Going Mobile: How Publishers Are Preparing for the Burgeoning Digital Market

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1 Going Mobile: How Publishers Are Preparing for the Burgeoning Digital Market Executive Summary September 2009

2 Purpose of This Survey any print publishers are focusing on the mobile market as an opportunity to expand their Mbrands, reach new audiences and generate additional revenue. Similarly, advertisers are funding mobile marketing initiatives to take advantage of the medium s immediacy, engaged audiences and location-based targeting potential. In fact, a recent report by Gartner Inc. predicts that global spending on mobile advertising will increase 74 percent in 2009 to $913 million and will surge to $13 billion by Interest is strong within ABC, too. The organization has received numerous inquiries about the auditing and reporting requirements surrounding e-readers and smartphones, and about counting mobile editions as paid circulation. The mobile market is also a frequent topic of discussion at ABC s numerous industry committees, including its Digital Advisory Committee. The nonprofit association has also seen an increase in its associate membership from firms that target the digital publishing market, including developers of popular e-reading devices and iphone applications. Due to these heightened activities, ABC surveyed its U.S. and Canadian newspaper, magazine and business membership to learn more about publishers current mobile initiatives, their strategic plans, and ABC s potential role. Some key findings of the survey are detailed on the pages that follow. Table of Contents Introduction... 3 Summary of Key Findings Mobile Market Growing in Importance...4 Mobile Devices Positively Impacting Web Site Traffic...6 Smartphones and E-readers...8 Mobile Business Model and Advertising...11 Reporting and Auditing Mobile Metrics...13 Conclusions Methodology About the Audit Bureau of Circulations and ABC Interactive

3 Introduction The proliferation of mobile devices in our culture is hardly a surprise to anyone walking down city streets, drinking coffee at a corner café or observing the driver sitting next to you in traffic. Fueled by larger and more reliable wireless networks, trendy phones at affordable prices, and an insatiable appetite for information at their fingertips, consumers are steering information providers toward a new distribution channel and advertisers to an appealingly targeted medium for their latest sales pitches. The Audit Bureau of Circulations and its digital subsidiary, ABC Interactive, recently conducted an online survey of our print publisher members to learn more about current mobile initiatives and plans, and the impact of mobile on their business models. The survey results provide an early stage snapshot of the activities taking place in and around the mobile market as both publishers and buyers focus their attention on this burgeoning space. For example: More than 80 percent of respondents believe people will rely more heavily on mobile devices as a primary information source in the next three years. Nearly 70 percent agree that mobile is receiving more attention at their publication this year than last. More than a third believe their publication already has a well-developed plan for attacking and conquering the mobile market. Forty-four percent of respondents who track mobile s impact on their Web site traffic said the devices increased visits by up to 10 percent today. Half believe mobile traffic to their Web sites will increase by five to 25 percent in the next two years. Among senior executive respondents, 56 percent said their publication has plans to develop a smartphone application in the next 24 months, in addition to the 17 percent of respondents who already have an app in production. Regardless of mobile s anticipated rise, ABC publisher members do not plan to abandon their print publications in favor of a digital-only product in the near term. While 55 percent believe that digital delivery of their publication is important to their strategic future, three-fourths believe that their publication will be available in a print form five years from now. More than half of the survey respondents believe the future business model of mobile content will be supported by both advertising and subscriptions. Nearly a third believe that mobile will have a significant impact on their publication s revenue in just three years. Publishers sentiments reflect their growing interest in the mobile market even as its potential and their strategies are still unfolding: We are just launching our initiative now, but plan on it having a major impact on our audience development both in print and online, said one print publisher. I think they [smartphones] will be more widely used. But I m still not clear on the impact on our newspaper, said one survey respondent. Another respondent commented, At this point, reader demand for mobile-friendly editorial content is stronger than advertiser demand. I believe advertiser demand will follow reader demand and will follow growth of smartphone adoption. 3

4 Summary of Key Findings Mobile Market Growing in Importance According to an April 2009 survey by the Pew Research Center s Internet and American Life Project, the number of Americans who have used a cell phone or smartphone to access the Internet for ing, instant messaging or to seek information has increased from 24 percent in December 2007 to 32 percent. In a typical day, nearly one-fifth (19 percent) of Americans use a mobile device to access the Internet, up from 11 percent in December The results of ABC s survey show that publishers recognize the growing importance of mobile devices for consumer-information gathering. Eighty-five percent of respondents believe that more people will rely on mobile devices as a primary information source in the next three years. (Graph A) Graph A Eighty-five percent of publishers acknowledge that mobile devices will become a primary information source in the next three years. Recognizing the growing force behind mobile, publishers are focusing more attention on it than ever before. Nearly 70 percent of survey respondents said that mobile was receiving more attention at their company this year than it did last year. (Graph B) Graph B More than two-thirds of publishers are paying more attention to the mobile market this year than they did last year. 4

5 Publishers are bullish on the potential power of the mobile market, with 55 percent stating that digital delivery is key to their publication s strategic future. But that doesn t mean they have plans to discard their core print brands: 76 percent do not believe that their publication will be available only in digital format in the next five years. (Graph C) Graph C Digital delivery is strategically important, but publishers strongly believe that their publication will be available in a print format five years from now. 5

6 Mobile Devices Positively Impacting Web Site Traffic Penetration of mobile devices in U.S. households continues to increase. According to emarketer, more than 91 percent of U.S. households currently subscribe to a mobile phone. By 2013, emarketer predicts that percentage will grow to nearly 97 percent. A January 2009 news article by the Canadian Broadcasting Corporation estimates that three quarters of Canadian households use a cell phone. As both mobile penetration and mobile Internet usage increases, ABC-publisher members are taking the first and most obvious step into the mobile market by formatting their Web sites for viewing on mobile phones. And their Web site traffic statistics are reaping the benefits. Nearly 52 percent of survey respondents, which includes smaller community newspapers and niche magazines, are distributing or formatting content for viewing on a mobile device. Newspapers are leading the charge, with almost 58 percent already formatting their Web sites for mobile devices. Business and consumer magazines are following closely behind with 45 and 42 percent, respectively. (Graph D) As one publisher explained, The fact that a site has a mobile platform brings the audience. Without it, people will be reluctant to come to a non-formatted site, due to load times. Graph D Nearly 60 percent of newspapers and more than 40 percent of consumer magazines and business publications already format their sites for viewing on mobile devices. 6

7 Publishers are tapping the power of mobile devices to increase their Web site traffic and the trend is unlikely to abate in the future. Of those publishers who specifically track Web site traffic generated by mobile devices, one-third said that mobile devices currently account for one to five percent of their total Web site traffic. Nearly eighty percent of that same group believes mobile devices will directly contribute to Web site traffic growth at least five percent in the upcoming 24 months. (Graph E) One survey respondent said, I believe mobile devices will likely be the number one electronic access device in less than five years. Graph E Half anticipate a five to 25 percent increase in Web site traffic from mobile devices in the next two years. Seven percent expect traffic to increase by 100 percent or more. 7

8 Smartphones and E-readers Publishers are actively exploring the vitality of smartphones and e-readers as a new distribution channel. Both devices are in the early-adoption phase but are quickly gaining momentum with large daily newspapers and leading consumer magazines. The results of the ABC/ABCi mobile survey demonstrate that publishers are placing bets on both platforms today, working with a variety of manufacturers and developers on formats, distribution agreements, and brandextending apps. More than half of respondents believe that smartphones (e.g., the iphone and BlackBerry) will become a vital way to distribute their publication within three years, while nearly 42 percent said the same about e-reader devices. (Graph F) We believe smartphones and digital readers are the future, proffered one survey respondent. Graph F Publishers are placing bets on smartphones and e-readers. Fifty-one percent of respondents believe smartphones will be a vital way to distribute their publication in three years, while 42 percent said the same thing about e-readers. 8

9 Currently, ABC-publisher members appear to be spending more energy and resources exploring smartphones and their customizable applications, due to the broader availability of devices like the iphone. Sixty-two magazines, newspapers and business publications already have developed an app for a smart phone, while 42 early adopters currently make their publication available on an e-reader. (Graph G) Graph G Publishers are already developing applications for smartphones. Among those who responded to this survey, 36 newspapers, 22 consumer magazines and four business publications are leading the pack in this space. Among senior executive respondents: 56 percent said their publication has plans to develop a smartphone application in the next 24 months in addition to those publications noted above that already have an app in production. (Graph H) Graph H Fifty-six percent of senior executives said their companies plan to develop an app in the next 24 months, in addition to the 17 percent that already have developed apps. 9

10 As previously mentioned, publishers aren t just counting on the smartphone as the digital future. Eleven percent of respondents said they already make their publications available on an e-reader device. Consumer magazines were most likely to be devleoping relationships with e-reader manufacturers. (Graph I) Graph I Many publishers are developing relationships with e-reader manufacturers. Consumer magazines are most likely to be working on that relationship, with newspapers following close behind. Interestingly, publishers were split on which company would develop the e-reader device that would be most successful. Apple, Amazon.com and Sony were all cited as leaders in this space. (Graph J) Which Manufacturer Will Produce an E-reader That Will Impact the Publishing Market? Graph J Publishers think Apple has the greatest chance of producing a successful e-reader device for the newspaper and magazine world. Amazon.com runs a close second. 10

11 Mobile Business Model and Advertising Clearly, publishers are spending a lot of time and energy contemplating the development and growth of the mobile market, including how to monetize the new distribution platform. Publishers unmistakably believe that mobile is an area of their business that will impact the bottom line. Nearly a third believe that mobile will have a significant impact on their publications revenue in just three years. As publishers weigh the pros and cons of charging for online Web content, the dynamic appears to be different for the mobile market, where consumers are more accustomed to paying for services and features. A majority of survey respondents believe that the future business model of digital publishing will be supported by both advertising and subscriptions. (Graph K) Graph K Publishers believe that a combination of an ad and subscription based business model will be most likely for mobile content. 11

12 Opportunities for mobile advertising abound and publishers were split on which model would come out on top. Sponsorship, video, search and banner all ranked equally high. (Graph L) Graph L Publishers see numerous opportunities for advertising in the mobile market. 12

13 Reporting and Auditing Mobile As evidenced by the heightened interest in ABC s multimedia reports, publishers are anxious to tout their brand s extensive distribution platforms, including paid print copies, free distribution copies, Web site traffic and e-newsletter open rates. Mobile is poised to be one of the next important distribution channels audited and reported on ABC statements. Fifty-seven percent of survey respondents think an independent third-party should audit and report the number of digital editions accessed by a mobile device, while 56 percent think an audit of Web site traffic generated by mobile devices is helpful. (Graph M) Graph M Publishers believe that independent third-party auditing of digital editions accessed by a mobile device and Web site traffic generated by a mobile device is in the best interest of the industry. Two-thirds of publishers believe that as advertisers spend more money in the mobile marketplace, they will quickly begin demanding independent third-party verification of key mobile metrics. (Graph N) Graph N Publishers anticipate that as mobile advertising grows, buyers will begin demanding more accountability. 13

14 Conclusions 1. It s early, but there are positive signs. The mobile market is definitely receiving more attention than ever before. For many respondents, planning is still in the beginning stages and publishers are wading through the information and technology, trying to decide on the right strategy. For other leading newspapers and magazines, many mobile initiatives are well under way, supported by advertising and sponsorships. 2. Mobile will drive Web traffic. Most respondents believe that mobile will be responsible for a five to 50 percent increase in Web site traffic in the next three years. 3. Betting on both smartphones and e-readers. Publishers are actively exploring the vitality of smartphones and e-readers as a new distribution channel. Both devices are in the early-adoption phase but are quickly gaining momentum with large daily newspapers and leading consumer magazines. 4. Early business model based on combination of advertising and subscriptions. Publishers agree that the mobile market will be both ad- and subscription-supported and many anticipate that mobile will contribute to the bottom line in just three years. Publishers believe there are many opportunities for paid mobile advertising, including sponsorship, search, video, and banners ads. 5. Advertiser demand for accountability will grow as ad spending grows. Respondents agree that independent third-party auditing would increase mobile s credibility and is likely to be demanded by advertisers as ad spending increases in this area. Data should be reported on ABC statements. 14

15 Methodology ABC and ABC Interactive conducted a survey of ABC print publisher members to learn more about their current and future plans for the mobile market, including e-readers and smartphones. The survey covered five main topics: the impact of mobile devices on Web site traffic, smartphones and iphones, e-reader devices, business model and advertising, and auditing. ABC and ABC Interactive conducted the voluntary, Web-based survey between June 25 and July 10, A sample base of 4,093 was invited to participate; a total of 375 qualified people completed the survey. The respondents had the following categories: Number of Percent of Completed Interviews Total Completes Consumer Magazine Circulation or Audience Management 67 62% Management Ad Sales Management % Executive Management % Other Mg, Super, Admin 1 0.9% Newspaper Circulation or Audience Management % Ad Sales Management % Executive Management % Other Mg, Super, Admin % Business Publication Circulation or Audience Management % Ad Sales Management % Executive Management % Other Mgmnt, Sprvsr, Admin 2 5.3% The respondents also had the following demographic characteristics: Number of Percent of Completed Interviews Total Completes Country United States % Canada % Gender Male % Female % Age Under % % % % % % 15

16 Audit Bureau of Circulations About ABC With nearly 4,000 members in North America, ABC is a forum of the world s leading magazine and newspaper publishers, advertisers and advertising agencies. The organization provides credible, verified information essential to the media buying and selling process. ABC maintains the world s foremost electronic database of auditedcirculation information and a growing array of readership, audience and Web site usage data. To learn more, visit About ABCi ABC Interactive is one of the world s leading independent auditors of Web sites and digital technology, performing thousands of audits since its inception in For more information about ABCi s verification services, complete an online request form or contact Kendra Fox, manager, marketing and sales, at (847) Copyright 2009 Audit Bureau of Circulations. All rights reserved. September 2009 Online Accountability: Gauging the Growing Demand for Audited Web Metrics 16

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