customers through targeted and individualized marketing campaigns.
In this Q&A, LEAP co-founder and Managing Director Daniel Williams talks about what his company is doing to help local news publishers comb their markets to find customers, sometimes in surprising ways, and build profitable relationships with them.
Are you encouraged by what you see happening in the local news industry?
We are encouraged by what we see as a reorganization on the part of new media companies to invest in technology that supports a shift toward a consumer-centered business model. Local media companies have been operating from a position of strategic advantage for a long time.
I don’t think they have necessarily recognized what that advantage is—their ability to connect buyers and sellers in the local markets they serve. If you exist to connect buyers and sellers in the local market, and the way you do that is by producing content and services of value to audiences, there will be a qualified group of consumers that advertisers will want to reach. That can obviously be through premium content, but also events, contests, speaker bureaus, and other benefits that accrue to paying members.
The advantage these media companies have is, No. 1, their relationship with their audiences and, No. 2, their ability to gather information on individual consumers in that audience by engaging them through content, transactional relationships, and so forth.
What encourages me is that news publishers are starting to make investments in new areas, whether it’s technology or adapting their business strategy to focus on consumer relationships. If they’re successful in building new revenue models based on the knowledge we have about the publishers’ audiences, the industry can survive. But the flip side is the continuing structural trends that are based on the old advertising model, where national and display revenues are continuing to decline in the high single digits annually. This is the massive disruptive event that is creating urgency for these companies to transform their business models.
The phrase “high-value audience potential” turns up a lot in LEAP’s research. What’s its significance?
It’s too bad that in late 2018 we’re still having these conversations with publishers that not all customers are created alike. We work with markets large and small, and the audience composition does not vary much. Take an average midsize market with a population of a million, which means you have around 400,000 households. The typical subscription penetration today is around 25%, which means around 100,000 households are paying for access to content in printed form.
When you go a step further and look at digital subscriptions—either pure digital subscriptions or print subscribers who activate digital access—you may see a lift of 10%-15%. Those numbers are rather sobering when you consider many of these companies are betting that digital subscriptions can support a newsroom.
To me it has never been about print versus digital subscriptions, but about determining how many people are willing to pay for access to your content and then allowing the consumer to determine how they wish to consume it. For many people, there is a print element to it, and for others it may just be digital, but for most it is a combination of the two.
What we try to do at LEAP through analytical modeling, scoring, and segmentation is to identify high-value potential audiences who have the greatest propensity for paying for access to content, and then assist our clients in reaching them to drive engagement, activation, and ongoing relationships that can be monetized in a variety of ways.
If you look at digital-only subscribers, the penetration percentage is quite low—in middling single digits.
It is inconsequential. In the markets we at LEAP work with—ranging from 5,000 to 400,000 paid print circulation—about 25% of the market is willing to pay for access to content, period—print and digital. Publishers have been trying to increase that percentage, but it isn’t changing materially, and most publishers have been at this for several years now.
When you break down the 25% who pay, 95% are legacy print subscribers, and only 5% are pure digital subscribers. That ought to tell you we are not at the point where we can abandon the print model, and publishers who try are doing it at their peril. Again, it should not be about print versus digital, but who will pay for content, period. Then, let the consumer determine their preferred method of consumption.
The economics of the digital publishing model from a cost side are more favorable, so we should be focusing on ways to add more value so we can retain readers at equivalent subscription rates while print habits give way to mobile and digital over time. We think a mistake today is when publishers aggressively raise prices while simultaneously cutting the size and quality of the editorial product. That is a path to obsolescence.
What is LEAP doing to try and raise that 25% total subscriptions number?
We help news publishers understand who their customers are—who’s paying for access to their content, what are their characteristics, are they in a digital relationship with you, are they engaging with your content, and, if so, what kind of content and how often, and do they have characteristics that align with your highest-value customers.
Everything applies not only to people with whom you have an existing relationship but also people with whom you had a relationship in the past and even people with whom you never had a relationship.
Taken together, this is the Total Audience Database for our client publishers. For example, one of our large market clients has 300,000 print subscribers, and about 60,000 of them are activated digital subscribers. But in the entire market, there is a combined total of 1.5 million actual and potential subscribers.
So for that 1.5 million actual and potential subscribers, we will break them out in quintiles. The top 20% quintile represents 60% of active subscribers and also includes 300,000 potential subscribers who are 2.5x more likely to become subscribers based on their demographics and lifestyle attributes. Once we are successful acquiring one of these “high-value” prospects, they retain at 40% higher rates and represent 3x higher average lifetime values relative to the overall market.
The top quintile also represents 200%-300% more potential lifetime value relative to the bottom 50% of the market. So, theoretically if you invest $1 million to increase your penetration of that top 200,000 by 10%, that’s 20,000 incremental subscribers, which could yield $5 million in annual revenue. That is a simplistic but compelling ROI.
These numbers should make the news provider in that large market pretty excited, no?
Absolutely. The way I put it to them is, it’s as important to know where not to spend marketing dollars as where to spend them. We can help them allocate their million dollars in their acquisition budget to the right prospect pool, and they not only get more efficiency out of their marketing, but they also can reallocate dollars to other important things, like product development and retention and loyalty programs that are necessary to sustain that base.
Based on your analysis of this market, can they concentrate on the topmost slices of their potential audience to achieve reasonable profitability?
Given what you’re able to do for your publisher clients in their pursuit of reasonable levels of profitability that emphasize reader revenue, does that mean the local news industry doesn’t need to continue gnashing its teeth about its future?
I wish that were so. We have a lot of the analytics and the knowledge and the insights about audiences to lead us down the right path in terms of product strategies and audience development initiatives, but the other side of the challenge in the industry is financial—the willingness of news providers to invest.
If you’re the publisher, and you’re sitting there with the CEO of the company and you’re staring at numbers where you’re down 10% in overall revenue year over year, and you’re eking out a small profit, and if you’re publicly traded, your stockholders are dissatisfied and you’ve got to cut your way to another EBITDA number—unfortunately, what often gets cut in our industry is the spend on marketing, research, and product development, including the very folks who produce local content valued most by our readers.
Having said all of this, there are some really exciting initiatives underway including at GateHouse Media, which has built an enterprise customer data platform and is in the process of building a centralized marketing division to support its 145 daily newspapers and other properties. Another is the Minneapolis Star Tribune which has received well-deserved acclaim for leveraging data analytics and partners to aggressively grow digital subscriptions as well as digital activation across its sizable print base.
At the recent LEAP Summit in Raleigh, there was discussion about the 21st-century transformations that communities across the U.S. are undergoing, especially in the area of equity, and how that presents new opportunities in editorial coverage. How do you see this fitting together with the work you do?
I think this gets right to the heart of why we exist: to build and serve communities. In fact, anything we might say about “audiences” can be applied in a slightly different context by replacing that word with “communities.” Whereas “audience” implies a more commercial application, “communities” implies a deeper connection through engagement, civic participation, and connectedness to what is going on around us.
A great example of this is what is happening right in my backyard with the Raleigh News & Observer’s North Carolina Influencer Series, which has assembled a diverse group of 60 North Carolinians to discuss, debate, and shape important issues at the local and state level. Local media companies are uniquely positioned to build and nurture both audiences and communities to sustain a commercially viable business model and serve the greater public good, and leveraging data to understand both is vital.