We’ve seen it so many times before: A new ad format catches people’s eyes, they pay attention and wonder what it is. Then they go back to ignoring it. It’s happened before with rich media ads, interstitials and so many others. Now it’s time for “out-stream” video ads that show up on web or mobile pages, within text, and just start playing.
The format sells itself as less invasive than pre-roll or mid-roll video ads, guarantees 100% viewability, and promises to be much more scalable than existing offerings. They only play when the user scrolls to the portion of the website where the advertising is embedded and lingers on that area for a specific amount of time. It seems like the ads work better than other video ads for now, but how long will that last?
Teads and Virool lead the charge With the demand for online video ads rising, yet a dearth inventory available with most publishers, ad-tech startups Virool and Teads have established themselves as pioneers in out-stream advertising. “Both companies have similar sales models,” the Wall Street Journal’s Mike Shields reported. “They sell ads to marketers directly and share revenue with publishers, or they allow publishers to sell the ads themselves, collecting a few dollars for each ad that gets delivered. Ad buyers can also buy these ads via automated software.”
Teads has raised $50 million in venture capital since it was founded in 2011 and reported 2015 revenue of $150 million. Virool raised $6.62 million in seed funding, and $12 million in its recent Series A financing. Collectively, their clients include top web publishers such as the Washington Post, Le Monde, USA Today and Mashable.
“Traditional publishers still have massive audiences flocking to their articles,” Sonja Kristiansen, Virool’s head of publisher development, told the Journal. “So what we are doing is unlocking video real estate on those pages.” She said that publishers are selling these out-stream ads at rates similar to in-stream ads on YouTube and Hulu — “$20 to $45 per thousand consumers reached.”
Beating other mobile ads Virool ads are also reportedly garnering ad rates “four times higher than typical mobile ads and 10 times higher than desktop ads,” Shields reported.
In-stream advertising on social media has already conditioned users to expect these sorts of ads, its proponents say, though out-stream advertising is not the same thing. “What I do not consider to be out-stream are placements within a feed—so Facebook, Instagram and BuzzFeed,” said Mark Book, VP of Digitas Studios. “I would consider this to be pure native in-feed advertising.”
And users engage with out-stream ads differently than they do ads on social streams, according to a recent study by Teads. Among its findings? Fifty percent of users surveyed scroll more on social media feeds and take in more content, but engage less with ads. Yet “23% of users were more likely to read content within premium articles than in social feeds,” as Adweek’s Marty Swant reported. Furthermore, “users spent 24% more time watching video ads within premium content on websites than they did watching video ads in social feeds.”
A problem fitting in But all is not rosy with out-stream advertising. Making these ads fit organically with its surrounding content is a challenge. Ensuring consumers don’t find these ads annoying is also an issue — no one likes video ads that take up a lot of bandwith, for instance. And since these ads play without sound at first, it’ll also take some convincing to gauge their value compared to other video ads.
Although certain alliances in the past year point to the growth of out-stream advertising — Rubicon Project has partnered with Virool, for example, and AppNexus has connected with Teads — some suspect that programmatic scaling will lead to bundles that include banner and pre-roll advertising anyway.
Still, both agencies and publishing professionals are optimistic. Seventy-seven percent of agencies worldwide, 70% of advertisers and 69% of media and publishing professionals have said that out-stream video ads will be important to the future of their advertising portfolios, according to a 2015 report from eMarketer.
Teads has also announced a new accreditation program for media buyers so they know the ins and outs of out-stream advertising. If marketers and publishers make sure they’re following their own insights and not just those of companies looking to champion out-stream, it’s safe to say it has a prominent place in the business — for now.
Our business is a mess … and seemingly getting worse by the minute. This is a sad statement but, unfortunately, more true today than it was a year ago or a year before that.
While many have stated their commitment to increased transparency, we seem to be moving in the opposite direction. While others have talked about efficiency, we are getting less efficient as an ecosystem by the day. Just about everyone talks about respecting consumer privacy as well as their experience, yet we continue to dig deeper and deeper into consumer’s habits without their permission and offer up a growing cacophony of misguided messaging despite these invasions.
From transparency to understanding
It really does not matter how we got to where we are; the unfortunate fact is that we are here. What matters is the how … and how fast, we can right the ship. I think the key is going to be less about transparency and more about understanding. For me this is a refinement of thinking because I’ve been advocating increased transparency for some time now. And, while transparency is a good thing on the whole, the more important issue in this situation is getting all the key players a better understanding of how the system is currently set up.
The saying goes that complexity breeds margin and to some extent that has proven true here; at least at the gross margin level. The bottom line is another issue, given the crazy estimates that AdTech companies are taking between 40 and 60% of every media dollar (depending on which study you look at).
What’s more efficient? Crazier still is what is being done in the name of efficiency. Consider third party data targeting, for example: Not only does this practice fail to work but it can lead to massive amounts of fraudulent impressions when done using open ad exchanges, which is really the only way to do it and get any scale.
Marketers looking for magic bullets are continually offered up bait and switch opportunities made palatable only because of the truly great performance of a small fraction of their buys. While other such efforts may achieve tolerable performance, this is hardly worth the byproduct of consumer adoption of ad blockers (in part to avoid the kind of tracking that makes these campaigns possible).
So sure, transparency will help in the sense that consumers will gain an increased understanding of when and where their data is being collected and how it is being used. But at the end of the day, without full understanding of the process by all the participants, it will be very hard to move our industry—and the state of digital advertising—to a better place. The self-interest of the middle is simply too overwhelming.
Learning our lesson
Of late, publishers—the supply side of the equation—have begun to get a better sense of what is happening but real change cannot happen without the marketers, the real demand-side also becoming much more learned about this new medium. (Let’s keep in mind that agencies and their trading desks are supposed to be agents acting on behalf of their clients.) Marketers need to be fully up to speed on what is happening, how it is being done and how it is doing on a granular basis.
The ANA’s recent efforts around this goal are to be lauded. They have worked hard to bring some very unsettling information to light in a highly charged environment. This kind of work is always hard and it takes great courage on many levels. ANA President and CEO Bob Liodice and his team are to be congratulated for what they have done so far and encouraged to keep at it.
As is always the case in free market environments, the folks with the initial dollars are the most important part of the financial ecosystem. I say “financial” because in general, the end-user really holds the most power. But unfortunately, educating end-users will take a lot longer than educating the marketers. Having said this though, one could argue that consumers have already begun to speak loudly with their aforementioned uptake of ad-blockers.
We have a truly amazing platform to work with. Digital media has so much going for it: It is incredibly flexible, it is interactive, it is not limited by form factor, it is multi-media and it should be extremely trackable. Unfortunately, as an industry we have done a lot to limit these assets. The fact that it still works as well as it does is amazing. Just imagine what it will do once we take the shackles off.
So let’s all do what we can to educate, well, everyone about the current state of the ecosystem. It is through this knowledge that the industry will find the right way to live with and deeply respect consumers while using technology and tracking in ways that allow marketers to use their dollars in more and more efficient ways. But beyond efficiency, increased understanding will lead to value being put where it should: With the outlets that generate the most consumer involvement and provide the best environments for messaging rather than a wide and growing group of “platforms” and other third parties that hijack the engagement of the media properties and also the trust of the consumer in the name of efficiency.
In our world of eye-popping stats, John Herrman recently shared a new one from a Morgan Stanley analyst that shakes the wobbly legs of the digital media industry in this New York Times column: “In the first quarter of 2016, 85 cents of every new dollar spent in online advertising will go to Google or Facebook.” Industry sources quickly tried to discredit this number as way too high even though for years many, including DCN, have noted overall market consolidation with this IAB/PWC report tracking the top ten’s growth from 70% to now 75% of the market.
But 85% to only these two companies?
Well, last week, IAB/PWC also released its quarterly U.S. advertising report, which was quickly followed by a “groundhog day” press release from the IAB, the industry trade group for the advertising sector, announcing the rapid rise of digital ad revenue. The Report notes that first quarter U.S. internet ad revenues hit a record-setting high after the highest growth in four years hitting a “21% rise over the same time period in 2015.” We don’t dispute this number. We just think it’s important to highlight that only two IAB members are benefitting from this increasingly lopsided ecosystem.
Using Facebook and Google’s public earnings, it’s very simple to back into the math. The table below illustrates the estimated U.S. ad revenue growth for Google, Facebook and what I affectionately like to call “Everyone Else.” These calculations show nearly 90% of the growth going to the two companies. If you’re in the “Everyone Else” group, you’re competing for $300 million of the $2.7 billion in Q1 growth.
Stop and let that sink in for a minute.
It seems the only other ways money is being made in the digital advertising ecosystem is through:
Intermediaries who capture 55% of the supply chain according to IAB research on the “Ad Tech Tax” that marketers are funding;
Fraud, which according to the ANA, results in more than $7 Billion per year being dislocated; and
Other shenanigans, which the ANA reported on last week in its groundbreaking Transparency Report.
And whether we like it or not, no discussion of ad revenue is complete without factoring in ad blocking. I want to once again applaud the IAB for bringing together its members last week to discuss user experience issues in light of ad blocking. I was pleased to be able to listen through the entire day and appreciated that most of the agenda was filled with DCN’s premium publisher members. Because DCN’s members depend on trusted and direct relationships with consumers and advertisers, our members are often closest to the value exchange with the consumer and to the impact from the installation of ad blockers across the web.
Senior strategy executive Mark Frost of Strategic Ink, opened the event by sharing the key findings from a recent IAB, 4As and ANA workshop. Most important was the self-awareness about the failures of ad tech, retargeting and unbridled data collection that often doesn’t serve the consumer. As we’ve written many times, the fact that digital advertising consistently ranks as the least trusted form of advertising speaks volumes. And, it is interesting in light of the revelation that Google and Facebook have a near-monopoly on digital advertising, that a recent report from Wells Fargo Securities and Optimal showed that consumers trust Google and Facebook least of all with their data.
This brings me to my final point. Princeton released research last month showing that Google and Facebook together account for all of the top ten third-party data collectors across the web. The impressively-credentialed researchers Arvind Narayanan and Steven Englehardt wrote, “In fact, Google, Facebook, and [their increasingly poor cousin, my words] Twitter are the only third-party entities present on more than 10% of sites.” It’s worth noting that Twitter is the only one of these three companies to publicly honor Do Not Track.
Google alone owns all of the top five third-party domains across the top one million websites. In the words of Harvard Business School Association Professor Ben Edelman, “No other firm engages in even a fraction of this tracking.” Importantly, his comment came in a filing of concern about the FCC opening up the set-top box business. While there are consumer merits to the FCC’s position, there is also significant concern we’ll be lowering the privacy bar so that Google and others can spoil another ecosystem with tracking and copyright issues. And this at a time when all bars need to be raised to protect consumers and the content they often enjoy for “free”— that is, at the cost of their time spent viewing advertising.
All of this information is vital to understanding the dynamics around data ownership and ad blocking — two complex issues which will impact our ability to evolve and improve the web we want as an industry. Facebook, due to its closed platform, and Google, due its dominance in browsers, ad tech, search and advertising, will have a large seat at nearly any industry or regulatory table discussing critical issues. So we urge the industry to keep your eyes wide open. Lax rules around data collection and use and incomplete solutions to ad blocking may very well play into their hands as they angle to swallow up that last 10%.
Notes and References
1Google 2016 1st Quarter Earnings Report – estimated based on reported total U.S. revenues x 90% (percentage of Google revenues represented by advertising).
The Internet of Things (IoT) continues to build traction and gain ground as the leading force in connected ingenuity. Nowhere was this more apparent than at TU-Automotive Detroit 2016, a recent automotive industry expo and conference that centered on the connected car.
The leading enterprises in the tech and auto industry showcased their concept platforms and concept cars all geared toward accessing more and better data while driving. Though participation was international, the show could be seen as the pinnacle of an American ideal – with each user’s vehicle representing their autonomy as an individual and all available cloud-based data as new horsepower to help drive their daily lives.
With each new device and implementation, IoT continues to fire users’ imaginations and build momentum, but there has been a dynamic shift in IoT, one which lends not only speed but also trajectory. Perhaps we are even defining a destination – from high-velocity data to useful and user-friendly information, all by applying greater context.
Context is King Recently, Google introduced the new Android Awareness API, which brings together all of the data drawn from the sensors on mobile devices to provide the clearest picture of the user. The API will offer data from seven signals including time, location, places, beacons, headphones, activity, and yes, weather.
What the API offers is the “next big thing” in IoT – contextual relevance.
Now content publishers and their advertisers continuously strive to find new ways to offer just the information users need when they need it, all driven by greater temporal and geographic resolution. With better practices for aggregating and parsing available data, we can now not only tell where users are, we can tell how fast they are traveling. We can tell based on their rate of travel whether they are walking, biking, or driving and even build a sense of what they are doing and where they might be going. Needless to say, this information goes a long way toward delivering on that objective:
If the user is driving on the highway between New Jersey and New York, it may be relevant to tell them about the road closure 25 miles away. Much more relevant than if they are walking down the street in Minneapolis. If it happens to be cold and flurrying snow, we might want to remind them about hot coffee available in the next ten miles.
What we are moving toward is a generation of user-friendly devices that provide information on a predictive basis. Publishers and advertisers can provide content relevant to not only where the user is but also where she is headed, which cuts out the static of unnecessary data and creates a better experience.
Forward Looking Solutions
At the TU-Automotive Detroit show, AccuWeather demoed a concept with NNG for a state-of-the-art connected car with AccuWeather’s MinuteCast Along A Route™. The map-based minute-by-minute forecast shows forecasts with Superior Accuracy for every step of their trip. This new level of personalization will help users make decisions about when to keep driving and when to take breaks to avoid severe weather – saving time, keeping users safer, and providing an extra level of peace of mind.
In this connected car concept, we can tell not only where the user is but also make educated guesses about where the user is going and how fast they are traveling based on changing locations. That way we can provide warnings on dense fog or slowed traffic 50 miles away – warnings which would not be useful to someone making a ten-mile crawl into a metropolitan area for their morning commute.
Of course cars offer a pretty flashy context for this concept. However, the same idea of greater temporal and geographic resolution can be applied to other implementations, such as wearables. Each device has the opportunity to add its own unique information to the overall visibility into the user’s actions, often provided directly by the user:
If a user is wearing her brand new Samsung Gear Fit 2, she is able to track her activity on a regular basis and volunteers that information. The user is also getting regular forecasts and alerts from AccuWeather, so we know what kind of exercise she’s interested in and can help her stay out of the rain while doing it.
Of course, with all this data anonymously aggregated these connected devices are opening new possibilities for big data driven studies, like the one we did with Withings which correlates weather and levels of activity for major cities across the world.
Reaching the Goal for Publishers Users may be daunted by this rush of new data that’s being collected; Enterprises could be similarly stunned by the sudden range of feedback that can be collected and correlated by users to the publishers and device manufacturers. While there are serious considerations such as balancing user experience vs. user privacy (AccuWeather addresses this by anonymizing all user data), you need to keep moving forward so that you don’t miss out on massive opportunity.
Whether your content is news and entertainment or transactionally based, the same principles of knowing your customer better, providing your content or service in a more relevant way, and building stronger relationships and opportunities for you and potential advertisers apply.
Each new form factor and device seems to present a new set of available data. Google valued whether the user was wearing head phones enough to make it one of the seven parameters for its Awareness API, which is logical since it says something about what the user is doing and how they can be approached. Particularly relevant information since voice command is opening up new types of IoT implementations an innovators like AccuWeather partner SoundHound are making that possible for just about any connected device.
With the proliferation of IoT devices, comes the challenge of coding your content for so many platforms. But what could be viewed as audience fragmentation is really a broad opening up of a ubiquitous global audience that can build a relationship with a savvy brand that is able to consistently deliver valuable content with context that would have been unthinkable ten years ago.
Whether your audience is wearing your data on their wrists, around their necks like headphones, or listening and interacting through speakers, you will have a better idea than ever of what they need and how and when to deliver it to them.
Of course, a trusted brand and quality content will always stay in style. You can already find the world’s most trusted, accurate forecasts from big weather data leader AccuWeather just by looking at your smart TV app, glancing at your refrigerator display, or talking to your wireless speaker. Or smart home center. The data has become as plentiful and varied as the people who use it and the possibilities are enormous.
In David’s role as Vice President of Digital Media, Emerging Platforms, he is responsible for AccuWeather Inc.’s suite of universally-accessible mobile and connected products within the emerging platforms marketplace. He spearheads the integration of current and new weather data sets within emerging platforms – including smartphones, tablets, connected TVs and appliances, wearable devices, smart cars, and smart homes.
We live in a visual world. To make a story or campaign compelling, visuals or video are absolutely essential. In fact, it is commonly cited that the brain processes images 60,000 times faster than text. People are captivated by short, instant bursts of content—even content that disappears after a few seconds like Snapchat.
Platforms like Pandora and Vine offer bite-sized video content with homegrown, organic videos that go viral in a matter of days. Recently, Pepsi announced a collection of five-second ads designed to to gratify millennials. Pepsi plans to make 100 different ads for TV and digital this summer to promote their new emoji-themed bottles. And YouTube will soon show 6-second “Bumper” ads before videos, which cannot be skipped.
The market for online video has evolved immensely. When online video first launched, brands re-purposed existing 30 & 60-second TV commercials. The ads looked more clunky, required click-to-start, and didn’t assimilate with the surrounding content.
Instant gratification has become the norm—with advertisers and publishers adapting to meet the consumption behavior of today’s shortened attention span. Video ads are easier than ever to consume with the broad installation and access to broadband on desktop and mobile. Shorter videos ads have higher viewability and completion rates since the content is near instant. In effect, shorter ads may be more successful since consumers are more likely to watch the ads and remember the advertiser.
Today, online video ads are custom-created for each channel, the ads auto-play and compete for attention with a surplus of surrounding ads. Eighty-five percent of online video ads are un-skippable. MediaRadar found that almost all of the video ads (98%) that run less than 10 seconds are un-skippable.
According to MediaRadar data, there were over 1,100 new video advertisers in Q1 2016 alone who didn’t place ads in 2015. Online video is a key driver in digital ad spend with $9.6 billion predicted ad spend for 2016. In 2015, $1.5 billion dollars shifted from linear TV to digital. And yet there remains ample opportunity to grow. Only 10% of TV advertisers bought online video ads in Q1 2016.
Publishers are constantly innovating and introducing new products or ad offerings too. From premium page takeovers to YouTube’s new Breakout Videos that will highlight the fastest-growing videos as an indicator of viral potential.
Todd Krizelman is Co-Founder and CEO of MediaRadar (@MediaRadar). Growing up near the epicenter of technological innovation in Palo Alto, California encouraged him to become an entrepreneur and co-found of one of the world’s first social media sites, theGlobe.com. Krizelman also held leadership positions at Bertelsmann’s Gruner + Jahr and Random House. With his expertise in ad sales and innovation, Krizelman joined veteran web architect, Jesse Keller, to found MediaRadar in 2007.
Each year, analyst Mary Meeker — a partner at the Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers — releases her massive Internet Trends report, with businesses scurrying to take advantage of her insights into what’s hot and what’s not. This year, Meeker released the report while at the Code Conference, for maximum high-level impact. There’s a lot to chew on, but here are the most important trends for content creators and online publishers.
Google, Facebook Dominate; Mobile Undersold While U.S. Internet advertising is growing, Google and Facebook remain the dominant platforms for selling advertising on the Internet. The two platforms collectively control a 76% share of the growth in U.S. online advertising, Meeker noted, using numbers from last year’s IAB/PwC Advertising Report. All others besides Google and Facebook saw growth of 13% in online ads in 2015.
On another front, advertising growth has yet to actually reach its full potential because marketers aren’t spending enough on mobile. As Wired’s Davey Alba wrote, “They’re still committing too many of their dollars to so-called legacy media.” As such, the $22 billion that is spent on mobile advertising in the U.S. is a tiny amount of what it should be, according to Meeker’s report. Indeed, only 12% of all advertising right now is mobile. While this presents a boon for content created or optimized for mobile, it’s also a huge risk and concern for traditional media players, as Larry Downes wrote in the Washington Post.
One big hurdle for mobile is the rise of ad-blocking. Four hundred and twenty million people around the world are now using some form of ad blocking software on their mobile phones, according to PageFair. When looking at the reasoning behind the rise of ad blocking, including privacy concerns, the onus is on publishers and marketers. They must not only appeal to consumer behaviors, but also to their aesthetics and feelings of what good advertising should be. Advertising on Snapchat, for example, is in part successful because it’s short, sweet and integrated into the platform seamlessly so that it’s part of the user’s natural experience. (And it’s outside the realm of ad-blocking.)
Messaging and Visual Communication Rising Among Millennials and Generation Z, visual communication is king. As Recode’s Noah Kulwin pointed out, “People worldwide shared almost twice as many photos in 2015 as they did in 2014, and almost half of that happened on a service owned by Facebook.”
And whether it’s a photo, video or live-stream — such as Candace Payne’s viral Facebook Live video trying on a Chewbacca mask — advertisers can very much take advantage of the sharability of visual communications. Take the Candance Payne example, as Larry Downes wrote in the Washington Post: She mentioned Kohl’s department store twice in her video — and that video was viewed more than 150 million times in one day. In turn, the company’s app leaped to the top of the charts in the iOS App Store. If user-generated video can redefine advertising in such a way, expect more videos with branded content.
And when it comes to messaging apps, that means commerce communication is officially entering the fold. “Messaging apps are continuously becoming the second home screen,” Meeker said during her presentation. If the best way to connect with Millennials — now representing 27% of the population, with a spending power that’s going to rise — is on messenging apps, then that’s the natural destination for advertisers. The rise of voice-recognition software on these apps also means that the commercial applications can’t be ignored. Perhaps dictating the purchase of a product via speech on a messaging app may not be far off.
Global Internet Growth is Slowing — Except for India Global Internet growth is slowing, except for India, where user growth is actually accelerating at 40%. India has now surpassed the U.S. to become the second most connected population after China. With more Indians purchasing mobile phones — which will be the entry point for the majority of Indians accessing the Internet — the potential for publishers and advertisers in this space is huge.
India then serves as an interesting case study through which marketers can better understand how to target new Internet users. As Meeker discussed during her presentation, new Internet users are becoming increasingly harder to find because they come from poorer, developing countries, where the cost of a smartphone is a significant portion of a person’s income. The cost of a smartphone in India is relatively low compared to other countries, however, so it would behoove advertisers to capitalize on this market potential.
New York Times President and CEO, Mark Thompson addressed the IAB Ad Blocking Summit, held June 6, 2016 in New York City. In his talk, An Update from The New York Times on Its Approach to Ad Blocking, Thompson took a hard look at the factors contributing to the rise of ad blocking and urged the entire industry to take responsibility for fostering a climate in which digital advertising degrades the user experience and fuels the adoption of ad blockers. Through the lens of The New York Times experience, Thompson provided insights into productive and proactive steps that digital content companies – and the entire industry – can take to address ad blocking.
Below is the full text of the talk he delivered:
Mark Thompson, President & Chief Executive Officer, The New York Times Company
Thanks Randall [Randall Rothenberg. President and CEO of the IAB].
I want to make five points this morning. The first is that we have to clean up our own act as an industry.
To a significant extent, the root cause of digital ad-blocking is digital ads and the way many websites deploy them on their sites.
Too many ads. Intrusive and distracting ads. Ads which slow page-load to a crawl, or are slow to load in and of themselves. Boring and uncreative ads, which no user can possibly enjoy viewing. ‘Relevance’ –if it means endlessly retargeting users with ads for something they searched for and bought or lost interest in weeks ago. The pervasive and indiscriminate tracking and sharing of user data.
We’re not all equally guilty. At The New York Times, we’ve kept the number of display ads on the page low. We’ve worked hard with our advertising partners to develop campaigns that are creative and compelling. We’ve developed new units and ideas – like Flex Frames which we launched last year as Mobile Moments on smartphone and which we’ll extend to all platforms this September.
But we shouldn’t kid ourselves. If a user installs an ad-blocker because of unacceptable ad experiences somewhere else then, guilty or not, we still face the challenge of persuading them to uninstall it or, more plausibly, to whitelist us so that their ad blocker allows our ads to load. Our first task as an industry is get rid of the bad experiences which make that whole tricky process necessary.
And our second is to develop and promote digital advertising whose originality and quality engages and delights users and, because of that, also delivers real results for advertisers.
In a world of phones and feeds, marketers need to think like programmers rather than as traditional advertisers, not trying to steal attention which is directed at something else, but offering consumers content which actually has value to them, in the right context and user-experience.
Our branded content business at The Times is all about that – creating and distributing high quality programming for marketers. It didn’t exist in 2013. It delivered more than $13m of revenue in 2014, and $34 million in 2015. We expect it to grow very substantially again in 2016.
For us, branded content does not mean fake journalism trying to pass itself off as genuine newsroom output. It’s work like the animated virtual reality film we made for GE for the launch of our VR app and the distribution of a million Google cardboards. High quality content well worth consuming in its own right.
And it’s not just about branded content; we’re also focusing quite a bit of energy on making display advertising better. Fewer, faster ads, delivered at the pace of mobile and more compelling at the point of discovery, where the user first sees the ad. Clearly labeled but an integral part of the main news feed, on both the phone and the desktop. Bigger, punchier units that provide a better canvas for creativity.
Third, we must do a much better job of explaining our business model – and the connection between advertising revenue and high quality content – to our users.
Let me talk about The New York Times first, then turn to digital publishing as a whole.
At The Times we have two big revenue streams in both print and digital: subscription and advertising. In print, where we make around $1 billion of revenue a year, the proportion is currently about 60/40, with $600 million coming from home delivery subscription and newsstand sales, and $400 million from print advertising. In digital, at present it’s more or less 50/50.
Our digital news subscription business is the largest and most successful in the world and it’s still growing rapidly. In the first quarter of 2016, we added 67,000 net new subscriptions – that’s more than we did in any of the three previous years. Our model is accelerating, in other words.
But delivering national and international journalism to the quality to which The Times aspires and our users expect means massive investment. We believe we can grow our digital subscription business until we have many times the current number of subscription relationships, which across print, digital, news and crosswords stands at around two and a half million. We do not believe that we will ever be able to sustain Times journalism or The New York Times as a flourishing business without an advertising business of real scale.
We need to spell this out clearly to our users. The journalism they enjoy costs real money and needs to be paid for. Advertising is a vital part of the revenue mix.
Everyone knows and accepts that physical newspapers cost money to produce and that someone who steals a copy of a newspaper from a newsstand is a thief. That’s not a word I’d use of those who install ad blockers – the Internet has left many people with the erroneous impression that digital high quality content doesn’t cost anything to produce – but there are some awkward facts to be faced.
If you consume great journalism without making any contribution towards paying for the journalists and the editors and photographers and videographers and graphics artists and engineers, and if enough people follow your example, that journalism will either be diluted or restricted to the relatively small number of people who have the willingness and ability to buy a subscription. And not just you but everyone will be impoverished as a result.
We want our journalism to be widely available and for non-subscribers as well as subscribers to be able to sample large amounts of it. Of the around 110 million people who come to us each month, more than 107 million are not subscribers. If ad blocking becomes ubiquitous, that kind of free reach will no longer make economic sense.
We believe in the civic value of our journalism and we want it to be widely read across America and the world, but not if that undermines our ability to continue to produce it.
No one who refuses to contribute to the creation of high quality journalism has the right to consume it. We are not there yet but, if we judge that it will strengthen the long-term prospects of that journalism to prevent non-subscribers who employ ad blockers and refuse to whitelist us from reading it, we’ll do it.
But if this is a real issue for us, consider those publishers who do not have a digital subscription model and who are entirely reliant on digital advertising, to replace falling print revenues in the case of legacy companies, and for the whole of their revenue in the case of digital ones.
I don’t need to tell anyone here that digital advertising is going through a wider disruption with the astonishingly rapid switch of consumption to smartphone, the decline of standard web rotational display, the power of the major social and search platforms and so on. My friend Shane Smith talked recently about a likely bloodbath among advertising-dependent publishers this year. I’m British and I find the word ‘bloodbath’ a shade melodramatic – especially from a Canadian – but I agree with Shane’s analysis.
This is why proportionate but meaningful industry-wide action on ad blocking is so important.
So put my first three points together and think of them as a potential new agreement between publishers and users. We have a responsibility to work with advertisers to deliver rich, enjoyable, valuable ad experiences, and to use and pass on data about their visits to our sites fairly and transparently. They have a responsibility to contribute to the economic sustainability of quality content creation.
In the end, free riding will not just damage us and the wider public realm. It will damage them.
Let’s now turn to my fourth point, which is a practical one. There is early but encouraging evidence that a significant proportion of users will respond to clear messaging about ad blocking and the threat it poses to quality content.
And that point is grounded in a basic idea that has become a requirement of digital business: when you empower your customers by providing them with choice, good things can happen.
Over the past few months, as part of a wider program of experiments and surveys, we’ve tested both dismissible and undismissible messages about ad blocking. Both sets of messages sought to explain to users who had installed an ad blocker the connection between advertising revenue and the journalism they wanted to consume.
With the dismissible messages, the user could click and close the message and go on to read the story they had come to The Times for in the first place. undismissible messages prevented users who got them from reading the journalism at all, unless they agreed to whitelist us in their ad blocker.
We tested both dismissible and undismissible messages with non-subscribers. You won’t be surprised to hear that, at least in these limited tests, undismissible messages were much more effective than dismissible ones. Indeed, more than 40% of those who encountered the undismissible message agreed to whitelist The Times.
Times subscribers are already making a significant contribution to the funding of our journalism, so we think of them very differently. We did not put undismissible messages in front of these valued paying customers. But we did try dismissible messages – and no fewer than 30% of the ad blocker-using subscribers we tested agreed to whitelist The New York Times.
We’re still testing and analyzing, but even at this early stage we have confidence that – if we decide to move in this direction – we will be able to convince many of those who use ad blockers to whitelist us so that ads still load on The New York Times site. It may be that, in both cases, the percentages of those agreeing to whitelist would grow over time – though we also recognize that some ad blocking non-subscribers, who are repeatedly confronted with such messages but who are unwilling to whitelist, might give up using our site altogether.
That would be a pity, but neither they nor we can have it both ways. It’s not fair to continue to consume something you’re not prepared to support in any way. As for us, in principle we don’t want to stop anyone from sampling Times journalism, but we also have to accept that someone who won’t subscribe or look at ads doesn’t help us succeed in any way at all.
But we do want to offer all of our users as much choice as we can, and we recognize that there are some users – both subscribers and current non-subscribers – who would prefer to have an ad-free experience.
So we are also exploring the possibility of offering a higher tier digital subscription offer which would allow users to enjoy Times journalism without seeing advertisements, while still making a fair contribution towards its creation.
My fifth and final point is that – although we recognize some of the frustrations that have led users to adopt ad blockers – there are technologies and practices associating with ad blocking which are unfair and deceptive. We intend to push back against them and we want to encourage the rest of the industry to do the same.
We are particularly troubled by the business model of some of the largest ad blockers who whitelist advertising in return for payment, thus effectively requiring digital publishers to pay in order to receive advertisements to their own users – including advertisements which are, by anyone’s definition, non-invasive.
The largest entity engaged in this practice is the private limited company Eyeo, which owns both the leading desktop ad blocker, Adblock Plus, and the so-called Acceptable Ads whitelist, which seeks a 30% of revenue from any firm that generates more than 10 million unblocked ad impressions a month as a result of appearing on its whitelist.
This is a manifestly unsavory business practice. Ad blockers often portray themselves as an answer to unsatisfactory digital advertising experiences. But Eyeo wasn’t founded by concerned citizens. It was founded by a digital ad veteran and represents the most cynical, most money-grasping end of the old unreformed digital ad business. We need to expose Eyeo, Adblock Plus and the Acceptable Ads whitelist, so that the public can see them for what they are.
Unlike most of the other ad blockers in the marketplace, Eyeo is not attempting to limit tagging to protect privacy – they permit trackers to pay to be included in their Acceptable Ads programs.
Eyeo’s secondary line of business has been to license the “Acceptable Ads” whitelist to other ad blockers, including some smaller mobile ad blockers. The second largest ad blocker, Ad Block, which was sold in October to and unknown buyer, also uses Eyeo’s Acceptable Ads list.
We want to encourage other publishers and counterparts throughout the industry, and the organizations which represent us, to be trenchant in publicly confronting ad blockers who engage in these coercive and misleading business practices. Recently, we have joined with other publishers in the NAA in filing a complaint with the FTC to investigate certain deceptive practices of ad blockers.
It is not just publishers who are vulnerable to these trade practices, and we encourage our partners across the industry to seek out opportunities to oppose them.
Five points then:
We have to clean up our own act as an industry.
We must develop digital advertising which is valuable and a pleasure to consume.
We must make sure our users understand the link between ad revenue and high quality content.
There is evidence that many users will respond to the right messages about ad blocking.
We must fight the unacceptable and deceptive business practices associated with some ad blockers.
Ad blocking is undeniably a challenge – I wouldn’t have said what I have this morning if it wasn’t – but let me finish by putting it into perspective.
We’re still certain that digital advertising will play a critical and positive role in our future success. As you’ve heard, we’re pivoting our ad business towards less intrusive, leaner, inline display; branded content; bold new smartphone executions, video, virtual reality and other kinds of visual storytelling. We believe that right now we’re offering our users the best digital advertising experiences in the history of digital publishing.
We’re already seeing tangible results – revenue from smartphone advertising, for instance, grew 149% year over year in the first quarter of the year – but the best is still to come.
So let’s take firm action on ad blocking. But let’s also unlock the full creative and economic potential of our ability to bring great content, great users and great creative advertisers together. Thank you.
Dueling studies aside, the Pew research team took a long look at people’s smartphone reading habits. Conventional wisdom suggests that we want to just dip in and out on our phones: We might review headlines, but we won’t do much more.
In fact, the Pew study found the opposite is true. We spend almost twice the amount of time reading long articles — 123 seconds for long form versus 57 for short — and long and short articles get almost the same number of visitors. (ForthepurposeofthestudyPewdefined long form as over a 1000 words and short form as 101-999 words. And lest you question the methodology, Pewclearlyputinthework.)
“All told, Center researchers spent months digging deeply into the details of 117 million anonymized, complete cellphone interactions with 74,840 articles from 30 news websites in the month of September 2015,” according to the research organization
My gut response to these findings would be, Duh! Of course people spend more time on longer articles than shorter ones — because they’re longer. But the fact we are reading these long articles on our smartphones at all is news in itself because it flies in the face of our preconceived notions of how we interact with content on our phones.
Julia Beizer, who is director of product at The Washington Post told Digital Content Next in a recent article, There‘smorethanonewaytosucceedatdigital that research suggests our smartphone usage might vary more than we believe.
“One of the early misplaced assumptions around mobile was that mobile users are standing in line waiting for coffee. A lot of people are doing that, but a lot of people are on their couches at home too. Research shows upwards of 70 percent are at home,” she said.
We are also on long flights and commuter trains and other places where we are captive and have a lot of time to kill with our phones in our hands. It makes sense that we would be using our phones — which are getting bigger and higher resolution screens — to do more reading.
But a single study doesn’t necessarily prove anything, even one as comprehensive as this one appears to be. That said, there are plenty of long form content initiatives that seem to be capturing their share of attention.
Last year the Huffington Post without the benefit of this study tookaleapoffaith and launched Highline, a long-form article site designed to let writers and readers dig into a story instead of getting a short, high-level view. Ayearlater, while the editors aren’t sharing their numbers, they’re still around and they claim it’s been a huge success and the articles on Highline are among the most read on the Huffington Post site. It suggests that when you produce quality work people will read the articles, no matter how long they might be or on what device they might be reading them.
What this all means is the attention studies could be wrong or at least misguided. Certainly, we lack patience. Wewon‘twaitaround if your content is taking too long to load, but it is important not to confuse that lack of patience (or the expectation of a good mobile experience) for short attention spans.
This is a big lesson for digital content creators, whether writing an article, creating content marketing pieces or writing website copy. If you write good stuff, you can keep people engaged regardless of the length. And given that time spent is increasingly being touted as the true measure of engagement, understanding the value of long form content is essential.
There‘stonsofotherdata in the Pew study including the impact of social media to drive traffic, the topics people like most (crime is big), the days and times we are more likely to engage with content and so much more. It’s worth digging into, but if your only take-away is that we will read an article whatever the length if it’s good enough, that’s more than enough.
