November 7, 2023

Building for a Loyal User Base

If you’ve read AMO for any extended period of time, you know the thing I talk about more than anything is 1st-party data. How can you properly serve your audience without it? Well, the same is true for me. And so, if you have not already filled out your user profile on A Media Operator, please take a minute and do so here. I would really appreciate it.

I also want to call attention to a new database that I’ve put together for AMO Pro members. It looks at private equity owned media assets and when they were acquired to help understand when we might expect to see some of these come on the market. You can access it here.

Now let’s jump in…

As we continue moving away from the platform world and toward one where publishers have to actually retain their audiences, we will hear less conversation about total audience sizes and more about loyal audiences. And that’s exactly what we are seeing from The Verge.

In September 2022, The Verge introduced a new homepage design with the stated goal of becoming more of a destination to its readers. While aesthetically not my cup of tea, the goal was to build a deeper relationship with its core audience. According to a story by Adweek, it appears to be working:

From January to September, The Verge saw its readership increase 15%, according to Patel. In the same timeframe, its loyal user base, which it defines as a reader who visits the site at least five times per month, increased 62%. 

Despite these increases, in the months following the September 2022 redesign, The Verge saw year-over-year traffic decrease every month except for June 2023, according to Comscore. From September 2021 to August 2022, the publisher averaged 17.3 million visitors per month, per Comscore. From September 2022, when the redesign occurred, to August 2023, the site averaged 11 million monthly visitors.

What we are seeing is media companies realizing that they need to focus on an actual audience versus random people hitting the site once and then disappearing. And so, while site traffic is down, that’s going to be the case across the board. What matters, therefore, is your ability to build a brand and retain an audience.

Homepage traffic is a good indication of that. Only people that are intimately aware of the brand are going to type The Verge into either their search bar and then click over from Google or type the URL directly into the browser. Therefore, one simple way to assess the overall strength of a publication’s brand is to look at the homepage traffic.

I am also a big fan of this concept known as the “loyal user base.” Tracking people that are visiting the site 5+ times a month is a good way to understand how you are doing. There are no vanity metrics to get lost behind. For too long, publications used unique visitors to inform strength when, in fact, the test of a strong publication was its ability to retain audiences.

Where this really starts to matter is with monetization. When you’re looking at strictly open exchange programmatic advertising, the game was one of pure numbers. How many people can you get? But when you’re moving into a world where you want to sell more guaranteed PMPs (for those that have to run programmatic) and/or using 1st-party data to inform ad campaigns, having a loyal user base is paramount to success.

And that’s simply on the advertising side. If we look at events, commerce, and subscriptions, it becomes even more important. A user who randomly hits your site is never going to convert to a paying subscription. Why would they? They barely know you exist beyond that single piece of content they’ve consumed. But if you can get them coming back time and again, the likelihood of them paying increases.

Whether publishers like it or not, this is where the future is headed. Sites are going to get less traffic. Facebook and Twitter are already sending fewer people to our sites. Google could do the same if Search Generative Experience (SGE) takes off. And so, the question then becomes what do you do with the people who know your brand? Those become the people that matter most.

The issue is that building a brand takes a long time. One operator recently remarked to me that their direct-to-site traffic was low and asked why might that be. I told her that her business was only a couple of years old, so the audience hadn’t yet been trained to seek out her publication for information. And so, you have to do things to help them along, like get them to sign up for a newsletter. Being able to own the distribution of your content—even just a little—is how you can start to build that loyalty.

This is also why I think there is inherent value in acquiring legacy print publications, much like Dotdash did with Meredith and Flying Media Group has done with all of the Bonnier assets. These publications have brands that go back decades and they can be a good moat as the transition away from platforms takes place.

The Verge isn’t the only one saying this. Condé Nast announced last week that it was laying off about 5% of its team. According to The New York Times:

The layoffs will affect about 270 employees. Roger Lynch, the chief executive of Condé Nast, told workers in a note on Wednesday morning that the cuts were a response to digital advertising pressures, a decline in social media traffic and shifting audience behaviors, including a move to short-form video. He said the video business would be folded in with the editorial brands.

“While we can’t control platform algorithms or how A.I. may change search traffic,” Mr. Lynch wrote, “we believe our long-term success will be determined by growing the many areas that we can control, including subscriptions and e-commerce, where we directly own the relationship with our audience.”

That second quote is the key point here. No one can control what the platforms are going to do. But what you can control is how you interact with the audience that you have a direct relationship with. And if we’re talking about brands, Condé Nast has some of the strongest in the media space. The issue for them is how it continues to grow while also managing its cost structure, which is why these layoffs happened.

But what’s particularly interesting about these layoffs is where a lot of the cuts took place. According to The New York Times, the team responsible for creating content for Hollywood has been seriously cut. And for good reason. Hollywood is currently still dealing with an actor’s strike, so no one is buying content. But more than that, Hollywood is not creating content like it used to. It can’t afford to.

And so, if there’s less content being made, it means less is being licensed from these big media companies like Condé Nast. While I am a big fan of this model, I think it’s a zero interest rate phenomenon. These big studios that were buying content left and right have become fiscally responsible. They have too much debt (just look at Disney needing to buy Hulu from NBCU with a massive chunk of its available cash).

All signs point to media companies becoming smaller and more focused on their target and loyal user bases. Those that can develop a brand are going to figure it out. This is the path to building sustainable media businesses. But I’ll tell you, I’d much rather a smaller audience that is dedicated to what I’m creating than millions of anonymous people who simply don’t care. One is a much healthier business.

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