Direct deals, diverse revenues and ESG: AOP survey reveals publisher priorities for 2023 and beyond

It’s safe to say that 2022 wasn’t the triumphant return to normality that we hoped for. Jumping from the pandemic frying pan into the cost-of-living fire has been exhausting for individuals, businesses, and the UK’s strained institutions. Yet, among this sense of ‘permacrisis’ – the Collins Dictionary word of the year for 2022 – the digital publishing industry has shown tremendous resilience, with stable revenues and an undeterred commitment to addressing today’s cultural and environmental challenges.

For the AOP’s latest survey, ‘Digital Publishing: Outlook and Priorities for 2023’, we investigated the sentiment of the UK digital publishing industry and how businesses are adapting to current and future challenges. What it reveals is a surprising level of confidence, an unsurprising move away from open programmatic, and a dedication to progress beyond profit.

Let’s take a look at the findings and what they tell us about the future of digital publishing in the UK.

Open programmatic continues to fade from publisher revenue plans

For many years, publishers have been aware that selling their inventory on open programmatic marketplaces does not always provide the returns they expect, with fees and inefficiencies in the supply chain eating away at advertiser spend until only a fraction makes it to the other side. Suspicions of supply chain inequities were confirmed when ISBA released its industry-shaking Programmatic Supply Chain Transparency Study in 2020.

However, ISBA’s follow up study, published in January this year, revealed the proportion of ad spend reaching publishers has increased from 57% to 65%, with unattributable spend – or the “unknown delta” – reducing from 17% to 3%. Though this is welcome progress, many publishers are already rethinking their digital advertising revenue streams.

Our study shows that open marketplaces have been significantly deprioritised in publishers’ growth plans. Only 14% of respondents expect open programmatic to be their biggest source of potential advertising revenue growth in the next three years, down from 20% in last year’s survey. The rest of the vote was almost evenly split between non-programmatic direct deals (42%) and private marketplaces (44%) as having the most promise for ad revenue growth.

B2B publishers show slightly more favour to open marketplaces, with almost one in five (19%) seeing it as their biggest growth driver for ad revenue, but generally there is a consensus among publishers surveyed that more sustained growth can be found elsewhere. It will be interesting to see whether the progress reported by ISBA moves the needle back towards open programmatic in the future, especially if further improvements to transparency and publisher revenues can be found.

It should be noted that survey participation skews towards premium publishers that can approach direct deals and private marketplaces with a degree of bargaining power that smaller publishers lack. Open programmatic remains an essential revenue source for such publishers, so it’s important for the health of the open web that improvements to this section of the market continue.

Publishers put their eggs in multiple baskets as subscription strategies mature

Subscriptions lead as the revenue stream that all publishers see as having the most potential growth for the second year running, at 17%, though this is a sharp drop from the 55% scored in last year’s survey. However, this should not be interpreted as subscription models falling out of favour (the latest Digital Publishers’ Revenue Index (DPRI) from AOP and Deloitte reported subscriptions as tracking positively in Q3 2022, up 12.1% vs the same quarter in 2021). Rather, it is evidence that the model has matured and publishers are now looking for additional new growth areas.

So where do publishers see the most promise? Unlike last year, there are no runaway leaders across the nine categories – with only connected TV and audio scoring less than 10% of the vote at 5% and 7% respectively – suggesting that publishers are placing their eggs in many baskets to diversify their revenue streams. Where the figures do diverge is when we split publishers by audience, revealing significant differences in strategy between B2B publishers, B2C publishers, and those that target both.

B2B publishers see the most growth potential in lead generation (28%), events (22%), and sponsorships (20%), indicating that business-focused publications are focusing on acquiring new readers while expanding and capitalising on their networks, which provides value for both the publications and their audiences.

Subscriptions (17%) lead for B2C publishers, followed by sponsorships (15%) and display advertising (13%). These are all standard fare revenue streams for digital publishers, though what stands out for B2C publishers is the declining interest in lead generation, which fell from 13% in the last survey to just 5% this year. B2C publishers may be more interested in extracting value from their existing audiences than expanding them, consistent with the investment in first-party data activation that I’ll come on to discuss shortly.

Publishers that cater to both B2B and B2C see the most potential from integrating with the rapidly growing retail media sector, with far more interest in eCommerce (23%) and affiliate marketing (19%) than their single-audience counterparts. With eMarketer calling retail media the “third wave of digital advertising”, it’s no surprise publishers are wanting in on the action and looking for other ways to activate their first-party data and inventory to connect with both advertisers and consumers.

We also asked which platforms publishers are exploring beyond their own properties to drive content discovery. As expected, B2B publishers massively favour LinkedIn, which is used by 44% of respondents versus just 4% of B2C publishers. Consumer-focused publishers put TikTok at the top of their list, with around a quarter (24%) using the platform, followed by Meta platforms, Facebook and Instagram, at 22% and 18% respectively. Snapchat comes in last, used by just 6% of publishers.

High level of commitment to a more diverse, equitable, and sustainable industry

Through recent discussions we’ve hosted with our members and the wider industry, it’s clear publishers want to build more open and inclusive company cultures and have a positive impact on the world around them. When asked about their organisational priorities, “ensuring a diverse and inclusive workplace” took the top spot among publishers, closely followed by the associated goal of “recruiting and retaining new talent”. “Developing new revenue streams through product innovation” and “data privacy and compliance” were also of equal importance to publishers across the board, as they considered their key priorities for 2023.

With the top two business priorities both people-focused, publishers are clearly aware of the value their workforce poses and the benefits of a diverse staff. It is vital this attitude translates to action: last year’s MEFA Measures Survey found that more than half (56%) of people from underrepresented backgrounds working in media and advertising don’t feel there is equal opportunity in their organisation, and more than three-quarters (77%) don’t see representative role models.

This commitment to progress carries through to our questions on Environmental, Social, and Governance (ESG) targets. The vast majority (80%) of respondents stated that they have either already published an ESG plan or are working towards developing one. Pressure to prioritise ESG efforts comes from both internal and external voices: two-thirds (67%) agreed that ESG was core to the values of both their business and employees, while 58% agreed that advertisers and agencies expect them to develop and implement a policy to meet ESG goals.

As for where publishers are currently focusing their efforts, reducing organisational carbon emissions took the top spot, and is a priority for three-quarters (75%) of respondents. Two-thirds (65%) agreed that they have a clear strategy in place to create a more diverse and inclusive workforce, while 62% agreed they have one for supporting social or community causes that are close to business values.

The area with clear room for improvement is reducing carbon emissions beyond the organisation itself. Just over half (56%) of publishers agreed they are focused on reducing emissions throughout their supply chain, while only 44% said the same for their websites. Given the general dedication to ESG found above, this should not be seen as a lack of care on the part of publishers. These are the areas where progress can only move as fast as the technology in the back end, and where there needs to be consistency in how emissions are audited for publishers to have measurable targets on their path towards net zero.

Recession forecasts don’t dent confidence, but progress plateaus on cookies

The Bank of England has forecast a recession for the UK, although it expects it to be short and shallow (thankfully). This not great, but not terrible, verdict on the economy is consistent with the cautious optimism found in IPA Bellwether’s most recent report, which showed surprising resilience in marketing budgets during Q3 2022. It also echoes the continuing, though modest, revenue growth for digital publishers reported in the Q3 2022 DRPI report.

We found similar sentiments in the annual AOP survey, with both publishers and solutions providers having an average confidence rating of 7.2 out of 10. And this confidence is not unfounded: the Q3 2022 DRPI report found that subscription sign-ups are tracking positively despite the cost-of-living crisis – proving that people greatly value quality content, even at a time when we might expect to see it deprioritised – while display advertising revenues returned steady growth of 13.9%.

Though publishers are confident they can weather a recession, they aren’t as sure about their readiness for Google’s delayed sunsetting of third-party cookies, rating their confidence at an average of 6.5 out of 10 (the same as when asked last year), while solutions providers come in even lower at 4.8 (down slightly from 4.9 last year).

Confidence may have plateaued, but that does not mean publishers have been inactive. There have been significant changes in strategy since the last survey, with a shift away from data collaborations with other publishers, which was a top priority for only 4% of respondents this year, down from 20% in the prior survey. A fifth (21%) of publishers admitted to not having a joined-up internal strategy in place around audience data – up from 4% the year before.

Now, the focus is on building up and activating first-party data. More than half (58%) of publishers reported they are investing in tools to ensure audience data informs everything they do. As for how they intend to gather and use this data, improving engagement funnels was a top priority for 23% of publishers, while implementing tech solutions for a 360-degree audience view and investing in personalised user experiences were the next highest priorities at 15% each.

Publishers are even less confident about their grasp on the Online Safety Bill. When asked about how confident they are in their understanding of how the upcoming legislation might impact their organisation, the average score was 5.6 out of 10 for publishers and 5.3 for solutions providers. This is both reflective of the general confusion – both inside and outside parliament – about how the bill will be implemented, though its remit of regulating content targeting children and limiting access to pornography naturally excludes our survey participants.

The future, ultimately, looks bright-ish. We are undeniably in tough times, with more ahead, but digital publishers are looking ahead with a sense of optimism and, more importantly, purpose. Anyone who’s been in this industry as long as I have knows that revenues rise and fall, platforms come and go, and many “next-big-things” end up forgotten. But having a vision for where we are headed carries us through it all, and if the sentiments expressed in this survey translate to action, then we should all be excited for digital publishing’s next evolution.