It is hard to believe that we are four weeks into the new year already. We hope your year is off to a great start! As we look ahead to 2020, others are looking at 2019 results and planning for the coming year. In this week’s edition of Five on Friday, The Guardian and Digiday report that publishers are losing digital ad revenue because of blacklisted content, Amazon Prime grows to 112 million U.S. members, the governor of Kansas proposes taxation of digital streaming services, Americans spent more than $25B in home entertainment last year, and 2Checkout shares eCommerce trends to watch for in 2020. As an added bonus, House of Kaizen shares a new subscription job opportunity. Have a great week!

Publishers Are Losing Digital Ad Revenue Because Keywords Are Being Blacklisted  

The Guardian reports that newspaper and magazine publishers in the U.K. are losing digital ad revenue because content on certain topics like shootings and terrorism are being blacklisted. Last year, U.K. publishers lost an estimated £170m (approximately $221.1 million U.S.). They also lost valuable revenue on top stories about the Rugby World Cup and Game of Thrones, because keywords in the stories were found to be violent or sexual in nature. For example, “shooting” a goal or “photoshoot” might be considered violent if taken out of context. The Guardian says that blocked keyword lists are growing into the thousands.

“An unintended consequence is that perversely some of the best and most trusted content is being blocked inadvertently,” said James Wildman, chief executive of Hearst UK, the publisher of magazines including Cosmopolitan and Elle. “If we write about the Duke and Duchess of Sussex [Harry and Meghan], chances are most software would see the word ‘sex’ and assume it is inappropriate content to appear alongside and block it.”

A November article in Digiday supports The Guardian’s claims that keywords are being blacklisted, costing publishers around the globe hundreds of millions in advertising dollars. Part of the problem, says Digiday, is that the right content can improve the impact and effectiveness of an ad. When news content is deemed inappropriate because of certain keywords, advertisers block them, and publishers lose out.

To help measure the true impact, Hearst has asked its advertisers to give them lists of blocked keywords so they can identify which articles are being blocked and why, says Digiday. Other options to fight the problem are using better technology that can better decipher content and its intent and closer relationships to advertisers. To read more on this topic, which has publishers growing more and more concerned, read the original articles at The Guardian and Digiday online.

Survey Estimates Amazon Prime Has 112 Million U.S. Users

Amazon Prime, the ultimate membership service, has an estimated 112 million members in the U.S., according to a recent survey conducted by Consumer Intelligence Research Partners. (The survey included responses from 500 U.S. Amazon shoppers between September and December.) This represents 11% growth over 2018 membership numbers. Approximately 65% of all Amazon shoppers in Q4 2019 were Amazon Prime members, says CIRP.

Josh Lowitz, partner and co-founder of CIRP, said that Amazon Prime membership in the U.S. continues to grow steadily, though its growth is slowing down over recent years.

“Amazon continues to add value to Prime membership, most recently with one-day delivery, and these enhancements along with the overall growth in online shopping seem to keep membership numbers increasing,” Lowitz said.

The survey results show that 52% of U.S. Amazon Prime members pay their membership monthly, a 21% increase over 2016, when Amazon began offering the monthly payment option. For some shoppers, this makes a Prime membership more affordable. For others, it is a convenient way to stop and start their membership according to their shopping patterns. For example, someone who only uses Amazon Prime to get free shipping during the holidays may find the monthly option more appealing.

The value of the Prime membership really depends on how much a user – or household – utilizes the membership. If someone watches Prime Video, shops online and utilizes other Prime benefits like Prime Music, early access to deals, Prime savings at Whole Foods, free delivery on Amazon Fresh, etc., the annual membership of $119.99 is the best way to save.

A monthly membership, while more expensive at $12.99 per month, is a better alternative for short-term shoppers who only want to save on shipping or binge-watch an Amazon Original. Regardless of the choice, we expect Amazon Prime to continue to grow in numbers, even it is in the slow-and-steady phase of growth.

Kansas Gov. Laura Kelly Proposes Tax on Digital Streaming Services

It has been a while since this idea has made headlines, but the concept of taxing digital services is back – this time in Kansas. The Kansas City Star reports that Kansas Gov. Laura Kelly is proposing a sales tax on services like Netflix, Spotify and digital newspapers, magazines and books, starting in July. Such a tax would raise an estimated $22 million for the state’s general fund as well as money for highways and local jurisdictions, says NPR. The governor’s office said the current sales tax policy is outdated, and the governor wants to “level the playing field” for Kansas-based businesses.

The Kansas City Star’s editorial board opposes the tax, and the believe Kansas residents will too. The board doesn’t believe that paying sales tax on a physical good like a book or video game is the same as subscribing to a book or video game service, and they should not be taxed the same. The editorial board does not believe that increasing sales tax on digital services is the way to cover the state’s budget needs. Instead, they propose an increase in the state’s sales tax to its 2010 level of 6.45%.

Here’s an excerpt from their January 20 editorial:

“Simply restoring the income tax to the 2010 level would provide Kansas with enough money to meet its needs, without taxing you when you subscribe to Spotify. Adding a fourth income tax bracket and raising taxes on wealthy Kansans might also do the trick.

“Politicians are uninterested in income tax increases, of course, because they’re visible. Better, they think, to raise taxes on a digital subscription or an app – or a loaf of bread – by a fraction of a penny. No one will notice.

“It’s cynical and wrong. Taxes should be fair, simple and low. The governor’s digital tax hike fails on all three counts, and it should be rejected.”

If Kansas does pass a streaming tax, the state will join other jurisdictions in doing so: District of Columbia; Iowa; Florida; North Carolina; Pennsylvania; Washington; Chicago, Illinois; Loveland, Colorado; and a few cities in California, according to CPA Practice Advisor, as of March 2019.

U.S. Consumers Spent More than $25B in Entertainment in 2019

Setting streaming taxes aside, let’s look at how popular streaming services were in the U.S. in 2019. Last year, U.S. consumers spent $15.9 billion on subscription streaming entertainment services last year, reports DEG: The Digital Entertainment Group. This represents 63% of the $25.2 billion spent on home entertainment in 2019, an increase of 8.4% over 2018. Here are some other interesting stats from that report.

–       Digital movie sales totaled $2.6 billion, a 5.1% increase.

–       Digital movie rentals increased 9% in 2019.

–       Content purchases in both digital and physical forms (e.g., Blu-Ray + digital format) was $5.9 billion, a decrease of 18.2%.

–       Content rentals dropped 12.3% with physical content rentals down 19.5%.

–       Netflix disc rentals earned $301.2 million, compared to $250 million from traditional video rental stores.

–       Redbox made an estimated $884.6 million in 2019.

–       Variety reports that top-performing movies last year included Avengers: Endgame, Captain Marvel, Aquaman, A Star is Born and Bohemian Rhapsody.

–       Top TV shows last year, according to Variety, include Game of Thrones, Outlander, The Walking Dead and The Big Bang Theory.

2Checkout: 2020 Merchant Survey Results – eCommerce Trends to Watch

What eCommerce trends can we expect to see in 2020? A survey by monetization platform 2Checkout reveals some interesting insights for the year ahead. 2Checkout surveyed more than 1,200 countries around the world about their priorities, challenges and plans for the new year. Here are some interesting insights from the survey:

• 43% of companies surveyed will focus on customer experience, 32% will focus on brand building and awareness, and 31% are focusing their efforts on analytics.
• 40% of respondents said choosing the right technology is a top challenge, an increase of 14% compared to 2018.
• 61% of companies plan to increase their eCommerce budgets in 2020, while 15% will stay the same and 5% will reduce their budgets this year.
• How will they spend those budgets? 57% said SEO, 53% said paid advertising followed by 34% on social media, 20% on demand generation and 19% on content.
• In terms of automation, 70% will continue to use automated email marketing, 56% will utilize targeted social ad campaigns, and upselling and cross-selling will be used by 39% of survey respondents.

“It is no surprise that customer experience and personalization remain drivers in the upcoming year, as digital commerce becomes more competitive and sophisticated, this is a natural response. We are also seeing technological advances improve the experience for both the sellers, and the buyers, which we expect to persist. Finally, maintaining compliance, and dealing with regulations worldwide are aspects that vendors can easily relieve merchants of to a great extent, giving them additional resources to focus on growth and optimization,” stated Erich Litch, President and Chief Operating Officer at 2Checkout.

For additional insights based on survey results, visit 2Checkout’s 2020 Merchant Survey Infographic at 2Checkout.com.

Five on Friday Bonus: Job Opening

Marketing and Events Manager – Business Development
House of Kaizen
New York, NY

We’re seeking a Marketing and Events Manager to help make House of Kaizen a better place to work and a place that works better while building a community of subscription growth professionals.

Subscription businesses require subscriber-specific marketing expertise to acquire and retain customers for sustainable growth. As a dedicated subscriber growth firm, House of Kaizen develops and executes subscriber experience optimization programs that drive growth for some of the world’s best subscription brands.

We’re headquartered in New York City but the best talent comes from many places, and much of our team works from home with some travel. Our Marketing & Events Manager can live anywhere in the United States and will report to a Founding Partner based in the Greater Boston area. Read more about this job opening, including job responsibilities and how to apply, at House of Kaizen.