Concerned About Amazon’s Growing Digital Ad Business? Turn to Email

Amazon’s rise as an advertising force means more marketers will move their digital ad spend. To stay competitive, publishers need to think holistically about new income streams and strengthen predictable ones, like subscriptions. On all counts, email can help.

For quite some time the digital advertising world has been described as a duopoly between Google and Facebook with every other online ad platform picking up the scraps. That state of affairs has been changing over the last few years, with Amazon’s advertising business catching up and becoming the third largest ad platform in the U.S.

How close is Amazon to the walled gardens? The company is predicted to reach $40 billion annually in ad revenue by 2023 — right behind Facebook’s $55 billion in 2018. And per Juniper Research, Amazon’s ad business is expected to grow more than 470% over the next five years. It might not catch Google or Facebook to crack into one of the top two spots, but its rapid growth has turned the digital ad duopoly into a triopoly.

Amazon’s rise as an advertising force means there are simply fewer ad dollars available to those outside the walled gardens. When Google and Facebook reigned as a true duopoly, publishers still had a reasonable percentage of the overall online ad marketplace to share. Now, marketers who might have spread ad dollars across Google, social, and publishers will likely move that latter group’s spend into Amazon ads as a way to reach that same audience where they are making purchase decisions. This is especially the case for CPGs and retailers.

To stay competitive with Amazon, publishers need to think holistically about new income streams and strengthen predictable ones, like subscriptions. On all counts, email can help.

Subscriptions and Email

Subscriptions as a source of revenue got lost in the shuffle as publishers became more digital. For years, publishers have given away their inventory: outsourcing traffic to platforms like Facebook, Google, and Twitter — and hoping they would deliver better-performing ad revenue. But this has proven to be a losing battle, with third-party distribution contributing a small fraction of total digital revenue for most publishers.

As Amazon emerges as an ad powerhouse, publishers are reverting back to what works. Per a Reuters study, 52% of publishers said subscriptions and memberships would be their main revenue focus in 2019 versus relying on ad monetization. In fact, The New York Times has publicly stated they are looking to grow their online subscriber base to 10 million by 2025.

But how can publishers win new subscribers? Just adding a paywall to the website and hoping readers opt-in to paying for content they are used to getting at no cost on Facebook or Twitter isn’t going to work. They need to entice readers. This is where a publisher’s first-party audience data is so critical — and email is a good place to start.

Publishers pursuing subscription models who have developed their email newsletters and properties have a distinct advantage here. Using the insights that a robust email system provides, publishers can determine the propensity of each potential subscriber to purchase a subscription (who opens, who reads on other devices, etc.).

The email address’s significance for publishers isn’t just a way of sending email: It’s the key to marketing and identity in this mobile world. When publishers use their email newsletters as a tool to drive their subscriptions campaign, they’re able to continue that campaign to a known person with consistent messaging, and dynamic paywalling, wherever that person is paying attention, including across mobile devices.

New Inventory via Newsletters 

However, publishers shouldn’t just rely on subscriptions, as ad revenue will always be important. Many publishers are opening up their email inventory for third-party advertisers to bid on via programmatic advertising platforms, which creates an incremental, recurring revenue stream.

Why does it work? Although email is an older technology, it remains a highly effective and impactful channel for marketers. An Adobe study on email marketing found people still spend hours on the channel each day, with the average consumer checking work email 3.1 hours per weekday and personal email 2.5 hours per weekday. Furthermore, those email newsletters are a fraud-free, logged-in channel that represents a direct relationship with a publisher’s audience — a relationship that is not susceptible to the subtle algorithm shifts that can wreck the best laid-out marketing plans on other platforms. And these emails ads can be personalized based on what the email opener is interested in, according to the publisher’s first-party data.

With this, publishers can partner with retail and CPG marketers to run non-competitive, targeted, and personalized email ad campaigns. For the recipient, it’s all about relevancy. People only tend to get annoyed by advertising when it doesn’t seem relevant to them. But if publishers can connect readers with a brand that really speaks to them, that has a product or service they care about, it’s actually a pleasant experience and produces a good ROI for the brand, and good revenue in turn for publishers!

Amazon may be turning the online ad business into a triopoly, but publishers have the opportunity to go back to a business model where they keep control over their audience and data and still offer value to brand advertisers.

How to Sell $38K of Subscriptions in 10 Days

If you’re a paid circulation magazine, you know that selling subscriptions online can be a challenge. However, I’d like to share an example of one publication that recently sold over $38K of subscriptions in just 10 days — and the subscription campaign strategy we used to do it.

If you run a paid circulation magazine, you know that selling subscriptions online can be a challenge. However, I’d like to share an example of one publication that recently sold over $38K of subscriptions in just 10 days — and the strategy used to do it.

The magazine we’re talking about isn’t a huge, national publication like Consumer Reports or America’s Test Kitchen. It’s actually a relatively modest, regional lifestyle publication and a member of CRMA (City and Regional Magazine Association).

The publisher’s website isn’t geared at all to drive subscriptions. They have no paywall in place, no digital subscription option, and no way to easily create effective landing pages. They also have an email/marketing automation system that is difficult to use at best.

Yet the team there overcame all of these challenges and, together, we ran a very successful campaign that generated $38K of subscriptions at an initial subscription price of only $11.

A Huge Boost in Paid Subscriptions

The magazine I worked with typically sells 10 subscriptions per day through various channels. However, during the campaign, that average jumped to 69 subscriptions per day … nearly 7x more. Look at the data and you can clearly see the day the campaign started and ended.

Subscription Campaign Success: Chart 1

In the 10 days prior to the campaign, the publisher sold $1,995 of subscriptions. During the 10-day campaign, however, they sold nearly $7,546 of subscriptions. So how does that equate to the $38K I mentioned above?

The publisher’s subscriptions include a non-optional, auto-renew program. That means that they don’t have to re-sell these subscribers every year. Thus, each auto-renew subscription is actually worth approximately $56 over the lifetime of the subscriber.

When you look at lifetime value, the magazine normally generated $5,620 in LTV revenue over a typical 10-day period. But during this 10-day campaign, they generated over $38,000 in LTV revenue … a 7x increase.

Subscription Campaign Success: Chart 2

How the Subscription Campaign Worked

The campaign offered a 50% discount on the normal annual subscription price and made it very clear that the offer was only good for 10 days. This combination of a steep price discount and the urgency of a limited time helped contribute to the campaign’s success.

But the other major factor was how well the publisher drove awareness of the discount and the limited time through all available channels that the magazine had: email, ads on their website, and social media. They also spent $1,000 in Facebook/Instagram advertising targeting a specific demographic in their geographic area as well as re-targeting website visitors and Facebook page followers.

Unsurprisingly, email was the biggest revenue driver accounting for 50% of the directly attributable sales. Ads on the publisher’s website drove 25%, with social media and Facebook/Instagram ads combining for the remaining 25%.

The Campaign Was Part of a Larger Strategy

It’s critical to note that this campaign was part of a larger audience development strategy that we’ve been working on for a while. The campaign wouldn’t have been anywhere near as successful as an isolated subscription sales effort.

The audience development strategy focuses first on building their email list. We create high-converting lead magnets that are promoted to their target audience with Facebook and Instagram advertising. Once an email address is captured, the person is then presented with an opportunity to subscribe to the magazine.

This allows the publisher to quickly build up their email list for free. They make as much money in year-one subscription revenue as they spend on advertising. When you take into account auto-renew lifetime value, the publisher actually makes money while building their email list.

Why is this important?

Their new email names converted at a higher rate than their old email names. The publisher’s pre-existing email list was larger than the new, lead-magnet-generated email list. But the new names converted to paid magazine subscribers more than 3x better than pre-existing names.

What’s Next?

While this campaign was off-the-charts successful, it’s not something that can be done more than a couple times per year. If you do it more often than that, you will condition your audience to wait for a big sale and campaign response rates will fall off dramatically.

Working with the publisher, we plan to do this type of campaign a couple times each year. In the interim, we’ll continue to build out their email list rapidly. They’ll add more evergreen lead magnets and will continue to promote them via Facebook and Instagram. We’re also testing the response rate of other programmatic networks like Google, Taboola, and Bing.

This strategy works with paid circulation publications, e-commerce sites, or membership sites. It can even be adapted for controlled circulation publications with some modifications. It takes work, patience, the right tactics, close monitoring, and perhaps some system changes. But the right combination of ongoing email list development and focused, intense subscription campaigns is a powerful combination for any publication.

Subscription Marketing Is Popular With Consumers, So Stop Thinking It’s a Dirty Word

The issue of whether to offer subscriptions, or some other verbal usage, won’t go away. However prosaic the argument for subscription marketing, it has tremendous implications for all brands eager to deliver the optimum ROMI from their marketing efforts.

The issue of whether to offer subscriptions, or some other verbal usage, won’t go away. However prosaic the argument for subscription marketing, it has tremendous implications for all brands eager to deliver the optimum ROMI from their marketing efforts.

And if subscription selling were a marginal marketing activity not so long ago, as the relationship between consumers and sellers have dramatically changed in this digital age, subscription selling (or whatever we end up calling it) has moved to center stage.

Over a year ago, I wrote that in a data-driven marketing seminar I was giving for some Brazilian Microsoft executives, I asked how many of the more than 40 participants “have a subscription”?

Less than 10 hands were raised.

Then I asked, “How many of you have Netflix?” Nearly all of their hands went up, and you could see on their faces the growing wave of recognition. While they hadn’t thought of their Netflix access as a subscription, they realized that they had “subscribed” to services to be paid for on a periodic basis, with or without a time commitment. (That’s not a bad definition of a subscription.) They also realized that not only were their insurance policies, cell phone contracts and utility connections all subscriptions, but Microsoft’s move to a cloud business model was a classic example of subscription marketing. Why should their software customers have to be sold new versions when they can receive them automatically, without any new investment, as part of their monthly, yearly, subscription? And that was just the beginning. Look how at how it has grown.

Starting at $22/month for 24 months, the subscription program comes with an Xbox One S console, two years of Xbox Live Gold service, and two years of Xbox Game Pass access. There’s a second, more expensive tier, as well; which comes with the aforementioned $500 Xbox One X console, two years of Xbox Live Gold service, and two years of Xbox Game Pass Access — priced at $35/month for 24 months. You own the console outright at the end of the 24-month term.

By now, far more consumers understand that whether they were aware of it or not, they are subscribers to a range of services, such as utilities and products that include cable and/or streamed entertainment. And they like it.

Even the fact that the word “subscription” has the negative connotation of “commitment,” and research shows that Gen X and Millennials tend to put off commitments longer than previous generations, if you have 20-somethings still living at home, you know what I mean. “Subscription” is not a dirty word to them. Surprisingly, so far I’ve seen no hard data that proves that alternative words such as “accept,” “agree,” “support” or “sign up” are more effective than the good old suggestion to “subscribe.” Perhaps it’s because marketers are slow to change what works, or that subscriptions (despite those Microsoft executives a few years back) have a familiarity that overcomes any negative perception of undesirable commitment.

Getting the Message Right: You’re Selling ‘Access’ to Your Brand

New York Times columnist David Leonhardt points out that the economist and former U.S. Treasury Secretary Lawrence Summers calls what’s going on the “de-massification” of the economy.

Developers aren’t building as many malls and stores, because goods now go straight from warehouses to homes. Offices don’t need as much storage space. Cellphones have replaced not just desktop computers but also cameras, stereos, books and more. Many young people have decided they’re happy living in small apartments, without cars.

This important change from owning to using is further supported by a recent communication to its authors from publisher Cengage — justifiably bragging that in just seven months, it had acquired 1 million subscribers to its Cengage Unlimited program. That’s no small achievement, when the price tag is $179.99 per year. (Disclaimer: Cengage published my book, “Accountable Marketing.”)

The offer to college students is compelling:

“The industry’s first-of-its-kind subscription for college textbooks and course materials, Cengage Unlimited offers complete access to more than 22,000 products, including eBooks, online homework access codes and study guides.”

Based on statistics that show college students spending $500 per year for these materials, Cengage understandably boasts that college students have already saved $60 million.

Cengage research reports that three out of four students express a preference for “having access to textbooks and course materials” and that this “is more important than owning them.” That illustrates an important trend. What students do today will certainly influence what they will do tomorrow. Media critic, Daniel Miessler, writing in Wired, put it succinctly:

In the future, we’ll all just have a collection of subscriptions. Instead of being judged by what you own, you’ll be judged by what tier you have of a given access type.

When you think about it, owning is a committed burden, access, an uncommitted opportunity. Subscribing or signing up, or whatever it’s called, should let someone else solve the ownership problems, while you enjoy usage.

If all of this is true, then our existing data-driven marketing paradigm may be too narrow to encompass all of the exciting opportunities in full bloom out there ready to be harvested. Companies that are just now focusing on the importance of data should also be headhunting experienced marketers with sterling track records of understanding the dynamics of subscriptions and making them work.

Think Before You Marketing Metric — We Must Stop Chasing Our ‘Tails’

Not so long ago, in a data-driven marketing seminar I was giving for some Brazilian Microsoft executives, I asked how many of the more than 40 participants “have a subscription”? Fewer than 10 hands were raised. Then I asked: “How many of you have Netflix?” Nearly all of the hands went up.

subscription
“Subscribe,” Creative Common license. | Credit: Flickr by Dominic Smith

Not so long ago, in a data-driven marketing seminar I was giving for some Brazilian Microsoft executives, I asked how many of the more than 40 participants “have a subscription”?

Fewer than 10 hands were raised.

Then I asked: “How many of you have Netflix?” Nearly all of the hands went up, and you could see on their faces the growing wave of recognition: While they hadn’t thought of their Netflix access as a “subscription,” they realized that they had “subscribed” for services to be paid for on a periodic basis, with or without a time commitment. Not a bad definition of a “subscription.” They also realized that not only were their insurance policies, cell phone contracts and utility connections all subscriptions, but Microsoft’s move to the “Cloud” business model was a classic example of subscription marketing.

So why should their software customers have to decide to purchase new versions of the tools when they can receive them automatically, without any new investment, as part of their monthly — yeah — subscription?

Had you measured the penetration of “subscription” possession in our group before that “eureka” moment, the metric would likely have been in the 25 percent range. After a different presentation of the question, however, it would have raised the rate to at least 80 percent. Does it matter? It certainly does.

So much of today’s marketing is driven by greater and greater amounts of data. And those of us whose job it is to plough and harvest this hayfield can be simply overwhelmed by its volume.

In trying to find the haystack needles to accurately inform marketing strategies that should deliver the best results for the lowest cost, we risk missing critical insights. Blame it on too much pressure or too little time; it has the same negative result and we wind up unproductively chasing our tails.

How many times have we heard advertising professionals argue for spending the lion’s share of the budget on TV because “we’ll reach more eyeballs, more often, at less cost per thousand”? It’s the same thinking that drives us to defend the proposition that because email is so cheap, we should broadcast our message with greater and greater frequency, rather than pay the price of quality analytics resulting in fewer eyeballs but the right ones.

Imagine that you are the responsible marketing executive for Pampers. You know that you are going to have to pay for a 30-second national TV spot at approximately $25 per thousand impressions. And let’s assume (an impossible assumption) that 100 percent of your viewers are going to be women. Thanks to Google, we discover that the national average of pregnant women in the U.S. population at any given time is 4 percent. That means that if you reach each of them — another wild assumption is that they are all at least thinking about “disposables” — as well as reaching the additional 8 percent who have kids 0 – 2 years old, as you can see from the diagram, you will be paying $208.33 per thousand — almost 10 times the rate card price to reach your target audience.

Image from Peter Rosenwald for subscription postWithout building a media plan, it is obvious that if you can afford $200-plus per thousand for reach, you have a lot of additional media that might be more efficient and cost-effective than TV spots. Certainly, a single viewing is unlikely to have maximum impact. So that cost of $200 will need to be multiplied by the frequency of broadcast.

What metrics do you use to determine the real commercial value of the marketing spend, the ROMI? How do you gauge whether one medium with a higher CPM will bring you customers with a greater lifetime value than one with a lower CPM? Without a direct and measurable purchase metric, traceable to the specific media spend and message, we’ll never really know for sure. Sadly, that’s the reality.

The metrics specialists will have fancy computers full of PowerPoint slides, defining and dashboarding each step in the customer journey and providing KPIs and benchmarks for clicks, open rates, etc. But in my experience, however, no matter how conscientiously these have been developed, they will have major distortions which are the result of failing, somewhere during the development process, to address basic questions like the meaning of words like “subscription” or “engagement.” The “specialists” will get away with their fantasy solutions more often than not because management tends to look at the big picture, not the details.

Perhaps the best preventive for this is for marketing managements to task their planners to provide not just their “objective” recommendations, but to cook up and serve a smorgasbord of choices and, wherever possible, to reference these choices to solid metrics.

Otherwise, we are likely to spend a great deal of time, effort and money chasing our tails.