2009 Paid Content Study

1. 2009 Paid Content Study Presented on 6/1/2009 Stefan Tornquist Research Director, MarketingSherpa

2. The Study The 2009 Paid Content Study was conducted by MarketingSherpa in partnership with the Specialized Information Publishers Foundation (SIPF). We would also like to thank Bill Baird of Baird Direct Marketing for his invaluable assistance, industry knowledge and insight. Baird Direct Marketing Inc.

3. Table of Contents (Clickable) Typical Sales of Respondent Companies Challenges to Paid Content – All Respondents Challenges to Paid Content – B2B Orgs. with Online Focus Challenges to Paid Content – B2B orgs. with Offline Focus Conversion Rates – All Respondents Blended Renewal Rates – All Respondents Revenue Sources – B2B Respondents Revenue Sources – B2C Respondents Revenue Changes by Product – B2B Orgs. with Online Focus Revenue Changes by Product – B2B Orgs. with Offline Focus Revenue Changes by Product – B2C Orgs. Marketing Tactics Used by Organization Type Marketing Tactics Compared Future Tactical Investment – All Respondents Future Tactical Investment – B2B Orgs. with Online Focus Future Tactical Investment – B2B Orgs. with Offline Focus Future Tactical Investment – B2C Orgs. Best Marketing Tactics by Product (A – F) Best Marketing Tactics by Product (F – Z) Social Media Tactics Compared 1 Social Media Tactics Compared 2 New Products Launched – All Respondents Success of New Products – All Respondents Online Tests Rated Offline Tests Rated Views Toward Spending – All Views Toward Spending – B2B w/Online Focus Views Toward Spending – B2B w/Offline Focus Views Toward Spending – B2C Feedback – Best Tactics Feedback – Responses to Economy Respondent Demographics

4. “Typical” Sales Source: SIPF, MarketingSherpa and Baird Direct, May 2009 Methodology: Survey fielded to SIPF members. N = 311 Throughout this study, one of the lenses provided is the ‘typical’ sale of respondent companies. Whether companies focus on selling a digital or offline product has a significant effect on their current success, their marketing focus and future-looking planning.

5. Challenges to Paid Content Publishers who focus on offline sales are feeling the twin pressures of changing times and the economic downturn. They report feeling virtually all of the challenges above more acutely than their counterparts whose typical sales are of online products. This is especially evident in the area of subscriber retention, where offline focused publishers rank that challenge as a clear second to new subscriber acquisition – and rate it a top challenge almost twice as often as those who principally sell online. Most striking for both groups is competition from free sources. The proliferation of blogs and more recently, social media has introduced hundreds of ‘expert voices’ to virtually every niche of publishing. Consultants and thought leaders from related businesses have found these media to be effective at…

6. Challenges – B2B Companies with ‘Typical’ Sale Online …branding themselves and their companies, as well as for generating leads and public relations opportunities. In fact, the very nature of B2B selling has shifted to the point where every vendor is encouraged to “think like a publisher” about their content and house lists, leading to an explosion of educational and pseudo-educational white papers, articles, webinars, blogs and social media mentions. The only bright spot in this storm of competing content is that its very complexity and variety are overwhelming for many. For select publishers this can be an opportunity; niche readers prefer having a single destination, but it requires the combination of successful branding and nimble content creation and aggregation efforts. Source: SIPF, MarketingSherpa and Baird Direct, May 2009 Methodology: Survey fielded to SIPF members. N = 311

7. Challenges – B2B Companies with ‘Typical’ Sale Offline In general, companies with a typically offline sale are feeling all challenges more acutely. Offline focused companies are especially aware of competition from free sources of information with 3 in 4 respondents rating it as a top “1” or “2” challenge. Source: SIPF, MarketingSherpa and Baird Direct, May 2009 Methodology: Survey fielded to SIPF members. N = 311

8. Conversion Rates – All Respondents Conversion rates here are for all respondents – sample size restrictions prevent us from reliably breaking down the data by target customer, etc. However, based on our analysis, subscription website conversion rates are the only category to have held steady or improved in the last 12 months, regardless of category or focus. Conversion (and renewal on the next slide) has suffered in the downturn. For some types of product, the trend was already negative, and it’s difficult to tease out the spike related to the recession from existing patterns. The exceptions are Subscription Websites, the only product type with more marketers citing improvement than decline…

9. Blended Renewal Rates – All Respondents …It appears that some fraction of the money that’s normally spent on alternative information products, such as attending conferences and subscriptions to hard copy publications, is being moved online. Subscription Websites are viewed as an inexpensive, useful alternative. Unfortunately, this movement is far from a zero-sum game and web revenues rarely make up for what’s lost on the print side. Companies that began with online offerings or changed their focus early on have the advantage over those who have used their web presence as an offline driver. From conversion rates, to ROI to revenue reports, those web-only and early adopting companies see more silver linings in the current clouds.

10. Revenue Sources – B2B Respondents With apologies for an overloaded chart – the purpose here is simply to show that the companies with an offline focus are doing a better job at diversifying their revenue streams. They are often 20%-40% more likely to be using the major secondary sources (advertising, conferences, etc.) than their offline-focused peers.

11. Revenue Sources – B2C

12. Revenue Changes by Product – B2B w/Online Focus As difficult as this year has been, online focused companies report revenue increases in a number of areas. While they see the same drops as their peers in ad sales, conferences and offline subscriptions, digital content areas saw increased revenue. The issue for most is that the increases online don’t match the corresponding offline reductions dollar for dollar. * Limited Sample Source: SIPF, MarketingSherpa and Baird Direct, May 2009 Methodology: Survey fielded to SIPF members. N = 311

13. Revenue Changes by Product – B2B w/Offline Focus Publishers with an offline focus report drops in revenue for most product categories. The only exceptions are in subscription website and audio conference/webinar sales. As with their online-focused peers, offline publishers are not making up 100% of lost dollars from these growth areas. Unfortunately, this is resulting in slimmer marketing budgets, which in turn allows more nimble online competitors to take market share. Source: SIPF, MarketingSherpa and Baird Direct, May 2009 Methodology: Survey fielded to SIPF members. N = 311

14. Revenue Changes by Product – B2C Paid content is rare in the consumer world, and is dominated by finance, product comparison and real-estate related publishers. All of these have taken an especially hard hit in the current economy, and that’s evident in the revenue reports seen here. Content licensing is the only positive area, and that’s not typically a large source of revenue. Source: SIPF, MarketingSherpa and Baird Direct, May 2009 Methodology: Survey fielded to SIPF members. N = 311

15. Marketing Tactics Used by Type The slow movement of offline-focused companies is evident in their chosen marketing tactics. They lag behind their peers in the areas of search engine optimization, paid search (SEM), social media and the use of ‘emerging tactics’ such as free video and podcasting. However, the same criticism can be directed at the rest of the publishers in the study, albeit to a lesser degree. Most are not using paid search (consumer pubs sneak in at 51%) and more than a third are not investing in SEO, the most basic, and arguably most essential tactic in online marketing. Source: SIPF, MarketingSherpa and Baird Direct, May 2009 Methodology: Survey fielded to SIPF members. N = 311

16. Marketing Tactics Compared It should be noted that a that many respondents didn’t know the contribution to revenue of many listed tactics. For example, a whopping 52% of respondents reported ‘not knowing’ how effective their SEO efforts are. Those responses have been removed from the sample, but are emblematic of a general lack of reliable information in the paid content industry. Interestingly, the top spots (ROI & revenue contribution) are taken by two very different tactics, email and direct sales. The former being the ‘cheap’ online answer to direct mail, and the other among the most expensive of offline tactics.

17. Future Tactical Investment – All Respondents First it should be noted that these figures don’t necessarily reflect the scale of investment changes in the given tactics, but simply how many organizations are planning to add, subtract or stand pat. That said, as we look through the various tactics, a pattern emerges that mimics the other findings in the study; online is benefiting from the downturn. Increases to online tactics appear to go to the traditional (email) and to the emerging (social media) but both tactics are relatively low cost, and it’s easier to plan on increases than in tactics like paid search. SEM, while generally benefiting in marketers’ budgets is, for the first time, being … * Limited Sample Source: SIPF, MarketingSherpa and Baird Direct, May 2009 Methodology: Survey fielded to SIPF members. N = 311

18. Future Tactical Investment – B2B Online …cut or eliminated by 1 in 5 respondent organizations. When we look at how different types of organization are planning their budgets, we see that those with an online focus are in a better position to make strategic decisions instead of responding to the times. For example, only 23% of offline-focused organizations plan on spending more on their direct sales force, with that number is more than doubled by online publishers looking to move higher end and advertising-related products. * Limited Sample Source: SIPF, MarketingSherpa and Baird Direct, May 2009 Methodology: Survey fielded to SIPF members. N = 311

19. Future Tactical Investment – B2B Offline * Limited Sample Source: SIPF, MarketingSherpa and Baird Direct, May 2009 Methodology: Survey fielded to SIPF members. N = 311

20. Future Tactical Investment – B2C * Limited Sample Source: SIPF, MarketingSherpa and Baird Direct, May 2009 Methodology: Survey fielded to SIPF members. N = 311

21. Best Marketing Tactics – by Product (Audio to For-Profit Association) There are few surprises in the tactics garnering the top spots – email, direct mail and direct sales. Email dominates in most subscription categories, direct mail works best for traditional print pieces (journals, paid newsletters) and direct sales is effective for high ticket items. Things get more interesting at the second or third level. For instance, social media is cited as an effective driver in several cases, despite being a secondary marketing tactic at best. Consulting, webinars and virtual events – all ‘thought leadership’ related products – are the products most closely associated. Source: SIPF, MarketingSherpa and Baird Direct, May 2009 Methodology: Survey fielded to SIPF members. N = 311

22. Best Marketing Tactics – by Product (Free eZines to Virtual Conferences) Source: SIPF, MarketingSherpa and Baird Direct, May 2009 Methodology: Survey fielded to SIPF members. N = 311

23. Social Media 1 – Still Unsure When it comes to social media, we’ve barely reached the stage of knowing what we don’t know. In this chart, we’ve included the percentage of respondents using a given tool that report that they are unsure of its efficiency. In many cases that figure far outpaces the percentage of those who have an opinion on ROI. This is exemplified by Twitter where half of the respondents using the micro-blogging tool don’t know what kind of effect it’s having. The highest scoring tactics are also the most work. Maintaining a unique online community and the stalwart email discussion group rate well in their effectiveness, but naturally require…

24. Social Media 2 – Narrower Focus …more time and/or budget than other tactics in this category. It’s much too early to let what appear to be low ROI evaluations prevent your organization from exploring the benefits and opportunities of social media marketing. Just as with email lists, people’s willingness to follow Tweets or befriend your page will likely wane in time. Now is the moment to build a network and to develop skills in this emerging area. There are already examples of consumer and business focused companies that have used these tactics to great effect, but we’re still at the case study stage, rather than having reliable aggregate data. By that point, it will be significantly more difficult to have the kind of growth that is possible today.

25. New Products Launched – All Respondents Most companies is our survey chose not to launch new products in the 12 months ending in May 2009. Those that did tended to launch more than one – there’s significant overlap. The most popular products were those that could be launched quickly, cheaply and digitally. The only exception in the top five is the launch of conferences/seminars. Anecdotally, it appears that the emphasis has been on launching smaller, more targeted seminars rather than larger trade events. While total revenues are lower, so are the upfront costs and margins are higher.

26. Success of New Products – All Respondents Please note that the subset of orgs who have launched specific products is quite small and the samples sizes here are limited. Consider the figures here to be ‘directional’ – the survey equivalent of sitting with some peers at a conference lunch table. The good news is that most companies were able to set reasonable expectations around new products and some exceeded those. Of concern are common products that are missing expectations, such as paid sub newsletters, audio conferences and virtual conferences. Source: SIPF, MarketingSherpa and Baird Direct, May 2009 Methodology: Survey fielded to SIPF members. N = 311

27. Online Tests Rated The next charts compare the efficiency of tests in online and offline settings. The measures look at how the effectiveness of a given test (how much improvement can be achieved) against the cost of performing the test in time and/or money. Landing page copy tests score extremely well, at the bottom of cost and the top of effectiveness. That’s a good reminder that the simple things matter a great deal. Also interesting is that price - theoretically the number one variable in an offer – gets the lowest score. General offer testing does better, but still lags behind tests that focus on the presentation of information and the list itself.

28. Offline Tests Rated The list is such an important element of offline testing that perhaps it shouldn’t have been included in this study. It’s like asking a farmer about the ROI of sunlight. After the list, the offline test responses resemble those from online. What is said and how it’s presented trumps price and offer.

29. Views Toward Spending – All Respondents The next set of charts look at organizational attitudes toward marketing through the downturn in general, and the divide between online and offline expenditures specifically. The gulf is apparent, with nearly a third of publishers taking an aggressive view toward their online marketing budgets compared to only 6% who say the same for offline budgeting. Before turning to follow the crowd, it’s helpful to keep several things in mind. Marketing shouldn’t get cut to the bone – studies dating to the Great Depression have correlated increased or stable marketing spends with faster recovery and growth. As enticing as it is to cut marketing expenses, you…

30. Views Toward Spending – B2B Online Sale may be doing so at the long term expense of your business. Offline impressions are inexpensive – maintaining a strong brand in a downturn has a two-fold benefit. First, it can distinguish you from the majority of companies who are laying low. Agile companies have used downturns to gain share and market position on former industry leaders. One way to take advantage of the troubles facing publishers is to leverage the inexpensive impressions that are available. Don’t forgo all online brand marketing in favor of direct – while the Internet lends itself…

31. Views Toward Spending – B2B Offline Sale …to the direct and measurable, brand marketing remains an important element. Many companies have found that when they moved too radically toward the greener pastures of paid search and email while cutting brand marketing, their direct marketing got more expensive on an acquisition basis. Brand marketing drives those searchers, email subscribers and even Twitter followers.

32. Views Toward Spending – B2C

33. “Most effective idea, tactic or program implemented in last 18 months?”

34. “Has the Downturn Sparked Ideas or Innovation?”

35. Survey Demographics

36. Target Markets

37. 2008 Revenue Ranges