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Dear reader,
Membership is more than just a source of revenue — it is a social contract between a news organization and its supporters. But the two are not mutually exclusive. In this week's lesson, we talk about money: how much you can expect to spend, and how much you can expect to bring in, when launching a membership program.
One note of caution: compared to subscriptions, membership in news is still a relatively new model and revenue strategy, at least beyond U.S. public radio. So the benchmarks we offer below are based on only a few years of data, largely from the U.S., where membership is most mature and organizations such as the Institute for Nonprofit News and News Revenue Hub have worked to collect enough data to offer benchmarks. They are meant to inform, not dictate, your strategy.
Use this section for: Creating a comprehensive list of all the costs you can expect to incur when launching a membership program, and developing an informed revenue projection. If you’re pre-launch, this can help you decide whether you can afford to invest in the costs of launching a program. If you already have a membership program, this section can help you figure out if you’re growing as much as you could be, and whether you’ve set your prices correctly.
In this section we: Share a step-by-step process for forecasting your membership revenue opportunity, give advice on how to set prices, break down all the costs associated with membership, and share a few member-driven newsrooms’ revenue pies.
What this section doesn’t include: Advice on how to grow your membership program. We cover that in a later lesson.
THIS WEEK'S ASSIGNMENT
If you are contemplating launching a membership program, one of the first things you want to figure out is the amount of revenue you can reasonably expect to generate.
You can get a decent sense of this by calculating your total addressable audience, and then using industry benchmarks for membership conversion to come up with a reasonable target.
Use this step-by-step process to project your membership revenue opportunity, whether your newsroom isn’t even publishing yet, or you’ve been publishing for years and are ready to make the leap to membership. If you’ve already got a membership program, you can use this to see how well you’re doing compared to your opportunity.
Another note of caution: in order to recommend a process that could be adapted by the greatest number of newsrooms, we’ve sketched a fairly generic model of newsroom configuration and audience journey. This model is meant to be adapted to your specific context, not imposed as a one-size-fit-all template.
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Step 1: Calculate total addressable audience
First, if you’re already publishing and have figures such as monthly site visits, you can skip all the way to step 3.
If you’re not publishing yet, start by figuring out some basic demographics of the community you’re trying to serve. If you are serving a particular city, you can start a calculation of total addressable audience by pulling census or similar data on population size for 18+ year old people living in your city.
It’s likely that only a small percentage of people in your addressable audience will read your journalism. According to the annual Reuters Institute Digital News Report, 28 percent of readers worldwide prefer to get their news online. In the U.S., that number is 37 percent. If you don’t have more specific data on your community’s news consumption, MPP recommends using the 37 percent figure to get a rough calculation of the universe of adults in your community whom you could hope to reach.
An example might make this easier to process: Let’s say you are a local news site in the U.S. serving a city of 200,000, and 80 percent are over the age of 18. That means there are 160,000 adults in your city, 59,200 (37 percent) of whom likely prefer to get their news online. That means your total addressable audience is 59,200 people.
Step 2: Estimate monthly unique users and monthly site visits
If you are a startup newsroom with no audience yet, the next step is to use your total addressable audience calculation to estimate how many monthly unique users you have. (If you’re already publishing, you can just use your existing monthly uniques).
To estimate monthly unique visitors, first decide how conservative you want to be in your estimate of what percentage of your total addressable market you think you can actually attract. MPP believes that it could be anywhere between 25 percent and 75 percent, determined largely by how aggressively you invest in helping people discover your site.
Let’s return to our earlier example where your total addressable market is 59,200. If 75 percent of those adults found you, that would give you an upper limit of 44,400 monthly unique users.
Then, calculate your potential monthly site visits. Assume that half of those monthly unique users visit you twice a week, or eight times a month. That gives you about 200,000 monthly site visits.
Step 3: Estimate newsletter subscribers
If you already know your monthly site visits, you’ll start here.
One of the most high-performing pathways to membership is the email newsletter, so the next step in this process is to estimate how many newsletter subscribers you can expect to get.
Based on some early industry benchmarks, MPP recommends estimating that you’ll convert between 8 and 10 percent of monthly site visits into newsletter subscribers. So if you're in the newsroom above with 200,000 monthly site visits, you can expect to convert about 16,000 site visitors to newsletter subscribers over time.
Step 4: Set targets to convert newsletter subscribers to paying members
Modeling the transition from newsletter subscriber to member requires yet another assumption, this time about newsletter conversion rates.
The Facebook Local News Subscriptions Accelerator Program reported that publishers might expect to convert 5 to 10 percent of email subscribers to paying subscribers. For small and mid-sized newsrooms in the U.S., News Revenue Hub reports that among their clients, a good conversion rate to membership from newsletters is 7 percent. MPP has seen conversion rates as high as 15 percent. Your newsletter open rates can give you a clue about how high to aim – if your open rates are strong, upwards of 40 percent, you could hew closer to 15 percent. If they’re on the weak side, aim for the lower end of this range.
Once you’ve identified what percentage of newsletter subscribers you can reasonably expect to convert, you have the last bit of data you need to set a membership target, and you can simply multiply your newsletter subscriber numbers by that percentage. This is your membership opportunity.
MPP does not include revenue benchmarks in this formula because of the variation in membership prices and pricing tiers across newsrooms. But you can calculate membership revenue by multiplying the number of members you expect to convert by the amount of revenue you expect to bring in per member (aka your membership price, or average contribution in a pay-what-you-can model).
If you aren’t ready for the financial fun to be over, next you can do a detailed accounting of all the costs associated with membership. There are a lot of tiny things to remember, from fees associated with your payment processor to the costs of fulfilling member swag. We think we captured almost all of them.
Something to keep in mind: Building membership-based revenue takes time, and these are not numbers you can expect to reach within a year of launch. Whether these benchmarks work for you will depend a lot on your inputs. Aggressively growing your newsletter list will increase your membership opportunity, for example.
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- Daily Maverick designed a pay-what-you-can model to keep membership financially accessible
- Black Ballad used member surveys to develop new revenue streams
- WTFJHT’s Matt Kiser shared his monthly costs and revenue with his audience to raise money
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IF YOU'RE NEW HERE THIS WEEK
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Read the previous lessons:
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Tools and technology are the infrastructure that underpin everything about your membership program — from how you publish stories to how you process credit card payments for all the members we just discussed. Next week, we’ll walk you through the process of choosing the right vendor for your organization.
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Think someone else would find this useful? They can sign up to get all future lessons, and you can share this one with them by forwarding this email or sharing this link with them.
See you next week.
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Ariel Zirulnick, Membership Guide Managing Editor
Joseph Lichterman, Membership Guide Researcher
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