Newsonomics: The Financial Times Triples Its Profits and Swaps Champagne Flutes for Martini Glasses
Even as the Financial Times announces excellent bottom-line numbers, the heat it’s feeling from the diverse and growing competition in business news is palpable.
The FT may be 127 years old and roundly and rightfully respected for its journalism. But it doesn’t even break into the top 25 business news websites, as counted by comScore (see chart below). In the U.S. — which became its largest market a few years ago, surpassing the U.K. — FT.com ranks #44, with 804,000 uniques. Topping the comScore list are three bigfree business news sites — Yahoo Finance, Business Insider, and Forbes — and re-energized, free offerings like the new Bloomberg.com intensify the battle for readers.
Why does the FT rank so low? Understandably, it’s favored revenue and profit over audience growth. While its paywall is metered, it’s a tough one to sample. I’ve seen up to eight monthly articles offered — with registration — and then repeated log-in requests as browsers run across an FT article on Twitter or elsewhere.
First published at Harvard’s Nieman Journalism Lab
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Consequently, the FT is opening up — adopting a $1 (or €1 or £1) one-month trial strategy, one. (Ironically, a similar model has been tested by numerous Press+ customers, after it — now bought and merged with Piano Media — modeled its own meter on the FT’s.) Having well transitioned many of its print readers to digital and harvested a good number of new ones — 20 percent of all new FT signups now happen on smartphones, a remarkable number for a news organization — it feels the need to reach a new, wider market of readers and would-be subscribers.
“Where do we go next?” is the question that the FT is now answering anew. As one three-year plan is completes, a new plan moves forward. “You can’t stand still,” FT CEO John Ridding told me in an interview this week. “We are rethinking key elements again.” It’s a good time for the FT to renew itself. Ridding says that the FT has tripled its profits year over year — a significant achievement for a newspaper industry in today’s frosty legacy publishing climate.
“There’s been a lot of internal debate about champagne and martinis,” Ridding said. That’s as in narrowly fluted champagne glasses and wide-brimmed martini. Simply put, the FT’s paywall marketing caught too few potential customers. Widen the top of the glass — or the overused metaphorical top of the funnel of reader acquisition — and more potential subscribers can be snared. Ridding says the FT has tested the $1 full-access-for-a-month approach in several geographic and business sector markets. It likes what it sees and projects a conversion rate of 11 to 29 percent. That wouldn’t be a surprise — Press+ also found 99 cents to be its sweet spot for trial offers, with a conversion rate surpassing even the FT’s projections. After the month-long trial, trialers will be confronted with the priciness of FT subscriptions, now running at $335 a year for boring, old “Standard” or $481 for “Premium.” (Of course, if you’ve got to ask about price…the FT’s ad pitch estimates its average subscriber income at $250,000; 13 percent are millionaires.)
The new FT strategy is a recognition of the limits of its very successful strategy, akin to The New York Times launching NYT Now and other paid niche products to try to sustain digital subscription growth. It’s also a recognition of the changing landscape. In a conversation I had with Bloomberg Media CEO Justin Smith last week, he isolated three key factors newly disrupting digital news reading habits: the arrival of millennials as a new market force, social as the dominant news discovery phenomenon of this era, and mobile readership replacing desktop habits. It’s all about habits, which these three trends and others are throwing up in the air. That means a time of peril — publishers can easily lose readers — and potential, as new readers form new habits.
The FT has at least a little room to experiment, as we can see in its numbers, released this morning, as part of parent Pearson’s half-yearly financials report. Those numbers matter to the global news industry. It z FT’s metered paywall that The New York Times used as its model in 2011, which in turn served as the model for the now more than 1,000 newspapers across North America and Europe who have gone paywall in the last three years. If the FT was a canary in the coal mine when it launched its meter in 2007, it emerged over time as the lead bird among newspapers, though they’ve followed in a somewhat haphazard V formation (“The newsonomics of a company of the news future”).
Today’s financials both reinforce that lead position, and show the continuing struggle of the business.
First off, consider what the FT’s most impressive number in today’s financials: “We’ve trebled profits,” said John Ridding, leading off our talk. That’s highly significant, though given the way Pearson reports financials, we don’t know exactly what number we can multiply three times. A year ago, I could report that the FT Group, largely driven by the Financial Times itself, had grown operating profit 17 percent to £55 million for 2013 — even though its revenue improvement was a meager 1 percent. So we should be able to estimate FT profit itself, exclusive of other businesses in the FT Group, at more than £100 million. (Correction, 7/23/15: The FT profit number for 2014 should be $30 million, as explained in this column).
That delta between revenue and profit stood out a year ago, and with that tripling, it stands out even more. The FT is farthest along in the crossover to digital of any large newspaper-based company. Even if it has struggled to grow revenues — along with the rest of the industry — its digital-heavy readership should yield financial advantages. That 17 percent improvement, I noted last February, signaled that the digital-to-print transformation was finally throwing off yield on the bottom line. It’s the kind of bottom-line payoff that most other smart digital-transitioning publishers can still only dream about — or throw a dart at a 2017-2020 calendar in hopes of guessing when their own company might get to the promised land.
What drives that kind of payoff, now for the FT, and later for others, is understandable math. If a publisher can get a print subscriber to transition to digital and pay almost as much (or more!) for a digital sub as for a print one, then profits increase. No manufacturing or delivery of paper is necessary; the FT has been able to close a few of its 28 manufacturing plants in the last 18 months, for instance.
The latest numbers reinforce that migration and hint at larger success. They only hint, rather than spell it out, though, because parent Pearson reorganized its divisions more than a year ago, placing Ridding and his FT Group within a larger Professional group, which Ridding heads as president. Unfortunately, the company opted more for opacity than transparency — for its shareholders and the rest of us — in no longer specifically breaking out FT Group results. That’s a shame, and unfortunately part of a larger trend of public news companies showing only partial (and of course, usually the most favorable) view of their business. I’ve always thought news businesses, even private ones, owed a little more to the wider society.
But the numbers we do see reinforce the perception of FT progress. The Professional group, overall, showed a 54 percent profit increase for 2014, helping make up the negative performance of Pearson’s 12 percent decline in its Schools group’s profit and the more tepid 5 percent increase in the Higher Education group. The Professional group includes rather far flung-from-the-FT businesses like English language learning effort — though one of Ridding’s charges is to find synergies within that wider group, he said.
The numbers under that FT profit tripling support a largely good story:
- The FT’s total circulation grew 10 percent year over year, to a high of nearly 720,000 across print and online.
- FT.com digital subscriptions grew 21 percent to almost 504,000. Speaking of crossover: Digital subscribers now represent 70 percent of the FT’s total paying audience. This caveat is always worth including: Uniquely and smartly, the FT has locked up a large direct enterprise (business-to-business) subscription business, and that accounts for about 66 percent of its digital circ total. The corporate subscription business is being managed well, up 30 percent year over year, with 90 percent of customers renewing, the FT says. Knowledge of actual business usage in the enterprise and flexible pricing has helped build those numbers.
- Revenue is fairly flat, and that tells us lots about innovation.Innovate as much as the FT has done, on the reader side and the ad side, and it’s still tough to get far into the black. The FT does perform several points better than the average newspaper company in revenue, but hasn’t yet found comfortable growth.
We’ve come to expect behind-the-numbers innovation at the FT. Much of it is based on its pioneering use of analytics, to first understand and then drive its business (“The newsonomics of ‘Little Data,’ data scientists, and conversion specialists”). The FT’s building of a 30-person data science enterprise is another model for the industry, but it’s now moving audience engagement resources directly into the newsroom. About eight people will move from other data science roles into the newsroom group. The goal: greater everyday integration by editors and reporters of increasingly insightful analytics now being produced. Will data determine the journalism? “We will never edit by numbers,” says Ridding.
Here’s a quick hit list of what else is on FT’s to-do list for 2015:
- FT.com will get a redesign, and, guess what, it’s mobile-first.Yes, expect more scrolling, more experiments with contextual, auto-customizing discovery. It’s the bane and hope of all big news companies: how to expose all the current, including relevant archival content, to members of its audience. Expect the FT to leverage what it knows of its most engaged users’ habits.
- Further improving the mobile ad sell and experience. The FT categorizes 15 percent of all its digital ad revenue as “mobile,” which compares to 10 percent for The New York Times. Even that categorization is slippery. Given generally lower ad rates for mobile, the FT mainly tries to sell its affluent audience across all platforms. Clearly, it’s having some success doing that. This year, it will launch a number of mobile niche ad programs, including rich-media full-screen ads.
- Further improving the engagement of its readers. Its definition of engagement: someone who has visited FT.com at least once in the past week, visits on average twice per week, and consumes on average eight pieces of counted content per month. FT’s formula for success here is clear, and undergirds all its strategies: Engagement drives both subscriber acquisition and retention — and satisifies advertisers. Consequently, it feels good about one metric its analytics have gleaned: The amount of time paying subscribers spend with the FT is up 10 percent year over year.
comScore’s top sites in the Business/Finance category of News/Research, January 2015
(U.S. multiplatform unique visitors)
1. Yahoo Finance — 57,772,000
2. Forbes Digital — 37,712,000
3. Business Insider — 37,523,000
4. Dow Jones & Company — 33,972,000
5. AOL Money & Finance — 30,315,000
6. IBT Media — 28,878,000
7. CNBC — 24,164,000
8. Bloomberg — 23,172,000
9. CNN Money — 20,209,000
10. Motley Fool — 19,592,000