Should publishers raise prices on subscribers who use adblockers?

Do you use an adblocker? Would you pay the local news organization that you subscribe to an extra dollar or two a month to be able to use their site with an ad-blocker?

Those are the questions Associated Press reporter Ryan Nakashima has spent the past six months researching over the course of a fellowship at the Bay Area News Group (BANG), a local news publisher in northern California. And this week in Solution Set we’re going to take a look at the results of the experiments that Nakashima has led with BANG.

Solution Set is a weekly report from The Lenfest Institute for Journalism and the Solutions Journalism Network. Every Thursday, we take an in-depth look at one neat thing in journalism, share lessons and point you toward other useful resources.



Here’s the TLDR version of what you need to know about Nakashima’s experiments with BANG:


TLDR

The Challenge: AP reporter Ryan Nakashima wanted to know if readers would be willing to pay more for an ad-free news experience

The Strategy: Nakashima partnered with the Bay Area News Group and created a modal that required readers who were using an ad-blocker to purchase a subscription or turn off their adblocker.

The Numbers: Between March 1 and June 1, about 9 percent of new BANG subscribers came through the ad-blocker modal.

The Lessons: Based on the experiment, Nakashima recommended that publishers should charge ad-blocking subscribers an extra $1 or $2 per month.

The Future: BANG plans to test out Nakashima’s recommendation.

Want to know more?: Learn more about user experience for subscribers and Nakashima’s experiments.


Now, let’s dig in a little deeper:

The Challenge

So many of the ads on news websites are terrible. There are obtrusive takeovers, they slow your browser to a crawl, and then they track you around the web seemingly until the end of days.

It’s no wonder that so many people use ad-blockers. Ryan Nakashima is one of them. But unlike most people, Nakashima is also a journalist.

“I don’t feel bad about not seeing them,” Nakashima wrote in a Medium post he published today. “But I also don’t like depriving myself and my fellow journalists of a living.”

He’s a technology writer for the AP based in the Bay Area. Nakashima was also a 2016-17 John S. Knight Fellow at Stanford University, and during his time on campus he began to think about readers’ and publishers’ relationships with paid subscription models and digital advertising.

“If you’re thinking about what subscribers are paying for, a lot of time it’s the content because that’s the idea of a paywall — you don’t get content without paying for it — but it also could be the experience,” Nakashima told me. “I think these people are saying, I want a cleaner experience that is faster, smoother, and respects my privacy.”

Over the course of his fellowship, and even after he returned to work at the AP, Nakashima began working to answer a simple question: Would readers be willing to pay more for an ad-free experience?


The Strategy

To try and study the question about an ad-free experience, Nakashima wanted to find a newsroom to experiment with. He found a partner in the Bay Area News Group, the joint Bay Area newsroom of Digital First Media properties The San Jose Mercury News and East Bay Times.

BANG launched a metered digital subscription offering in 2017 and was interested in attracting more digital subscribers.

Nakashima began conversations with BANG last fall and they quickly agreed to partner. They gave him a desk in the newsroom. He spent one day per week at BANG’s San Jose offices and would regularly sit in on the company’s meetings about digital subscriptions.

“He just melted into our staff and became part of the newsroom,” BANG executive editor Neil Chase told me.

“I’m always happy to have an AP reporter hang out with us, but he became part of our strategy team. He took on this question of ad-blocking and worked with a bunch of different people in our shop to run the test and build the ad-blocker popup modal that we have. I’m pretty sure half the people on the team would forget he’s not an employee if you ask them.”

Nakashima and BANG didn’t have the technical capacity to create a true ad-free version of the site, so they came up with what Nakashima called a “poor person’s version of ad-free.”
Here’s how the experiment worked: Beginning this spring, when a user tried to read a BANG story with an ad-blocker on, they were shown a modal that said that in order to view the story they could subscribe and keep their ad-blocker on or whitelist the site and view it with ads. (BANG tried a few different versions of the modal.)

BANG’s tracking wasn’t perfect, and it wasn’t able to catch every ad-blocker, but Nakashima said he pushed BANG to experiment anyway. BANG’s sister site, The Denver Post, had begun to also put up the paywall to readers that were using an adblocker and they had been having success with it, Nakashima said. The Post shared its data and analytics with him as well.

“When you look at the revenue of the people who were turning off their ad-blocker, this amounted to a bunch of people’s salaries. This is significant dollars,” he said. “Wow. Even if it doesn’t work that well. Even if you don’t have the technical things worked out perfectly. Just launch this. It’s better to launch an imperfect ad-blocker message than to not have one at all.”

Nakashima wanted to see if the subscription revenue generated by the ad-free users was more than the lost advertising revenue. He then wanted to find out if ad-blocking readers and subscribers behaved any differently than readers and subscribers who didn’t use an ad-blocker.

I’ll get into the results below in The Numbers, but I wanted to note a couple of things first. The six-month project was supported by a grant from the JSK Fellowship’s Jim Bettinger News Innovation Fund.

Also, as Nakashima was conducting his study this spring, BANG, along with fellow DFM property The Denver Post, was in the news as the company made a series of drastic cuts to the newsroom. That drew a ton of attention to local news and could have impacted subscriptions. (Read more about Digital First Media in Wanna Know More?)


The Numbers

Nakashima documented his earlier results in a series of Medium posts, which you can find here and here. He wrote about the most recent data, which we’re discussing here, in this Medium post. He also created a spreadsheet with much of the recent data that you can find here if you want to dig into the numbers yourself.

I should also note that this study was conducted with a limited number of readers and while the data is interesting and worthwhile, readers at other publications may behave differently.

Given the limitations of BANG’s tracking and paywall technology, Nakashima wasn’t able to exactly track readers who subscribed via the ad-blocking modal. Instead, he and the BANG development team were able to develop a workaround that showed when a user hit the ad-blocking modal and then returned in a logged-in state.

“This gave me a group that was isolated to people who subscribed,” he said. “It’s like seeing circumstantial evidence around a crime. They bought the gun, they went to the crime scene, and they’re covered in blood. We didn’t see it happen, but we know.”

As a result, from March 1 through June 1, 332 people running ad-blockers purchased a subscription and logged into a BANG site.

That’s about 9 percent of the 3,650 or so new Mercury News and East Bay Times subscribers over that same time period.

Over the same time period, about 36,000 people who weren’t blocking ads logged into a BANG site. These users were other digital subscribers plus print subscribers who had activated online access.

Nakashima tracked both groups of users and compared how they used the site and the amount of revenue they generated. He used Google Analytics to gather the data.

The ad-blocking users averaged 45 sessions, or uninterrupted visits, and 2.5 pages per session over the course of the three-month study. The users who weren’t using an adblocker averaged 11 sessions and saw 4.2 pages per session.

Adding it all up, the average adblocking user saw 112.5 pages over the three months compared to just 46.2 pages for a typical logged in user.

“Overall, they see about twice as many pageviews. This should be a good sign for retention, if they’re more engaged they should be sticking around longer. The caveat there is that this turns out to not exactly be the case.” (More on that below in The Lessons)

BANG makes an average of $7.60 per user in monthly subscription revenue. As a result, over the course of the three months of this study the publisher made about $7,500 from the ad-blocking users.

Meanwhile, the larger group of logged-in users generated about 43 cents per month in ad revenue. (Though tracking issues could mean that the figure is closer to 60 cents per month.)
Over the three months Nakashima tracked, the ad-blocking subscribers cost BANG about $1,000 in ad revenue.

“Small potatoes, perhaps, but not when you consider the hundreds of millions of ad-blocking surfers around the world who might pay for journalism,” Nakashima wrote.


The Lessons

Charge more?: That’s Nakashima’s recommendation. In order to make up for the lost advertising revenue, he’s suggesting that publishers charge a higher subscription price to readers who don’t want to turn off their adblocker.

“What I came to in thinking about is: Let’s raise prices on the ad-blocking subscribers, and let’s do it on a cost recovery basis only,” he said. “It’s very justifiable. Hey, if you get extra cheese on your pizza, it costs an extra dollar.”

BANG and Nakashima began the experiment in February and sent a survey to 107 of the early ad-blocking subscribers to learn more about their motivations. Of the 107 who received the survey, 20 completed it and about half of those respondents said they’d be willing to pay more for ad-free access.

Nakashima recommends publishers charge $1 or $2 more per month.

If BANG charged the 332 subscribers it detected using ad-blockers from March through May an additional $1 per month it would have generated $996 in additional revenue — enough to essentially make up the revenue it lost from ad-blocking subscribers.

“The fun thing is that this can be really easy,” he said. “There’s like no engineering involved. It’s just working within the rules of the page. If you’re an ad-blocking subscriber, you don’t see any other offer. You never get to the paywall because you’ve been stopped from the firstpageview. If you offer those people the same promotional offer, which is now 99 cents for three months, and then after that the price will pick up to $11 or $12 instead of $10 after the trial period. You explain, at that point, the price includes the benefit of being able to leave your ad-blocker on and you’ll have faster page loads, etc. If someone is so price sensitive that they don’t like that, they can turn their ad-blocker off, go through the paywall, and get a cheaper offer.”

• Make the user experience better: Even if your publication doesn’t discourage readers from turning off their ad-blocker or doesn’t charge users more for an ad-free experience, there are still lessons to learn from Nakashima’s work.

As we mentioned above, over the course of this study, ad-blocking users ended up reading more stories and coming back to BANG’s sites more often.

Nakashima doesn’t know for sure why that’s the case, but he has a theory that I agree with: “There’s less friction, that’s my theory. There’s less friction to getting to the good stuff. I think that does help with engagement.”

By decreasing page load times and streamlining websites, publications might be able to encourage readers to stick around longer. This is especially important as publishers build subscription models around providing lasting value to regular users rather than trying to take advantage of fly-by traffic.

Readers have also been conditioned to hate ads, so if you can create an ad experience that isn’t terrible, readers might be more accepting of them

“I would accept ads if they were placed in a more thoughtful way so they don’t interfere with my ability to read the news,” one of the BANG readers who replied to the survey told Nakashima.

Retention matters: One of the side effects of the test has been that the ad-blocking readers have unsubscribed at a higher rate than non-adblockers.

Since February, when the testing began, 19.5 percent of ad-blockers unsubscribed compared to 12.2 percent of typical readers. Most of the people who unsubscribed did so around the time when their discounted introductory rate expired.

With a typical meter model, readers get to sample a certain number of stories before they are required to subscribe. The readers who hit the ad-blocker modal didn’t get that sample period, and Nakashima thinks that contributed to higher churn rate.

Another theory: Readers who are savvy enough to use an ad-blocker are also savvy enough to test out subscriptions and remember to cancel them.

No matter the reason though, retention is critical for any publisher pursuing a subscription model.

“Getting the retention piece, which is huge, is going to be a big focus,” Nakashima said. “Once you get them in the door, how do you serve them better? How do you align your metrics to basically optimize you for keeping people once you get them? How carefully are they going to understand their customer? There are some investments that need to go into that on the technology side and starting to have that conversation with their journalists: Which of our stories are going to keep people around longer?”


The Future

Nakashima’s funding has run out, so he’s concluded his study for now.

He’s shared all his findings and his main recommendation — that publishers raise prices on readers who want to use ad-blockers — with BANG.

And the publication is planning to try it out, said Chase, the executive editor.

“It takes a while to actually test something like that and to figure out the long-term impact. We don’t have all the tools in place to really understand the impact of a price change like that, but we’ll certainly try it,” he said. “So many people who have ad-blockers start with a somewhat contentious relationship with us. They’re not pleased with the experience, so they get a piece of software that allows them to change that experience. If we don’t look at that and say, ‘huh, they’re changing the experience and trying to tell us something,’ we can either get mad at them or just listen and make our product better.”

And, ultimately, as he wrote in the Medium post he published today, Nakashima views this research as only the start as publishers look to maximize revenue and attract new paying customers:

To be sure, there are other big issues to deal with when managing digital subscriptions — like making sure logged-in subscribers get the access they pay for (we found in an exit survey in April that 29 percent of the 40 cancelers who responded to our survey quit because of access issues); figuring out what content works to drive subscriptions and doing more of it; and creating more touch points in the community through public forums and social media channels.
Consistent efforts at improving the experience — from making it easier to subscribe, to easing the headache of logging in, to making what ads are running less intrusive — should also pay off in the long-run.
The solution I’m recommending only goes so far. The mass media business is still a scale game, and news organizations need to make their product better so they reach more people and convince more readers to pay.

Want to know more?

• Poynter’s Kristen Hare has covered some of the earlier steps in Nakashima’s studies at BANG. You can read her stories here and here.

• Here’s a smart Monday Note story from Frederic Filloux on his expectations for subscription-based news sites’ user experience.

• This spring, Chase wrote a column discussing the challenges at DFM and encouraging readers to support BANG and local journalism.


Creative Commons photo by Bart Heird.
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