When aggregation/news-reading apps are first launched, their founders tend to emit a hazily rose-tinted view of future revenue prospects. Flush with venture capital, a fledgling startup’s first priority is not to decide whether a lucrative future lies with a freemium model, paid subscriptions, and/or targeted advertising; its initial goal is to provide the best possible service and to build an “audience of significant scale”– the rest will (hopefully) fall into place. This is no longer the case for Flipboard and Pulse, two major apps in this category, which have each been around for over two years and have attracted 20 million users respectively. No longer hatchlings, these companies are entering the phase of concretizing their revenue plans, and the strategies they have selected are sharply divergent.
Where revenue from advertising is concerned, both companies are having to confront the same off-putting odds: despite a great deal of optimism about the untapped opportunity to be found in mobile advertising, it is projected to represent less than two percent of all U.S. spending on marketing this year (or approximately $2.6 billion), even though ten percent of Internet traffic is now coming from mobile devices, reports the Wall Street Journal. Furthermore, mobile ad space goes for peanuts: while an ad in a national newspaper can be priced at $50-$100/1,000 viewers, it costs an average of $2.85 to reach 1,000 viewers through a mobile advertisement, according to Opera Software ASA, a mobile-browser firm.
Undaunted, both news-reading apps are plunging into different areas of mobile advertising. Flipboard, true to its social, magazine-like approach to aggregation, is opting for magazine-like ads with social elements. An example is this autumn’s Levi’s campaign, which AdAge describes as both a “branded magazine” and a “social catalogue.” The ad lets users browse through— and purchase from— the denim company’s fall collection within the app, and allows them to share images on Facebook and Twitter. The campaign ran within nine publications’ Flipboard feeds throughout October, including Vanity Fair, Glamour, Elle, and Marie Claire. According to the recent GkF MRI iPanel Report, a quarterly examination of Consumers, Tablets and E-readers, this is in line with tablet users’ wants. The study found that over half of tablet owners said they were “very interested” in the advertising that appeared within their apps, with 66 percent of millenials calling themselves “very interested” in the advertising that appeared within at least one genre of app, the most popular being shopping/retail.
Pulse’s approach, on the other hand, eschews invasive ads in favour of sponsored content, which it is embracing as its sole source of advertising revenue. Sponsored posts can come in text, image or video form; an example is an article in the business category entitled “The Next Big Thing in China: Coffee," paid for by global investment management firm T. Rowe Price. Publishers get a slice of ad revenue if sponsored content is posted inside their content feed, or if they bring the advertiser on board. In the near future, Pulse is planning to let advertisers embed sponsored posts that allow readers to purchase tickets for the cinema or schedule test drives from within the app. So far, this approach has been earning Pulse approximately $300,000 a month— a modest sum that co-founder Akshay Kothari expects to see increase considerably, given that the company has just hired its first advertising executive, Jordan English.
“It’s tempting to just put a banner ad at the end of each story,” AdAge quotes Kothari as saying; “we’d be profitable and making real money.” Indeed, banners account for almost $1 of every $5 spent on mobile advertising in the U.S. However, readers tend to consider this “spray and pay” approach to be “cheap, crude, and annoy[ing],” according to the Wall Street Journal, not to mention ill-suited to the mobile experience. “The canvas is getting smaller,” wrote Dmitry Shevelenko, the Head of Monetization Products at Pulse, in an email to AdAge. He added that invasive advertising tactics such as full-page “takeovers” are “largely irrelevant on intimate devices,” asserting that “brands are at their best when they are unshackled and can focus on being powerful storytellers.” However, while they may be less irritating than “takeovers,” sponsored posts come with their own caveat; if insufficiently marked, this form of marketing can be misleading for readers, and potentially damaging to a publication’s reputation.
As for subscriptions, Flipboard and Pulse are once again on different tracks. The former announced a deal with The New York Times in June that marks the first time The Times is feeding its metered paywall protected content through a third party, but sees the app pocket none of the revenue from subscriptions. Pulse, meanwhile, almost simultaneously struck a deal with the Wall Street Journal, allowing it to offer three low-priced packages ($0.99-3.99/month) of highly specified content (editor’s pick, technology or politics). In this case, the revenue is divvied three ways— between the platform provider, the publisher, and Pulse. So far, the sales are “decent,” said Kothari, who expressed a desire to expand to an entire category of paid content on the app within a year.
It is too soon to tell which elements of these strategies, if any, will allow Fliboard and Pulse to successfully dig into mobile news’s mythical revenue potential. Still, anyone with an eye on the mobile news landscape would do well to pay close attention.