Interview: Digital’s Second Age Begins Now, FT CEO Says

Financial Times chief executive John Ridding tells paidContent that data and mobile will fuel digital publishing in to a 2.0 phase. But he may need to score a victory against Apple (NSDQ: AAPL) to get there.

“By 2014, 40 percent or more of our revenues will come from digital, half will come from (paid) content,” Ridding says. “When you go back just two or three years, 60 percent of our revenues came from print advertising.”

The FT’s cross-platform digital subscriptions have seen two spikes on the way to 230,000 – the free stories introduced in 2007 and, more significantly, the iPad app launched in April 2010. Both have helped the publisher reduce its reliance on ads, the market for which has slumped twice since FT subs were introduced in 2002.

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“Phase one was adapting the model to the realities of the business model,” Ridding tells paidContent. “We’ve done that. We can see healthy profitability. Now what’s exciting is we’re in phase two – for me, that is fundamentally capitalising on the opportunities of a more digital business.”

Pattern recognition

Ridding says the ways in which his company uses data has “transformed” subscription and retention rates “significantly”. One technique, in particular, is “trigger upsell”…

“You look at the readership pattern of groups who have gone from being a regular user to a subscriber. Then you look at other readers who display similar patterns and focus the marketing effort on those cohorts,” Ridding says. “It leads to a step-change in the efficiency of acquisition. The more data you have, the more you can refine this science – before, it was frankly an art.”

Mobile ‘megatrend’

The other great transformer is smartphones and tablets. Mobile registrants to are 2.5 times more likely to subscribe, are more engaged and more likely to give feedback, Ridding says.

“Mobile delivery allows us to reach readers and cities we wouldn’t have been able to before due to the challenges of print distribution. As the world economy rebalances and economic power shifts from traditional powers of Europe and the US to the BRICs and beyond, this technology allows us to reach these audiences in a profitable way, which we’ve struggled to do before.”

Staying alive in print

But, whereas Guardian News & Media has started its “digital-first” business strategy by axing overseas printing in advance of its iPad edition, Ridding wants a “channel-neutral, as opposed to channel-biased,” approach…

“It’s not an either-or,” he says. “We remain an excited believer in print. It’s a fantastic format. We’ve been raising cover prices significantly. Print journalism has been woefully undervalued. Certain advertising categories like luxury love print.”

That’s why even the prospect of reaching that fabled tipping point, shortly after 2014, of hitting 50 percent digital revenue, would not necessarily carry a watershed impact for print. “It would obviously be a landmark, but it would be not a substitute for print,” Ridding says.

Bitten by Apple

The FT’s biggest digital growth driver is iPad, which, together with mobile, contributes 15 percent of new subscriptions. But, whereas the FT’s app has processed subscriber data and taken payment directly itself, that is now threatened by Apple’s new in-app subscription, which requires all transactions go through iTunes Store.

It’s been pretty extraordinary,” Ridding says. “Eighteen months ago, we were getting a couple of hundred new subscriptions a week, probably less – now we’re in the high hundreds, or even adding a thousand-plus.

(Giving away) thirty percent of subscription revenue isn’t something we celebrate, but that was secondary actually – we already pay other distributors and agents; newsagents take a cut. Central to our whole strategy and all our aspirations is to have that direct relationship with the reader.”

Ridding cites the episode of 2007, when asked Factiva corporate subscribers to pay an additional license, on top of their Factiva subscription, for FT material.

“It was difficult but we were resolute; it’s paid off very well. That’s informed our own view that we have to really understand our readers. We can’t do that if we give up our relationship as part of the changed terms Apple is putting forward.” Ridding claims 360,000 unique users for the web-based app equivalent which the FT is using to demonstrate it doesn’t need iTunes. But, web or not, it will be interesting to see whether the visibility afforded by iTunes Store is really as dispensable as the FT suggests.

“You have to think about the customer – life is going to get pretty confusing if you have to have a different sign-on with all the different device manufacturers.

We’ve had a series of very cordial conversations with Apple about how we see the world and how they see the world. We can each see where each other is coming from. That’s fine; you can’t always agree on everything. They fully understand what we would need to continue.”