From The Economist Group’s annual report 2012, published June 18th 2012
Lean-forward web and lean-back digital editions
When publishing on the web really took off about ten years ago, we at The Economist reasoned, rightly (in part), that this was the beginning of a general shift in reading habits from print to web and, wrongly, that in order for The Economist to continue to satisfy our readers’ needs in the same way as it did in print we would have to find a way of repackaging the newspaper for the online environment.
In fact, although the web did herald something new, our research told us that, regardless of age or geography, our readers enjoyed The Economist in print as a ritual, lean-back, immersive reading experience which could not be replicated on a desktop computer. We saw, then, that the web would not replace print in our readers’ lives. Indeed, over the past ten years, while the web has devastated the business models of many newspapers, our print circulation has nearly doubled.
The web provides a completely different experience from print. Yes, visitors to Economist.com do read content there, but the web offers an interactive, snacking, lean-forward and, increasingly, a social and shared experience. That realization has taken us in a completely different direction online, where we now focus on giving readers the opportunity to read our journalism but also to engage with our journalists and with each other, not just on Economist.com but on Twitter and Facebook and elsewhere too. Happily, therefore, the web has been additive to the business rather than replacing print, and it has given us the ability to reach millions more people with our distinctive journalism and to begin to build a community among our readers.
What is revolutionary for magazines like The Economist, however, is the reinvention of long-form reading triggered by Amazon when it launched Kindle in 2007 and fuelled dramatically by Apple’s iPad. We are fortunate because tablets, e-readers and smartphones allow our readers to enjoy the ritual, lean-back, immersive experience of reading The Economist that they love in print. Many of our readers tell us that this experience is, in fact, even better than print, because as well as being lean-back, digital editions are delivered immediately and reliably (much more so than via the postal service); the backlit screens display images, maps and charts beautifully; and the devices offer opportunities to innovate and deliver more functionality—so, for example, our tablet and smartphone apps also deliver the full newspaper in audio each week. (That said, we continue to proceed cautiously with extras, in terms of both functionality—we are always conscious of the importance of keeping the reading experience free from distractions—and content, because the weekly, finishable package is so important to our readers and no one ever complains that The Economist is too short!)
Digital reading is likely to grow fast. Forrester predicts that by 2016 there will be 760m tablets and 1 billion smartphones in use. Last year, in a study we carried out among our subscribers in America, the vast majority of respondents told us that while at the time of the study their preferred way of reading The Economist was in print, over 60% expected that by 2013 their preference would be for a digital format.
Digital advertising and other marketing services
These new reader behaviours have a significant impact on our business as people read, discover and share content in new ways. Advertising is changing too. Marketers increasingly look to spend their budgets on web rather than print advertising and on other marketing activities altogether, such as sponsorship, thought leadership, PR and so on. (Elsewhere in this annual report we explain how we are addressing the shift of marketing budgets to non-advertising services.)
On the advertising side of our business, we deliver solutions for clients based on the two distinct experiences that our readers look for: the socially powered, lean-forward community experience at Economist.com; and the lean-back, immersive, reading experience of digital editions. Advertising and sponsorship opportunities at Economist.com continue to grow well. We are able to command higher prices for advertising than others because of the unique audience we have and their engagement with us that is at the heart of the community model of Economist.com. Advertising in digital editions offers the best of both worlds: the brand impact and beauty of print and the interactivity and measurability of the web. It is early days and client budgets for this area remain small, but we see good prospects for growth in advertising in our digital editions.
An evolving business model
Advertising at Economist.com is growing; we have new opportunities from selling advertising in digital editions; and we have launched an online advertising network called the Ideas People Channel where we sell advertising across nearly 50 publisher websites which we know Economist readers visit. Nonetheless, we do not expect web and digital-edition advertising to replace all of the inevitable decline we expect to see in print advertising. Other marketing services such as thought leadership will, we believe, replace the rest. Growth, however, will come from increased profit from digital circulation.
Higher prices, the lower distribution costs that digital allows and more efficient marketing, combined with higher circulation, will mean significantly higher profits from circulation over the medium term. As we invest in our digital capabilities, we are confident that the circulation of The Economist will continue to rise even though we fully expect print circulation to fall in the near future.