Owning the subscriber relationship isn’t really about selling the data

I think John Gruber is wrong about the motivation for the FT’s desire to retain its subscriber relationship and not hand everything over to Apple:

“Not a word of complaint about the 70/30 revenue split. Their complaint is solely about access to customer information, which they profit by selling. And remember: it’s not Apple that controls that information with App Store subscriptions: it’s us, the users. What the FT is arguing here is that they don’t want their subscribers to have any control over their customer privacy.”

First, simply because the FT doesn’t publicly complain about the split doesn’t mean they’re privately happy about it. But more importantly, the idea that the FT “profits by selling” subscriber data is… well, not entirely wrong but not entirely right either. It’s much more nuanced than John, in his rush to pitch Apple as “pro-consumer”, is making it.

Having worked on a magazine which had a higher-than-normal subscription base, I know a thing or two about the value of subscribers. And the value you get from your subscription list largely doesn’t lie in selling that data directly to third parties.

In fact, quite the opposite: The big money is in using the demographics of the overall set of subscribers to sell highly-targeted advertising in the magazine (or, in the case of the FT, newspaper) to a highly-responsive, affluent audience. Selling the “raw” data is much less valuable, as it means you no longer “own” the channel for the ads.

To put it another way: Selling a mailing list so a someone can mail out a piece of DM is much less profitable than getting them to either buy an ad or put an insert in your magazine. Setting up a co-marketed service (like, say the one that the FT does with Berry Brothers for wine) is much more profitable still.

On MacUser, we had (in my day) a subscriber base of something like 70% of the readership. Because of the surveys we did of subscribers, we knew they were mostly involved in design and print, and spent a lot of money on new IT equipment (I think it was something like £10,000 per reader per year).

This meant we could charge companies who wanted to reach that audience premium rates for ads, so much so that a magazine which peaked at around 35,000 readers was massively profitable. It also meant the ads were more effective, because that audience were interested in buying that kind of stuff. And for the audience, it meant ads were relevant – it was stuff they were interested in buying.

(This is the bit that people often forget: If advertising is to be successful, like any piece of content it has to be useful to the audience. And the more you know about the audience, the more you can target the ads so they are useful, rather than just cheap filler.)

That’s where the money was, not in selling the subscriber list like it was cheap data. Selling someone a tipped-in insert in the magazine was massively more profitable than selling them data to do a mail out.

That’s not to say you never sell the data: You do, where people have opted in (and it’s legal to do so). But it’s not where the big money is. A single page ad will make far more money for the newspaper than selling the entire database, and will probably get better response for the advertiser too.

The more you know about your readers, the more valuable your ads. The problem with the Apple model, which the FT is correct in highlighting, is that it effectively breaks the relationship you have with subscribers, which lets you increase the cost of your ads.

For a publication like the FT, where you’re reaching a high-value, affluent audience, this is doubly-true. And when you consider that direct online channels will ultimately allow you to target ads which are personalised to individual subscribers (and thus get higher response rates and higher value), it’s easy to see why the FT wants to hold on to that subscriber relationship.