The Economist: 240% YoY growth in programmatic revenue

vFor a publisher that has a stated strategy of doubling its reader revenue in five years, you might think The Economist doesn’t have much faith in advertising down the road. While the iconic “newspaper” is indeed a reader revenue success story, its advertising business is still thriving, says Ashwin Sridhar, Senior Vice President, Global Head of Economist Digital Products Revenue, and Head of Ideas People Media.

by WAN-IFRA Staff | June 6, 2016

We featured The Economist and Sridar in our “Programmatic Advertising” research report, published in March last year, nearly a year after the company implemented its mostly premium programmatic offer and strategy.

Here we catch up with Sridar who tells us The Economist’s programmatic growth over the last year is “astronomical,” as well as sharing his thoughts on other advertising-related issues of the day.

WAN-IFRA: How has The Economist’s programmatic “programme” developed since we last spoke more than a year ago?

Ashwin Sridhar: Programmatic for us is going great. We’ve now had two full years of programmatic revenue and the growth rates are astronomical. One of the key learnings for me is the way market has reacted to our programmatic offerings. I’ve always said that we were more focussed on premium programmatic. In the US, we are starting to see a lot of programmatic guaranteed deals come in where we’ve had the feedback from the buyer’s side that PMP (Private Marketplace) was great but that there’s too much volatility.

My view on this is that PMP deals don’t work for either side of the equation – they don’t work for publishers because it’s hard to forecast revenue and you don’t know where to focus your sales energy. And I think the buyers’ side, or the agencies, has come to realise that it doesn’t work for them as well.

The agencies say ‘could you give us more impressions’ and we say ‘we are giving you a lot of impressions, but you are cherry-picking a few of them based on data. We can’t give you any more impressions’. And we also say that if you want the certainty of impressions then strike a programmatic guaranteed deal with us – guarantee us a certain amount of revenue, guarantee us that you will have a certain percentage of pay grade and then we can talk. And we certainly see the market moving in that direction in the United States. Not so much on this side of the Atlantic but this is a market that lags behind the United States a bit. That’s the first observation that the market is moving to programmatic guaranteed.

The second is more of an acceptance to… I was going to say audience extension but I talk about our programmatic offerings in two ways now:

One is programmatic as a platform. This is us giving buyers the opportunity to buy advertising on our side programmatically. Now that could be a guaranteed or non-guaranteed deal, what have you, but essentially using programmatic as a platform to transact.

The second thing that we offer is programmatic as a solution. This is us taking a look at the newest and greatest that programmatic has to offer. How can we leverage that, how can we package that up to a solution and take that to an advertiser to solve a specific marketing problem because I don’t think marketers think in terms of ‘programmatic versus direct sales’. They think ‘this is what I need to do, I need to change the perception of my brand, I need to improve brand awareness’. It is thinking about those problems and addressing them by way of packaging the solution. That is where we are getting most traction; most of our programmatic revenue actually comes from programmatic as a solution.

Now that could leverage the data that we have to offer advertising to their target audience at scale at a much lower cost base, so that’s your classical audience extension. Or it could be far more complex that includes our data, but also offers what’s called account-based marketing. If we are working with an advertiser, especially in the B2B sector, we can identify certain enterprises, since they have a short list of clients, where they hope to make inroads. Then we can offer targeted advertising to just those individuals within those enterprises. So we started offering that; we started offering lead-generation programmes which we weren’t able to do in the past.

So it’s all about looking at the greatest assets that we have at our disposal, which is the insights we have on our audience, and not just on but across the entire group, then how do we leverage that, how do we leverage the new and upcoming technology and innovation of programmatic and put together a solution that offers marketers a solution to their marketing problem.

You mentioned that the growth rates have been astronomical. Can you quantify how revenues have grown in the last year? 

We have had a 240 percent growth year-on-year in programmatic revenue.

How has programmatic impacted your sales teams in terms of adopting this new sort of way of selling?

I think it has been broadly well-received. That’s not going to be the same for every individual but broadly speaking, overall it has been well-received. One feedback I have heard from a salesperson in the US is that ‘this was great, this is a budget that I wouldn’t have expected us to win because this is a direct-response campaign and traditionally we wouldn’t have won this because we would’ve been too expensive, we wouldn’t have had a solution.” So it’s opened up new avenues for sales teams. We are able to have a brand conversation as well as a direct marketing conversation with our clients.

If anything it has added to their toolkit. So they are able to our clients and have a conversation… “Branding? OK, we can help you with that. Content? We’ve been doing that for years, we can help you there. Events? Yes, we can do that, too. Oh, lead-generation, direct marketing? We have a team that can help you with that.

At the heart of this are two things:

One is education. We took the stance that we have to educate ourselves and make the salespeople comfortable talking about programmatic. Ultimately, you can’t sell something that you don’t feel comfortable talking about. But if the conversation does reach a point of being just too technical, that is a follow-on conversation that somebody on our team can have.

The second thing that has helped us is the incentive structure that we have in place, that is now dis-incentive for people working together. We said that we would double commission sales so we have the salesperson who will be compensated for these deals. And we also said that the programmatic salesperson who sees this through to execution and to success will also be compensated. It’s the education and compensation that has led to the broader acceptance and reception that this has had internally.

The Economist is part of the Pangaea Alliance. How has that worked so far?

We are not one of the founding partners; we are an inventory partner and that’s because we have slightly different pressures. We don’t have the abundance of inventory that CNN or The Guardian have. So what we said is that the Pangaea Alliance is an interesting proposition. Essentially, it is a scale proposition for programmatic buyers and we said we would look at deals that come through it. Ultimately, what we don’t want to do is disappoint our clients because that has been the biggest frustration that clients have had with programmatic: they ask for one thing and something else is delivered. So we look at deals that come through Pangaea on a deal-by-deal basis and we say we’ll participate in that because we think we can give the client what they’re asking for. Sometimes we say no, we can’t deliver that and not because we don’t want to work with the client through Pangaea but because we don’t think we can ultimately drive value to that advertiser. So, in that sense, working through Pangaea isn’t any different from introducing programmatic.

We are saying we are platform-agnostic, we will work with any advertiser across any platform as long as it makes sense for both parties commercially.

In general, what advertising solutions are working well for The Economist?

It’s the integrated campaigns that are working well for us. The challenges that marketers are facing today are far more complex than they used to be. Gone are the days where you could produce a campaign that ran in broadcast, one in print, and, if you were really adventurous, one in radio. Now audiences are fragmented across multiple channels and it’s very difficult to be heard. Marketers are trying to solve that problem by being everywhere in an intelligent way. The loudest entity doesn’t necessarily capture the greatest share of attention. So the area where we are seeing the most growth is in these integrated campaigns where we are producing content by a completely separate editorial team from The Economist’s editorial team.

It’s that strategic planning of how to position a brand in front of the right audience. That’s where we think the most growth is coming from.

It is very much about being the trusted advisor to our clients, truly understanding what’s keeping them up at night and offering them solutions. That’s how we are positioning ourselves.

You once mentioned that advertising as the major source of revenue is not a sustainable strategy. Could you elaborate on that?

We still maintain that position and that is the strategy that we are pursuing. From a circulation perspective, the five-year goal is to double the profitability of circulation. We are not saying advertising is not important, we are not saying we are going to pull out of advertising. It’s a two-legged stool, one’s reader revenue and the other is revenue from our advertisers. Essentially, we are a platform business. In the digital world publishers seem to be struggling to monetise their readers, but we seem to be doing a good job of that. What we’re now saying is let’s continue along that path and make circulation more profitable and figure out how we can continue increase our advertising revenue in a more challenging landscape and to do that whilst not compromising on selling our souls. We need to be true to our brand.

For example, we will never do native advertising. Again there are many definitions of native advertising. To me, native advertising is content that comes from advertisers or sponsors that masquerades as content from editorial. We are not going to do that because we don’t think our readers come to us to read a message from our sponsors. They come primarily to read our content and in the process if they come across a compelling sponsor message in the process, which is clearly marked as such, they are receptive to that and they will react to that in whichever way they deem appropriate.

What we are saying is that we will not use native advertising, which is misleading our readers into thinking content from our sponsors is actually content from editorial. That would be brand-damaging and we’re not going to do that.

What are your thoughts on ad blocking?

Ad blocking is a problem created by publishers, and it is an UX issue. For a very long time publishers have acted with absolute disregard for the reader experience. I’m not going to name any sites but out of the portfolio of sites that you go to on a daily basis, I would wager that at least half of them have terrible ad experience, and that’s the problem. Users don’t want to be bombarded with advertising. So it’s a user experience issue and we need to solve that. And the solution to the problem is not cutting out readers and say that if you have an ad blocker installed we’re not going to show our content. I think that’s not going to play out in the favour of publishers because users are just going to go elsewhere. Introducing an ad blocker blocker is not a long-term strategy, either. That’s trench warfare and you don’t want to get into that because it’s only a matter of time until there’s an ‘ad blocker blocker blocker’ and then there’ll be another blocker for it. You don’t want to get into an arms’ race.

Everyone is complicit in this; publishers are because they have been affected by the revenue challenges. The intermediaries in the ecosystem are also. They have come in and said if you introduce this piece of javascript code, we will generate incremental revenue and publishers just said let’s latched on and added it on the site. And advertisers as well, they want to get user attention and they’ve gone with very provocative and sometimes disruptive advertising, and that’s the problem. What we need to do is clean up the entire ad ecosystem, which is not a simple task by any means.

I think the likes of Facebook, Google and Apple are taking steps in the right direction. If you look at advertising in Apple news, it’s elegant. We are on Apple News and we know the click-through-rates are great. If you look at what Facebook is doing with Instant Articles, they’re trying to increase the overall reader experience and the only ads that are allowed there are  traditional banner ads or animated gifs but that’s about it. You don’t have these pop-up ads. And it’s the same with Google AMP as well. There’s an element of back to the future, if you will, where we are just going back to advertising the way it was in the good old 1990s, which is banner advertising with a bit of animation that doesn’t disrupt the reader experience.

We are and always have been in the attention-capturing business, not just the publishing business, and it’s more true today than ever before where users are constantly interrupted over the course of the day. What we do and do really well is capture reader attention. We do that consistently. If we do a good job of that from an editorial perspective, then we have the ability to take a slice of that captive user attention and offer that up to our marketers to say ‘Here is a slice of that valuable user attention,’ ‘Here is your marketing moment’, ‘Now engage with that user in a meaningful way’.

I think the whole metric of click-through-rate is where things went wrong, it was incumbent on the publisher or the media outlets to create that interaction. I think that is the wrong way of looking at things because ultimately there is nothing I can do, which will make a user click on an ad.

But if that’s the metric that I’m held accountable for and it’s incumbent on me to drive that metric, then it’s no surprise that we’ve ended up where we have – a world where ads are just forced down users’ throats in the hope that someone clicks on them.

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