An analysis of subscriber behavior data by Northwestern University’s Spiegel Research Center has found that a news organization’s customers who use an ad blocker are more likely to keep their subscriptions.
The new study, while limited in scope, raises important questions about whether news outlets are turning off some of their best customers with intrusive advertising, and whether their bottom line might be better served by curtailing or customizing those ads.
Spiegel Executive Director Tom Collinger described the newly identified reader behavior as “advertising disengagement.” He said the age-old industry assumption that advertising had either a neutral or positive effect on readership may be outdated.
“This is a big ‘a-ha,’” said Ed Malthouse, Spiegel’s Research Director. “You’ve got to pay attention to the user experience.”
This is a big ‘a-ha.’ You’ve got to pay attention to the user experience.Ed Malthouse, Research Director, Spiegel Research Center
The research was conducted as part of the Medill Local News Initiative, a project to identify ways to sustain local journalism at a time when it faces severe economic pressures. Spiegel is part of Northwestern’s Medill School of Journalism, Media, Integrated Marketing Communications.
Spiegel’s ad-blocker analysis was part of its major research project unveiled in February 2019 that found regular visits to a news website – preferably daily visits – provided the best indicator that a reader would remain a subscriber. That study was designed to focus on the growing news industry trend of relying more on readers paying for their news and depending less on advertising dollars, which have proven disappointing in recent years.
In addition to the finding about reading regularity, the Spiegel researchers were surprised to discover a possible paradox: Subscribers who read many stories and read them for longer were no more likely to keep their subscriptions than those who didn’t. In some cases, they were actually more likely to “churn” – to drop their subscriptions.
The big question was why. When the original research was released, Malthouse speculated that thorough reading of a news outlet’s product might expose shortcomings in it. Another theory was that an overload of negative news might be part of the answer – that the more people read, the more disaffected they got. But Spiegel’s new finding about ad blockers suggests that advertising might be part of the explanation.
“If you think about it, that would explain this negative effect,” Malthouse said. “The more pages you read, the more you want to churn. The more you get beat to death by advertising, the more you get frustrated and wonder, ‘Why am I paying for this?’’’
Spoiled by Spotify and Netflix
The challenge for news outlets is that non-news online services are raising consumer expectations.
“Consumers are being conditioned by other organizations to expect really good user experiences,” Malthouse said. “‘I pay for Spotify and I don’t have to listen to ads anymore.’ ‘I get Netflix and I don’t have to look at ads anymore.’ What’s happening with the news organizations is they think they can maintain the old model of ‘I’m going to put a lot of ads [in], and I’m going to ask you to pay for it.’ And I don’t get that.”
While Spiegel has conducted subscriber behavior research on more than a dozen news websites, only one had data on whether the readers were using an ad blocker. This new analysis involves that single news outlet, which Spiegel is not identifying. The ad-blocker study tracked subscription retention of 6,994 new digital-only customers from September 2017 to October 2018. In the sample studied, 46 percent of subscribers used ad blockers; 54 percent did not.
The retention rate was notably higher for people using ad blockers than for those not using them, based on similar reading patterns. That finding is charted here:
“If you’re not using an ad blocker, the more pages that you’re reading, the more likely you are to cancel,” Malthouse said. “Whereas, if you are using an ad blocker, the effect is fairly flat.”
The effect was not completely flat, however, suggesting that other factors may encourage churn as well.
The new Spiegel research syncs up with a 2018 study by Mozilla Corp. researchers that also found ads inhibiting online consumption. In that study, people who used ad blockers were found to spend more time and read more pages than those who didn’t.
News organizations are increasingly facing up to the fact that some customers find ads to be an annoyance. Mackenzie Warren, Senior Director of News Strategy at Gannett’s USA Today Network, said in June that the news chain was “experimenting with ad-free or ad-lite products.” Though USA Today is not a subscription product online, “we have thousands of people who are actually paying us every month for an ad-free or ad-lite version of usatoday.com.”
Do Different Ads Have Different Effects?
Tim Franklin, a Medill Senior Associate Dean who heads the Medill Local News Initiative, said the new Spiegel finding was important and showed the need for deeper investigation.
“Is it possible that certain, specific types of ads are the cause?” Franklin asked. “I’m thinking about pop-up ads and automatic video players, which are particularly obtrusive.”
Collinger and Malthouse agreed that there are plenty of questions to answer.
“We do not know the advertising type, the category, the form or format, the placement, the colors, the animation effect, personalization type/amount, or the overall amount of the advertising that contributes to churn,” Collinger said. “And we do not know if there is a cumulative effect over time.”
We do not know the advertising type, the category, the form or format, the placement, the colors, the animation effect, personalization type/amount, or the overall amount of the advertising that contributes to churn.Tom Collinger, Executive Director, Spiegel Research Center
One thing is clear: News executives should be paying attention to how advertising affects engagement.
“As the local news industry shifts to more of a consumer-pay model, it’s absolutely critical that news organizations hang on to every paying reader.” Franklin said. “If online advertising is a significant contributor to churn, local news leaders have a serious Hobson’s Choice-like decision to make. Do they drop digital ads—or cut the number of digital ads—to better retain subscribers? Or do they continue to clutch that digital ad revenue and hope subscribers stick around? Is there a possible middle ground? These are really big strategic questions.”
Tough Questions for Advertisers
Collinger said the impact of the study goes well beyond the news business. “It’s hopefully a wake-up call to the advertising industry writ large,” said Collinger, who cited a host of questions for advertisers:
- Which news audiences are especially turned off by ads? And how willing are they to pay for ad-free or ad-lite news?
- “What type of advertising is seen as desirable rather than offputting?” Collinger asked. “Is it by category of interest? Is it by advertising size, or level of intrusiveness?”
- “Could dual-objective recommendation systems solve for this? These are machine-guided methods of balancing the type and amount of advertising that will be acceptable, but the decision systems could be personalized or customized to each reader.”
Malthouse credited the researchers’ focus on ad blockers to “a really good piece of detective work” by Yayu Zhou, a PhD student in Industrial Engineering and Management Science at Northwestern. Also contributing to the research was Bobby J. Calder, Professor Emeritus of Marketing at the Kellogg School of Marketing at Northwestern.