Our client, Daily Journal is a highly respected & upscale newspaper which is read widely in the UK. The paper is positioned between the Wall Street Journal and the New York Times. Recently, the newspaper added an online segment which is a spin-off from the motherfirm. Dailyjournal.com is currently just an online version of the newspaper, but work is underway to structure the online version into a consumer-appealing website.
Their main goal is to earn revenue from the website and that's where you come in. The client wants to know how to generate revenue from the website?
This case is made to be interviewer-led. Therefore the interviewer should guide the interviewee through the interview.
The aim of this case is to come up with a few options for the client to earn revenue from the website, so the candidate's business acumen and business sense are tested here.
Short Solution (Expand) (Collapse)
The following framework/structure provides an overview of the case:
1. How would you approach such a case?
Candidate should start by explaining his approach of tackling this case.
The main aim is to come up with revenue models that can be used by the newspaper. Given that we're dealing with a website, candidate should ask for statistics on the website, but the information can be shared either way.
- A user survey has been conducted to view the website's performance and to get a sense of the people visiting the website.
- The website has a large number of hits and it's the number 3 in the UK already in terms of unique visitors.
- People visiting the website are from the upper middle class segment with incomes of $75,000 and higher.
- Visitors are also quite educated with 50% that have a university education and 25% that have at least a Bachelor degree.
2. Now that you have some information on the site-stats, what kind of revenue models can we think of for the client?
A subscription model
Visitors can pay a monthly fee to get access to parts of the content or the entire content. The company can also restrict access by date or by quality of the article.
A transaction model
Instead of committing people to a subscription, some content can be restricted in access and users will have to pay a small readers fee to read the article. They can also buy readers-credits to read restricted articles.
The company can have advertisements placed on the website and earn revenue from it.
Other options are all good as long as they make sense and are compatible with online newspapers.
Eventually, interviewer should guide the candidate towards the transaction model.
3. Let's look into the transaction model, how would that look like and what is the estimated revenue the company can generate?
The general news that can be found on other websites is for free, but a limited amount of articles, research-articles, columns and so on cost a small fee to be read. These articles are more enticing towards the users and the small fee gives it a low barrier to purchase & read.
4. Great, say we want to estimate how much revenue could the company generate with this model, assuming that the site gets 1 m unique visitors per year and annually 25 m articles are read, the company wants to publish 100,000 premium articles a year and it is expected that each visitor will read about a 1,000 premium articles a year?
Candidate should come up with additional assumptions on the fee & conversion rate.
Let's assume a conversion rate of 5% and a fee of $0.25 per article that is read.
(5%*1 m)*($0.25)*1,000=$12.5 m.
5. Since we have less time, let's round it up. Say you come across the client and he wants a quick summary - what would you say to him?
It seems that a transaction model is beneficial where visitors pay a small fee for premium articles. Our possible revenue is an estimated $12.5 m per year, but we still need to expand our analysis to validate that estimate.
In today's age and with the knowledge you might have on newspapers & magazines, which model is better to pursue - subscription model, advertising or transaction model? Why?