Among media publications, The Economist holds a rare and enviable position as one of the few print titles whose profitability is growing. Newspaper and magazine presses worldwide have been sputtering to a stop as the print advertising that fuels them has dried up and the audiences that read them have migrated online and elsewhere.
The 175-year old magazine is not immune to the advertising slowdown either. Since 2013, its advertising revenues have been halved. But its circulation profits have risen exponentially, quadrupling in the same period.
It hasn’t always been this way. Prior to 2011, The Economist was bleeding money from subscriptions, but made up the difference through advertising. Now, the tables have turned. Circulation profits are now the largest profit driver for the publication (up 52 percent in 2017 yoy) and where most growth is found.
What changed was a commitment to make readership the top marketing priority, ahead of advertisers, a pledge CMO Michael Brunt has not swerved from since taking the position in 2013.
Brunt says The Economist’s research shows its brand is considered synonymous with a higher quality of editorial content than most competitors, making it less vulnerable to the audience fragmentation that has ravished media publications.
Many of the publication's subscribers around the world also share similar characteristics: they are globally-minded people who want to keep up with what is going on internationally, or at least want to appear to be keeping up. They’re ambitious in their careers. They speak English. They buy luxury goods. They’re curious about new technology. And they care about social issues.
“The consistency of the audience means that we can develop marketing approaches that we can export around the world,” Brunt told Campaign. “What works really well in Hong Kong works equally well in New York. We don’t need a completely different brand positioning here than we do in France.”
How readers make more money than advertising
While Google and Facebook continue to siphon more digital advertising dollars away from publishers, Brunt sees four main drivers that can keep subscriptions profitable.
Print to digital migration: Print is more costly to produce than digital content, so there are savings as more readers switch. But The Economist’s print edition is still wildly popular. There are now about 1.5 million subscribers to The Economist worldwide, with only about 350,000 of these being digital-only. The vast majority still read the magazine in print.
Bundling: By offering the same content as two products (digital and print) in a bundle, the company can charge more. Just over half of The Economist’s subscribers take the bundle worldwide. But as bundles become the norm and if print eventually declines, this revenue bonus becomes marginal.
Price hikes: You can raise subscription fees if your audience is loyal, as The Economist did by 20 percent in March 2016, without any lasting loss of numbers. But in a world of free online content there are limits to what readers will pay for news and analysis, regardless of quality. You cannot raise prices every year.
Volume: This leaves boosting circulation as the main driver of profitability. Brunt says the company has identified 76 million people who share the same “globally curious” characteristics as its 1.5 million readers. This should mean there’s still plenty of room to grow, especially in the US and across Asia-Pacific, where penetration numbers are relatively low.
Growing audience, however, requires marketing spend. Brunt insists it’s worth it. “The cost to acquire a subscriber is a fraction of the value and profit we get back from a subscription so it makes sense for us to invest in circulation first and foremost.”
The costly push for Australian readers
But those marketing costs are set to rise, and the easy gains may soon be drying up. Most of The Economist’s efforts have so far been geared towards converting those who already engage with the brand. Brunt is now off to Australia on a mission to create awareness where he doesn't have that luxury.
“We have to start further back with an audience in Australia (and in the States) that just don’t have The Economist on their radar. Inevitably it does cost more to warm someone up and then convert them.”
While The Economist is better-known in Australia’s largest cities like Sydney, Melbourne, Canberra and Brisbane, it’s the mid-tier cities like Perth and Adelaide that require even more investment.
Part of Brunt’s strategy will involve spending in experiential marketing, which is costly but has successfully generated a lot of buzz for his brand in the past.
Back in 2015, The Economist earned headlines for its campaign that offered potential readers in Hong Kong and London free ice cream or waffles laced with insects as part of a sustainability message to diversify protein intake without harming the planet.
“We have an econometric model that’s tracking the halo effect of that experiential marketing,” Brunt says. “We track everything. We have data on how many scoops of ice cream we’ve given out and how many subscriptions per scoop.” This year The Economist plans to recruit 40,000 new subscribers.
In Australia the publisher also plans to “dabble in TV”, but a lot more money will be spent on digital outreach. Soon after starting as CMO, Brunt hired a customer journey officer to introduce readers to The Economist content, then funnel them towards subscriptions within 180 days. That timeline may now take longer, but the process is the same.
The company starts by introducing The Economist content to those who are already reading about certain subjects and creating ads that are “effectively upmarket clickbait.” It then logs that interaction and follows the users over the next six months, continually introducing them to more content which they can sample and get a taste for. If all goes well, they are then lured into subscribing.
“It takes awhile before we introduce a commercial message,” notes Brunt. But in the meantime, machines monitor the content subjects each reader (or device ID, to be more precise) consumes and then serve up more of the material they respond to.
“When we see something that’s resonating well, we have software that automatically boosts the reach by putting spending behind it,” Brunt says. The company also then takes social media matches provided by Facebook to put promoted posts in front of readers, largely editorial not commercial, so the customer journey team can engage and again track until they subscribe.
Advertisers still count
While The Economist’s main priority is to drive readership rather than speak to brand marketers, Brunt insists the company is not completely giving up on commercial sales and keeps strong relations with its key Asian advertisers, including Huawei, Hyundai and Standard Chartered Bank.
“Upping our investment in circulation doesn’t mean we’ve eased off the pressure on ourselves [to sell to advertisers],” he says.
Partnerships with loyalty programs offering air miles or with banks (who offer key customers subscriptions at special rates) remain another part of their marketing mix. But increasingly, brands want to engage with The Economist’s audience through content rather than straight brand awareness ads. While still profitable, content marketing products inevitably involve more time and resources with slimmer margins for the publisher.
The challenge in China
APAC only accounts for about 10 percent of The Economist’s global subscribers. The largest Asian markets are the English-speaking populations in places like India, Singapore, Hong Kong and Japan. China has about 10,000 subscribers but its website and app have been blocked in China for a prolonged period since publishing a critical cover story of President Xi Jinping in April 2016. The Economist refuses to self-censor and Chinese officials do not always share its editorial tastes.
To get around these challenges The Economist has put considerable effort into building its audience for sister publication Global Business Review in China. The GBR app, which toggles between English and carefully translated Chinese, has 10,000 subscribers, despite a hefty annual subscription of RMB 400 (US$60.45). Marketing efforts have involved engaging business schools whose graduates are likely to become more affluent and take on international roles to fit the ‘globally curious’ mold.
While he’d love to sell them The Economist, Brunt feels GBR will continue to have greater mainland growth potential than the flagship publication.