Outsell: Paid content no antidote for falling ad revenue

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While ad-supported media explore ways to counteract the falloff in advertising by getting more users to pay for content, the existing marketplace for paid content is shrinking, according to a pricing study recently released by Outsell.

The study found that information managers—the buyers of business and profession-oriented content—expect a net 3% decrease in their content budgets for 2010. Ironically, Outsell's research also showed that content vendors are planning price increases of a net 6%.

“Paid content is not declining at the rate that print advertising is, but paid content will not be the saving grace of the industry in 2010,” said Anthea Stratigos, Outsell co-founder and CEO.

Stratigos noted that business model trends fluctuate over time. “A few years ago, it was all about vertical search. Then everything was going to be funded by online advertising,” she said. “All of a sudden, advertising is not doing well and paid content is the answer—but paid content is not a panacea.”

Many business media companies looking to shore up their revenues in the face of rapidly declining print advertising dollars are expanding their presence in, moving into or exploring business information and other paid-content models. “They're entering a competitive market that already exists, and people forget that the money supply is limited,” Stratigos said.

This is the third year in a row in which Outsell conducted research near the end of the year to provide guidance on pricing for paid content for publishers and other information providers. “Last year, too, budgets were decreasing and prices were increasing, but not to the same extent we're seeing this year,” Stratigos said.

In September, Outsell sent out a Web-based survey to information professionals with which the company has relationships, distributed the same survey to 10 library- and information-related networks, and partnered with some industry groups to elicit more responses.

Information budget changes across all sectors netted out at a decrease of 3% for 2010, with every sector reporting declines, according to the study. The largest net decrease (-5%) came from the corporate sector, while the education sector came in with the smallest expected decrease (-0.5%).

Outsell used two methods to estimate 2010 price changes. It surveyed managers who authorize subscriptions, licenses and other data products; those managers based their responses on contracts they have seen and other contacts with vendor representatives. As a double-check, Outsell spoke to several key vendors afterward.

The firm emphasized that the data is “directional” and intended “to be used for benchmarking purposes overall as opposed to specific negotiations.”

Although the result was a net 6% increase across all vendors and industry segments, a subset of 40 key information vendors— including Thomson Reuters, Forrester Research, Factiva, Elsevier and Wolters Kluwer Health—showed a smaller expected net increase of 3%.

All the data add up to show a paid-information marketplace that is increasingly competitive. “There are slivers of growth” in certain vertical markets, such as health care, compliance and government-related services, Statigos said. Aside from those markets, the information companies that are doing well are providing “information solutions that support money making, money saving or risk mitigation,” she said.

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