To start a new section, hold down the apple+shift keys and click to release this object and type the section title in the box below. The bottom line The mix of advertising, transactional and subscription models that a business should aim for will depend on the size and make-up of its audience and the nature of its product set. TV, for example, still brings in big audiences that are relatively well understood and therefore remains attractive to advertisers. Online news publishers also attract large audiences, but often know very little about who those audiences are and can struggle to demonstrate the level of audience engagement that social media can offer brands. Subscriptions can be a highly profitable source of revenue but tend to appeal to the most regular and loyal customers, which may only be a small proportion of the total audience. For many businesses, subscription may therefore always be just one source of income, coexisting alongside transactional sales and advertising. Subscriptions require a new set of organisational capabilities around customer service and retention, which companies accustomed to a transactional or advertising-funded model need in order to be successful. Ad funded vs Ad funded Transactional Subscription Paid for • Majority of revenues generated • Majority of revenues from • Majority of revenues from through advertising paying audiences recuring customer relationships • Typically to mass, largely • Payment on transactional, i.e. subscriptions unknown audience non-recurring basis Key success • Large audiences and/or well • Effective marketing to drive • Effective distribution platform factors understood audiences steady customer volumes or network • Effective management of • Have products that encourage • Products and services that can inventory repeat, follow-on or in-oroduct be consumed and refreshed sales (e.g. video gaming) regularly • Building customer unity Challenges • Maintaining ad yields • Building customer loyalty • Building customer service and of this • Competition from social retention capabilities model networks • Setting pricing and marketing budgets, based on understanding of cost to serve and customer lifetime value Media Metrics The state of UK media and entertainment 17