Profit is more important than monthly unique visitors

Do publishers measure what matters for digital?  If profit is the goal, then monthly unique visitors and page views are not relevant performance indicators.  What matters most for profit is revenue capacity and contribution from the loyal, profitable audience. When a Fly-by is worth less than $0.20 and a Fan is worth 250 times more, it’s hard for publishers to make profitable revenue off Fly-bys.  Unfortunately, few publishers put a monetary value on their audience members or develop strategies to build and reward loyalty that yields profits.

The monetary value of an audience member is defined as the combination of advertising and direct revenue (e.g., subscriptions, events, e-commerce, etc.).  However, analyzing the relationship between loyalty and advertising revenue demonstrates the importance of a loyal audience on profits, even though the direct revenue from loyal audience members makes profits larger.

An example of calculating the monetary value of an audience member from advertising revenue is shown in the graphic to the right.  In this example, the audience member consumes 200 page views per month on average, or 2,400 page views per year.  Those page views come from different sections each of which have different advertising prices, sell-through rates, and consequently revenue contribution.  Incorporating these different factors, the audience member’s engagement nets out to be $85.32 per year.

In the age of digital media and big data, calculating the monetary value of every user is straightforward, which means a publisher can directly measure and track their revenue model based on their actual audience composition and behavior.  For a digital audience, the loyalty distribution is typically comprised of 70 to 80% Fly-bys, with fewer than 5% Fans.  In a recent analysis, an audience of two million unique visitors per month had 65,331 Fans and approximately 17 million Fly-bys per year.  In this case, the average revenue per Fan is $73.05 per year, whereas the average revenue per Fly-by is $0.18. 

Rolling it up to an overall revenue picture shown in the graphic, the 65,331 Fans generate nearly $4.8M in recurring revenue against the 17 million Fly-bys that generate only $3M in non-recurring revenue.

The Implication

Publishers need to scrutinize the key performance indicators used to manage their operations.  Most importantly publishers need to establish a set of metrics that are revenue performance indicators.  For example, revenue capacity and contribution of a loyal audience directly correlates to profitability whereas monthly unique visitors and page views do not.  To build a profitable audience, publishers need to track and understand the monetary value of each audience member, and then drive their audience development strategies to optimize average revenue per user.