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Let’s jump into it…

The era of ad-free publishing is ending

The New York Times’s announcement earlier this year that it had acquired The Athletic was triumphant, because it allowed the Grey Lady to brag that it had reached its goal of 10 million paying subscribers three years early. The newspaper crossed that threshold the moment it inherited The Athletic’s 1.2 million subscribers.

But the acquisition was also an admission of defeat — for The Athletic. Four years after its co-founder announced his goal to “wait every local paper out and let them continuously bleed until we are the last ones standing,” The Athletic was burning through cash at a precipitous rate and in desperate need of a buyer. It ended up selling for far lower than its initial asking price.

Though the NYT got its bragging rights, some wondered if the acquisition was a smart move. The Athletic had long struggled with subscriber churn issues, especially given the seasonality of sports. The churn was so bad that the site was forced to offer steep discounts in order to sustain its subscriber growth. It wasn’t surprising, then, that it immediately began eating into the NYT’s profit margins right after the acquisition. Given those brutal economics, investors were extremely skeptical that the newspaper could turn the ship around.

So what was the NYT’s answer to this skepticism? Advertising.

You see, The Athletic was among a crop of media companies that mostly swore off advertising as a business model. These publishers typically positioned advertising as antithetical to a good user experience, and they often cited it as the main driver behind clickbait, low quality content. The only way to deliver true value, they posited, was by charging the audience directly for access to content.

As it turns out, the NYT’s leadership didn’t agree with this philosophy. As Adweek’s Mark Stenberg reported this week:

Beginning Monday, The Athletic will feature ads for the first time in its six-year history … The Athletic will feature ad formats including display, video, shopping functionality and photography, and ads will live on newsletters, the home page and the discover feed. The publisher aims to net double-digit CPMs, and Chanel will serve as its launch sponsor.

The Athletic isn’t alone in making this move. After more than a decade of swearing off advertising, Netflix recently acquiesced to investor demands and announced it was introducing a cheaper, ad-supported tier later this year. Disney+ plans to debut its own version of the same. Several weeks ago, I wrote about how several Substack writers were going against the platform’s anti-advertising ethos and accepting sponsorships. Even tech publication The Information, which built its business on expensive, ad-free subscriptions, recently hired a head of brand partnerships.

So what’s behind these moves? First, I think it’s recognition that paid subscriptions — while providing a great revenue generator for content companies — often can’t prop up a business entirely on their own. The preponderance of free content will always serve as a counterweight to any digital subscription, and increased production of premium content eventually produces diminishing returns. On top of that, a sizable portion of internet users vow to never pay for content, no matter the quality.

At the same time, I think there’s more industry-wide recognition that advertising isn’t necessarily always bad. Sure, plenty of sites have installed abusive ad tech and then ramped up production of low-quality, clickbait content, but there’s also been a genuine movement across the media to introduce a better user experience. Web developers now prioritize a quicker website load time, and auto-play video ads have mostly disappeared from the sites that publish high-quality journalism. As The Athletic’s chief commercial officer Sebastian Tomich told Adweek, “I truly believe that premium digital ads are not something that people are paying to get out of. People are paying for the journalism—and as long as we don’t introduce a bunch of bad ads that get in the way of the experience, we are confident in our ability to grow both businesses side by side.”

I don’t think I’m being profound when I say that revenue diversification is a good thing, and it probably surprises no one that many of the most successful media businesses — The Economist, The New York Times, The Financial Times — have multiple business models. While I believe that paid subscriptions can serve as a great bedrock to hold up the foundation of a media outlet, advertising is still an important element that’s helped fund the media for more than a century. If ads help pay for good journalism, then I can’t fault any publisher for embracing them. If The Athletic had embraced them sooner, in fact, it probably could have fetched its initial asking price.

What do you think?

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How Libsyn plans to challenge Spotify for podcast dominance

The podcast industry is around 17 years old, and Libsyn was among the first companies launched to service that industry. For most of that time, it focused on paid podcast hosting, but in recent years it’s acquired companies that specialize in podcast advertising and subscriptions.

Libsyn needs that more diverse product offering if it wants to compete with rising podcast behemoths like Spotify and SiriusXM. I recently sat down with Dave Hanley, who helps run its advertising operations. He told me the story behind Libsyn’s acquisition of his podcast advertising platform and the company’s strategy for recruiting the next generation of hit podcasts.

To listen to this conversation, subscribe to The Business of Content wherever you get your podcasts. iTunes/ Stitcher/  Overcast/ Spotify/ Google/ YouTube/ Audible

Quick hits

There's a reason that just about every major publisher is building out its ecommerce operations...it's a highly effective form of advertising when compared to traditional display ads. [Digiday]

NPR's Planet Money has done a really good job of adapting its content for TikTok. [Teen Vogue]

I'm trying something new with my paid subscribers. I'm allowing them to choose the topic for my live Zoom calls. [Simon Owens]

lol. So true. [Gus Johnson]

The Verge is getting bloggier — using its homepage to curate outside news sources. Its hope is to get more people visiting its homepage. [The Verge] MY THOUGHT BUBBLE: I think The Verge's idea to make its homepage more bloggy is awesome, but the design itself is just awful. It’s what happens when you choose aesthetics over functionality. My eye is drawn to so many places on the page, and putting white text on black is just such an eye sore. The Verge should have created an elegant, simplified stream that goes straight down the middle of the page.

I find this emerging type of VC fascinating. Basically they find up-and-coming creators and give them seed money to help them grow bigger. If I had an extra $100 million to play around with, this is how I would invest. [NYT]

"[Webtoons], despite being below the radar of many Coastal Elites, has become massively popular in the West." [Garbage Day]

ICYMI: How Newsflare monetizes video from over 60,000 contributors

It built a thriving marketplace that connects filmmakers with buyers.

Do I have any readers in Seattle?

I’ll be traveling there in late October. Hit me up if you want to grab lunch.