Digital news consumers unlikely to pay for content and increasingly block ads

Photo: AP

The takeaway from Reuters’ vast new study of the world’s digital news consumers is that the disruptive trends publishers have been grappling with the last few years have crystallized into something more lasting, not just in the United States but around the world.

Readers deplore online ads, particularly the personalized ones that follow them from site to site. They still don’t want to pay for news. They don’t find tablets all that exciting for reading news. And the homepage is diminishing fast, usurped by Facebook (not so much Twitter).

The biggest surprise: Using apps to block ads has gone mainstream.

Taken together, these hardened rules pose economic threats not just to legacy news brands, but even to the disrupters—Huffington Post, BuzzFeed—that upended digital news in the first place. The study, conducted by the Reuters Institute Digital News Report, in partnership with the Tow Center for Digital Journalism, surveyed more than 20,000 people in a dozen countries. And it came with a warning: News companies “will have to be more inventive than ever with editorial and business strategies if they are to survive.”

Those companies with metered paywalls should be particularly concerned about the findings. Paywalls rely on a certain number of people to pay, offset by a another group of less frequent visitors who won’t pay but are still valuable because of they’re exposed to site’s ads. But what if more and more non-payers use ad-blockers? And what if the number of people willing to pay doesn’t grow?

It’s already happening.

Some 47 percent of US internet users now utilize ad blocking software. For 18- to 24-year-olds, that number is even higher: 55 percent. Consumers are, the study says, annoyed with “advertising and the interruption it causes to their reading experience.” Focus group participants seemed to particularly hate ads that surfaced based on browsing history. As one woman put it, “Online ads are obtrusive, obnoxious, annoying.”

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Reuters Digital News Report 2015

And they are easy to get rid of. Installing ad blocking software is a cinch: Just mouse over a site like AdBlockPlus.org, click on a green button that says “install,” follow some simple instructions, then reopen the browser. Ads—all of them—vanish. That ad blocking, a tactic once employed by the geekiest of Web users, is going mainstream is scary on its own merits—if advertisers know people aren’t even seeing their ads, why would they continue spending billions of dollars a year to place them? But it turns into a toxic scenario when viewed alongside the resistance to paying for only online content.

Just 11 percent of US consumers are paying for online news, according to the report, and there has been “virtually no increase” since 2013. It’s doubtful that’s an audience size large enough to support newsrooms of hundreds of journalists. This statistic is replicated around the world, with only about 10 percent paying for news. The outlier is urban areas in Brazil, where 23 percent of internet users pay for news. It’s not totally clear why, though Brazil has one of the world’s fastest-growing economies.

The rest of the world isn’t as generous.

“A small number of loyal readers have been persuaded to pay for brands they like,” the report says, “but it is proving hard to convert casual readers” when there is so much else available for free, even if the quality isn’t as good as the paid-for stuff. Most of those not paying in the United States said they never would or that they could be persuaded for less than $1 per month, which is a lot less than they probably pay for coffee.

Connecting these hardened rules with mobile is even more disconcerting.

Tablets, once thought of as a replacement for the broadsheet, aren’t a savior. The Reuters study finds that “tablet growth for news [is] weakening in most countries.” Mobile phone screen sizes are increasing—Apple’s biggest model is six inches, up from four—giving readers less need for tablet-sized screens. As the study notes, “We see the smartphone more clearly as the defining device for digital news with a disruptive impact on consumption, formats, and business models.”

In fact, 26 percent of US news consumers say that mobile phones are the main way they access news. This is both exciting—news now has its gadget, just like music found the iPod—but it is scary in some respects, too. For one, successful advertising campaigns on five-inch screens have proven difficult, and people don’t spend as much time with the content. They dip in and out. Also, ad blocking is coming soon to the mobile Web.

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Reuters Digital News Report 2015

Multiple outlets have reported that Apple, in the next version of its iPhone and iPad software, will allow the technology in its browser. Blocking ads makes pages download faster and crash less. Once users try it, they can’t imagine ever going back. With about 500 million iPhones in hands around the world, if even a small chunk of those users fall in love with ad blocking, that’s a significant problem for advertisers and news outlets (to say nothing of Google).

It is tempting to say, “Well that won’t matter because people get their news from apps.” That’s wrong. “It is interesting to note,” the report says, “that in most countries the mobile browser remains the main access point to news.” Rather than scrolling around their phones to find news apps, readers want to do everything in the browser.

But they do like some apps—social apps. Here is a brief historical summary of how people have consumed news from newspapers over the years: the front page, the home page, Facebook. “We see significantly fewer people accessing the front page of a news website where a list of stories is displayed,” the study says. “More people are going directly to stories via a side door such as search or social media.”

Some 41 percent of people around the world get their news from Facebook each week, a number that towers over Twitter (at 11 percent) despite the media’s obsession with the Twitterverse. The study does find that people will seek out news on Twitter, particularly breaking news, as opposed to Facebook, where they “bump into” news, suggesting that one outlet is active and the other is passive. But publishers are still trying to figure out how to monetize social user streams. There was a mix of excitement and unease over Facebook’s recent effort to host stories on its web site, giving publishers a cut of the advertising revenue. The New York Times and others quickly offered stories this way, but have since pulled back for unexplained reasons.

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Reuters Digital News Report 2015

Meanwhile, WhatsApp, a mobile messaging platform bought by Facebook in 2014, is a popular source of news consumption in Spain and Brazil, though it’s less so in the United States. And search isn’t going away. It remains strong in Italy, Spain, and Germany, countries where more than 50 percent of users say their news discovery starts with search engines. (It’s 40 percent in the United States.)

Sensing that the combination of ad blocking, the rise of mobile, and the soaring use of Facebook is forecasting a digital winter, publishers are racing into sponsored content, letting brands write big checks to make ads look like beautiful native content. Those with ad blockers don’t see this stuff anymore because the software wipes it away, and most consumers would apparently prefer not to see it either, according to the report. More than 40 percent of US news consumers say they “have felt disappointed or deceived after reading an article they later found had been sponsored,” the study says.

“Thats what makes me mad! ITS PRESENTED AS NEWS!” one focus group user said. Another offered this assessment: “I think it’s a dirty way of getting your attention. Which is by lying.”

A potential bright spot: “Half say they don’t like sponsored content but accept this as part of how they get free news,” the report says. This statement also offers publishers a potential opening to convince people not to use ad blockers: No ads, no journalism, and the world becomes a far less interesting place. But it’s not clear that a large enough chunk of Web users are concerned enough to make that a winning argument.

In some respects, the reader hasn’t changed. Most have never really liked ads but have put up with them, by flipping past them in the old days of newspapers. But paper didn’t offer a button to erase ads. The ads didn’t blink annoyingly. The car ads didn’t follow them from the local news section to the baseball box scores. Now readers, not publishers, control what they want to see.

Consumers are in charge of news—how they see it, when they’ll consume it, what they’ll pay for it—and if publishers want to survive, they better figure out a way to get more economically in sync with them.

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Michael Rosenwald is a reporter at the Washington Post. He has also written for The New Yorker, Esquire, and The Economist. Follow him on Twitter @mikerosenwald.