Category results for "Revenue"
Who’s winning (and losing) the online video boom?
As the NewFronts wrapped up, there was a growing feeling that online video wasn’t just a precursor to the Upfronts and broadcast that were coming next. The NewNew Fronts are becoming the main event.
Traditional TV networks are losing their audiences as competition from non-linear, streaming programming is rising — everything from Netflix and Hulu to Facebook and Snapchat. Digital ad spending overtook TV ad spending for the first time last year ($71.6 billion versus $71.2 billion, respectively), according to eMarketer. A new report commissioned by the IAB found that spending on ads around original digital video programming has doubled in the past two years.
These inescapable trends are creating a new frontier for publishers trying to reap the benefits of the video ad boom. Broadcasters and newspapers are trying to figure out how to allocate more resources for video, while digital-native publishers try to keep up with demand.
With that in mind, here’s a rundown of some of the winners and losers in the online video explosion.
Winners
Comcast
NBCUniversal, the digital offshoot of the traditional broadcast network, earns major points for having invested $500 million in Snap (think long-term, not just the first earnings report!), $400 million in BuzzFeed and $200 million in Vox, thereby creating partnerships that benefit both traditional and new media players. When Conde Nast joined the NBCUniversal and Vox Media advertising network, the digital conglomerate announced it’ll reach 200 million consumers online, including 99% of all millennials in the U.S. And these three entities are together developing two new ad products around mobile video and branded content.
If there is a behemoth winner in the house, it’s surely Facebook. The world’s largest social network has pushed its news feed to prioritize video, and publishers have to post videos there if they want to reach Facebook’s nearly 1.3 billion daily users. Recode’s Kurt Wagner reported last month that Facebook is planning to pay publishers to create more produced video on the platform, to help push its new mid-roll ad products (the new deal will replace the one Facebook struck with publishers last year to use Facebook Live).
Facebook will offset the cost of paying publishers by earning the money back from the mid-roll ads, and then splitting whatever revenue remains with the publishers. While some publishers are hesitant to embark on such a deal with unproven benefits — no one knows how the ads will fare yet, and earning returns on Facebook video has long been a frustration for publishers — many others will give it a shot.
YouTube
Like Facebook, Google’s YouTube is riding the benefits of the online video boom. YouTube may have stumbled earlier this year when advertisers found their content showing on extremist videos, but it’s still the world’s most popular video destination. And now the world’s most popular video website is planning to produce six different ad-supported original series and develop more than 40 original shows and films over the next year. It’s also investing more resources into its ad-free subscription service YouTube Red (and the YouTube TV skinny bundle), pushing YouTube into a tier of competition that includes Hulu, Amazon Video and Netflix.
Google earned more than $24 billion in advertising sales in the first quarter — more than that of the entire TV industry – even in the face of boycotts over brand safety. The tech giant is betting on high-profile YouTube stars and celebrities to bring viewers to these advertisers, and has made changes to improve controls for advertisers. If it continues to cultivate a wide audience around its original programming, it can certainly demand higher rates from advertisers even in the face of setbacks.
New York Times
The Gray Lady may have been a late bloomer to the digital boom, but its adaptation strategies are certainly catching up. Its subscriber growth is the highest its been in its history, thanks in large part to the post-election bump — as well as wise investments on digital offerings. If you haven’t noticed, many articles online now feature video content alongside it. In February, the Times announced it’ll feature fresh daily content on Snapchat Discover. Alongside pushing VR video as an editorial decision, it’s also been publishing VR branded content.
And at this year’s NewFronts, the Times announced “Times Story[X],” which will launch this summer and serve as a powerhouse for creating strong visual, technologically forward narrative journalism that both the newsroom and its marketing unit T Brand Studios can use.
Losers
Traditional TV networks
The four major broadcast networks lost 8% of their audiences this TV season, adding to a four-year trend of declining TV ratings. TV networks have also increased their ad prices in these last four years in an effort to offset declining viewership — which doesn’t necessarily bode well for marketers. The ad-buying agency Magna has announced it’s shifting $250 million of its budget originally allocated for TV toward YouTube.
The Walt Disney Company, which owns the ESPN cable network, missed its revenue target this past quarter and announced in April it’s laying off 100 people to cut costs and better adapt itself for digital distribution. Time Warner and Viacom have also reported that second-quarter advertising revenues are likely to decrease. It’s no wonder: Viacom’s MTV, once the go-to network for younger audiences looking for information and entertainment catered to especially for them, is losing its viewers to Snapchat and YouTube.
Advertisers sticking to TV (and not diversifying)
Advertisers know that they can guarantee audience reach with the time they have with television advertising. Traditional TV has also benefited from the brand safety issues marketers have faced when their content has inadvertently popped up against extremist propaganda on YouTube. Networks touted their reach and reliability for serving up mass audiences, in a New York Times story, but they also face tough competition from targeted ads on social platforms and the explosion of choices on streaming services. But it’s still a question of when, not if, those ad dollars will move to digital video.
In the end, the winners of the video boom will be those publishers, platforms and brands who embrace the power of video, but make sure it fits with their mission – and serves their intended audience. Native video publishers like NowThis and Hulu might have an advantage, but legacy publishers and broadcasters still have a chance to shine if they can evolve quickly.
Email newsletters connect with core audiences
In a time when the email channel is becoming increasingly clogged, you would think email newsletters would take a back seat to other forms of audience interaction. But just the opposite seems to be happening as media outlets see the newsletter as a way to communicate directly with their core audiences. Email newsletters are popular and proliferating.
Perhaps this trend is being driven by the success of newsletters like The Daily Skimm, an email-only news briefing delivered every morning with a colloquial tone that treats the news with a sense of humor and gives you what you need to know in an entertaining fashion. Regardless, every major media outlet seems to offer a variety of newsletters. These are often segmented into subjects like finance, politics and sports, full of links and information, and designed to provide the core audience with details tuned specifically for them.
A little something for everyone
Newsletters remain popular because they deliver value to both the audience and the producer. The audience gets the information they want delivered straight to their in-boxes, often tailored to their specific interests.
The publisher gets something valuable as well. While interacting with people who clearly like your media outlet and the content you produce, you also get to own the information about your readers, says digital strategist, Jacqueline Boltik.
“For newsletter producers, having an email newsletter is smart because it’s the only way to really own your audience online. Ultimately Facebook owns your Facebook fans, Twitter owns your Twitter followers. Building your digital base anywhere other than email is like building a house on rented land,” she said.
She says beyond owning your audience data, there are many other reasons to offer a newsletter. These include driving traffic, monetization, and the ability to leverage your email data to strengthen your digital strategy on other channels.
Building connections to your audience
While the data certainly has value, a newsletter is much more than simply a data collection exercise. It’s also about building a strong connection between your audience and your publication, and in some cases to your journalists or other content creators.
“The best newsletters feel personal. Even though email is one to many, it feels one to one. In general, the more you can make your newsletter feel like it’s from a person while still fitting in with your brand, the better your newsletter will be received by readers,” Boltik said.
Quartz publishes a newsletter called the Daily Brief that it sees as a key way to interact directly with some of its most avid readers. “For audience engagement, it’s immensely valuable. Daily Brief subscribers are among Quartz’s most fervent and dedicated readers, and they’re also what advertisers consider to be a “premium” audience. About half are senior leaders at their companies,” Mia Mabanta, Quartz’s executive director of product and brand marketing explained.
Beyond that, Andrew Golis, general manager of Vox Media’s news brand says that newsletters provide a way to understand the news from a trusted source in a world where social media is bombarding us with stories. “We’re all more and more overwhelmed. As consumers, newsletters allow us to connect to a curator and analyst we trust. We get a finishable wrap-up of what’s important to pay attention to and why.”
The value proposition
You would think that driving traffic back to the site would be another primary goal, but publications don’t necessarily see it that way. Email newsletters build and maintain brand loyalty with core audiences—which is valuable in the long term. If they drive traffic, that’s a bonus, but it’s often not the objective.
In fact, Quartz includes links to other sites besides their own says Mabanta. “We explicitly don’t use the email as a way to drive traffic back to our site. It’s meant to be a self-contained experience. The user can click through if she wants to dive deeper, but she doesn’t have to. And oftentimes that link doesn’t lead her to QZ.com,” Mabanta said.
Vox’s Golis feels the same way. “We don’t approach newsletters as traffic drivers. Instead, they are distributed media experiences valuable in and of themselves. We love them because they give our loyal audiences a way to establish a permanent relationship with Vox. They also give our journalists the opportunity to build that connection and a set of stories and insights with a consistent community over time,” he said.
A valuable proposition
That engaged core audience also draws in sponsors and advertisers, who are willing to pay a premium to get the attention of a known quantity, and because you own your email data, you should have a good sense of who that audience is. “Better leveraging email data is a significant opportunity for many companies and as combining data sources becomes more flexible, digital advertising is going to become much more efficient and effective,” Boltik explained.
You can get those sponsors or premium advertisers on board to directly monetize your newsletters. Or you can simply use them as a way to stay connected with your most ardent readers. Whatever the strategy, newsletters remain a valuable way to understand and interact directly with your core audience. And that, in the era of distributed content, is a valuable connection indeed.
When shift happens at Telemundo, opportunity knocks
For years, Telemundo was viewed as a distant second to Univision’s domination of America’s Hispanic media market. Then, shift started to happen. Now, “Every week, prime time ratings are a nail biter,” according to NBC Universals’ EVP of Digital Media and Emerging Businesses, Peter Blacker. But—like most overnight success stories—this shift, which the company will highlight with it’s theme “Shift Happens” at the Upfronts on May 16, has been happening for some time now.
Blacker traces the origins of Telemundo’s strong and steady growth trend to its decision a few years ago to focus on “Generation M.” No, that doesn’t just stand for the desirable millennial demographic. Telemundo’s definition includes two other major factors that are impacting media: multiculturalism and mobile.
The racial breakdown of the American consumer is steadily moving towards a multicultural majority made up of non-whites. From a programing perspective, that means that audiences are more socially complex and less starkly defined. Combined with the technological forces of social and mobile, a wave of innovation is occurring at NBCUniversal overall, and Telemundo in particular.
Authentic content and ongoing relationships
According to Blacker, this is readily apparent in their approach to social content. They consider the unique properties of each social platform and aim to create distinct experiences and programming for each one. As an example, Blacker noted the shift in their social efforts around their popular Telemundo series El Señor De Los Cielos, which boasts 8.5 million Facebook fans. “We used to approach these shows as very connected to television programming. When the show was on the air, we were very active. Then, when the show ended, we went on to the next show.”
However, those millions of fans had a year-round appetite. With the help of some additional staff, his social team worked with the show’s writers to create eight-minute mini-episodes to “feed the fan base all year.” Other social-specific content may take the form of a simple gif or meme. The important part, according to Blacker, is that it is that the quality and tone accurately reflect what the audience loves about the show itself. And the strategy seems to have paid off. And the strategy seems to have paid off. According to Shareablee’s 2016 data, “not only did Telemundo come up as the biggest inside NBCU, top three across all media companies.”
When the developers on Blacker’s team approached the studio about creating a second-screen app experiences for El Señor De Los Cielos “they wanted to kill us” because of the added complexity. The app, Double Acción, uses audio queues to sync up access to secret archives, exclusive photos, videos, trivia, games and more. The impact of their complex request was softened when AT&T signed on as app’s debut sponsor.
Much Ado about innovation and monetization
Blacker notes that the ability to work closely with the larger creative team at NBCUniversal helps keep Telemundo’s social strategy authentic to their show brands. He also points to NBCUniversal’s investments in companies like Buzzfeed and Snapchat, as well as its own innovation lab, as inspiring and informing experimentation.
Blacker hinted at multiple pioneering projects that will be announced at the Upfronts in May, including virtual reality and ad innovations. An advance preview can be seen in his partnership with Buzzfeed on a digital telenovela “Much Ado About Nada.” The program will take the form of 10-minute episodes that will be distributed on a weekly basis across Telemundo and BuzzFeed digital platforms. It was created in response to research about what resonates with Generation M, this younger, mobile-oriented and multicultural audience.
The ability to identify and engage Generation M has supported continued investment in innovation, Blacker said. “Our partners are trying to connect with a multicultural millennial audience on mobile devices. That is the future of their business.”
Ultimately, said Blacker, “the reason why we’ve been able to continue to invest in virtual reality and new pioneering formats like the Buzzfeed project is because we’ve been able to connect with sponsors and advertisers. We’ve developed a reputation for innovation that we can back up with scale.”
What if publishers could see the revenue value of their content in real-time?
More content is being produced and consumed than ever before. However, one of the biggest obstacles to success for publishers today is the inability to fully understand the value of their content. Yes, publishers are getting more and more data. But with so many different types of ads, targeting, and decision-engines running on a publisher’s site, the revenue generated from a piece of content has become impossible to retrieve beyond general averages.
In fact, as we have previously noted, most publishers merely settle for what’s available (averages) rather than what’s needed (real-time values). However, as we all know, a data-driven business cannot run on averages. That would be like trading stocks based on the average over the past week while someone else is trading based on precise real-time values.
Add to this the silos between the editorial and ad ops and you have an ad stack and content stack that don’t talk to one another.
The Opportunity
So, how can publishers harness bridge these gaps and work smarter? There are three significant opportunities for publishers in this challenging landscape. Those that tap into these will be empowered to do more than simply survive. They’ll have a competitive advantage.
1. Use Data to Fuel Audience Insights
Data should be the glue that connects publishers to their audience. It should enable them to serve more personalized content and enhanced user experiences, so they can better compete with social media platforms. Data should flow between publisher Data Management Platforms, network insights, and 3rd party data providers via APIs. This enables publishers to connect their content with their user and deliver customized experiences based on content type, device and location.
2. Connect Content and Revenue
Publishers need to connect content and revenue so that content can be personalized and optimized for yield. There is currently a lack of understanding about the true value of content. This doesn’t mean the total value of content. Instead, it means knowing the exact value of any article or video at a single point in time and the ability to take meaningful action based upon that insight. When content is a publisher’s currency, and each click is the trigger for revenue, a publisher must connect what they are selling (advertising) with the content that accompanies it
3. See a Holistic Picture of All Revenue
Lastly, publishers need to understand revenue from all sources in a single dashboard, not as individual boxes on the page. Once publishers have access to these insights, they can further optimize to the correct partner, referral source, or set of specific pieces of content to maximize additional revenue. Simply adding more paid links as a way to generate more revenue is sure-fire way to disappoint users, while being counter-intuitive to the principles of yield optimization.
The Power of the Complete Picture
Partners with expansive network insights as well as multiple paid relationships and networks can help publishers meet revenue goals. This model has played out over the last decade, beginning with display and evolving over time to include native, sponsorship, ecommerce and even off-platform distribution. However, the majority of publishers have not yet brought those revenue sources together into a single, manageable view to that they can take direct actions that are maximized for each piece of content.
Connecting content with revenue allows publishers to understand how much RPM value their Facebook referral traffic is delivering compared to all of their other sources. Yield teams can understand which partner delivers the most value. Audience development teams can launch campaigns based on feedback from ad operations about under-delivering sponsorship campaigns. Executives can see how revenue goals in real-time, all based on the connection between revenue and content.
Publishers must break down the walls that are typically built up between revenue and editorial teams. Real-time insights allow them to personalize the content experience, while also considering the value of each piece content. It is clear that publishers need to leverage the appropriate tools and strategies to achieve this level of insight and opportunity.
D
ennis Yuscavitch has spent the last several years creating and launching new product, most recently with Outbrain as director of product marketing. When he’s not making publishers and advertisers happy he’s often coaching his local youth soccer team. The consummate early adopter, you can find him online @dennisy or via LinkedIn.
Why publishers and advertisers need to get native advertising right
Native advertising has come a long way from its debut in the digital marketing environment, when the lines between advertising and editorial were blurry at best. But a new study from the cloud-based intelligence platform MediaRadar, “Leaders and Lessons in Native Advertising,” found that 37% of publishers still aren’t complying with the Federal Trade Commission’s rules on disclosure for native advertising.
In late 2015, he FTC clamped down with more guidelines and an 11-page guidebook for businesses to promote more transparency within native advertising and ensure clarity for audiences, as I wrote at the time. Of course, 37% is a huge improvement from 61%, which was the figure cited in last year’s study on non-compliance. But the bottom line is that honesty about native ads has yet to become the status quo. In a world where fake news and ad fraud have troubled audiences and skewed our instincts for what’s valid, it’s to the benefit of publishers and advertisers to work harder.
The Evolution of the ‘Explicit Native’
Attracting the attention of users quick to download an ad-blocker or scroll past promoted posts on social media poses a significant challenge for marketers and publishers. Enter native advertising, thought to be the panacea for balancing editorial interest with advertising dollars. The FTC guidelines emphasized explicit disclosure of native ads in proximity to the headline (which, let’s face it, is the only thing many readers will allow their eyes to glaze through).
While the IAB deemed the terms “overly prescriptive,” DCN’s own Jason Kint said the impact of the guidelines would largely depend on what cases the FTC brought to the fold. There’s a difference between publishers and advertisers “trying to do the right thing” versus those engaging in “egregious acts of deception,” to use Kint’s words.
Native Exposed
And we saw the first case the FTC brought up, in March 2016, when it charged retailer Lord & Taylor for allowing 50 Instagram stars to wear the exact same dress — with none of those influencers noting in their posts that wearing the dress was a coordinated campaign. Nylon magazine also ran an article and an Instagram post featuring the dress. It was almost as if Lord & Taylor had decided to blatantly disregard the FTC’s disclosure rules.
The FTC saw it as such and brought charges against the retailer, eventually reaching a settlement. The company, for its part, announced that it “never sought to deceive” its customers. But it was a clear warning that the FTC was serious in doubling down on enforcement, and that actions speak louder than words when it comes to trusting marketers. No matter that the FTC’s makeup under President Donald Trump is still a mystery (there are only two current members of the Commission) — the stage has already been set for advertisers to work harder to ensure compliance and not outsource this work to other parties.
And if the evolution of labeling content as native indicates anything, most digital publishers are trying harder. There’s been a 119% year-over-year growth in doing so. So how about the 37% of publishers choosing not to comply? They’re risking their reputation and revenue.
The Benefits of Going All In
With native set to continue to grow again this year, it seems only logical to go all-in on following the rules while delivering good advertising, and not circumventing the rules for the same goal. Yet some challenges going forward are that most native advertising campaigns only last a couple of months, and native renewal rates are fairly small at 33% across all media sites.
How should we address this? Well, MediaRadar’s study indicates that publishers who have robust native advertising operations and have invested in the necessary tech — including the New York Times, Wall Street Journal and Quartz — have a stronger renewal rate at 49%. Top publishers who sell and measure the impact of native successfully can expect renewal rates of 60 to 80%, according to MediaRadar’s forecast.
Tips for Success
That being said, here’s some advice for publishers going forward:
- Invest more in native advertising for more profit. It’s not going away, so seizing the right packages and running campaigns long enough to actually benefit is key. That also means considering the use of in-house native advertising teams, or freelancers devoted solely to creating native advertising.
- Communicate the results. This helps prove the efficacy of the advertising. And, granted the results are positive, this helps increase renewals.
- Consider newer ad categories that have yet to jump on the native bandwagon. Media and entertainment, professional services, finance and real estate, tech and retail were the top five categories in native advertising last year, so look beyond those to expand.
- Invest in the right technology. It will help sustain your business in the long run.
- Don’t break the rules. Unless you’re OK with potentially risking some revenue (a fine of $16,000 for every native ad violation) and your reputation among users.
- Try harder. The big issue for publishers who don’t follow the FTC’s guidelines, it seems, is that they want to game the system to make bad native ads work. But sacrificing quality or trust isn’t the way to go. The answer: Better advertising.
Media brands with superfans most likely to succeed with digital subscriptions
Leaving this year’s Digital Content Next Summit in New Orleans, I was struck by how much of the conversation revolved around media companies moving from an advertising-supported model to a subscription-based model. There was a lot of healthy debate around the optimal types of brands and level of scale required to succeed in this transformation. Everyone wants to know what the best offering is and what types of content are best suited to capture subscription revenue.
One variable not discussed as deeply was the value of passion. Ask yourself: How passionate are your fans about the topics you cover. How passionate are they about the media brands themselves? The answers tell you a lot about your odds for success.
Passion Play
At TEN, we believe our passionate fan base is a key success factor in transitioning from a legacy publisher business model to a direct-to-consumer business with multiple revenue streams, including subscriptions and events. Let’s start with how we quantified how passionate our fans really are.
We partnered with market research specialists GfK to try to put a monetary value on our fans’ passion and influence. GfK’s proprietary study told us that our fans are two to five times more valuable than the national average in terms of buying power and buying influence across auto, action/outdoor, and home tech—our core content pillars.
We have built trust with these fans and through years of covering their passion and being a market leader in that particular space. Brands such as Motor Trend, Hot Rod, and Surfer go back decades as the respective bibles of their categories. Our job has been to leverage that brand trust and deliver great experiences on new and evolving platforms. In many cases, the business model is free with ad support, paid, or a combination of both.
Ready for Action
And now we are seeing it come together. Strategy is meeting up with execution. Looking at social, our auto reach is more than 106MM with an average age of 27. They are the greatest collection of millennial automotive fans in the world—an unexpected position to be for a legacy publisher reinventing itself in the new media landscape. Passion produces engaged fans. And that engagement provides a bridge to monetizing these fans in a variety of ways.
When we talk about original content and digital video, the story is even stronger. Our Motor Trend YouTube channel is ranked number one in the U.S. by Tubular Labs in every category they track, from subscriber monthly views and cross-platform views to engagement rates. This translates into revenue through pre-roll and ad-supported sponsorships and integration into our programming.
In our events business, we’ve gotten 30,000-plus fans to attend Roadkill Nights, an extension of our original video series of the same name. This past summer, Roadkill fans got to drag race down the iconic Woodward Avenue in Detroit. The show’s host, David Freiberger, is now (much to his chagrin) a genuine social media influencer, mobbed by autograph-seeking fans at every event, some bearing Roadkill tattoos.
That kind of success is what created the optimism around our original content and our SVOD service, Motor Trend OnDemand, which we launched in 2016. Today, you can find our shows and SVOD service on Amazon Prime Video, Netflix, Roku, Apple TV, iOS, Android, and Chromecast. Hundreds of thousands of people engage with us there each month on top of the millions who watch us on YouTube and Facebook Live. Most important, they care enough about this content to pay for it.
The Passion Grows
This passion and viewership is further amplified through our existing media footprint. We use our social channel, sites, magazines, and events to drive viewership, subscription, and engagement—often in real life. Moving forward, we expect to add more affinity models, where we bundle the SVOD, print, events with exclusive experiences to surprise and delight our fan base.
All this leads us to encourage our media peers to monetize their consumers directly. This means focusing on the brands and properties with the highest engagement metrics, most passionate level of fandom, and the kind of content opportunities best suited for today’s consumption platforms of choice: on-demand digital video and social. If you do that, passion will beat scale every time.
Scott A. Bailey serves as President, Automotive, for TEN where his primary responsibilities include enhancing the relationship between the Automotive Group’s brands and its audience, leading the continued development of TEN’s digital businesses, and improving its customer offerings by expanding its media platforms. Scott is a two-time nominee and Emmy Award winner for his work in advanced media technology and brings decades of digital and publishing experience to TEN . He came to TEN from Synacor, Inc., where he served as Chief Operating Officer and was part of the management team that took the company public in 2012. Before Synacor, Scott served as Senior Vice President at Comcast Interactive Media, and prior to Comcast, he was the General Manager for Turner Sports Interactive, a division of Turner & Time Warner.
Ad blocking: No, we haven’t won.
About a year ago, Josh Benton of Harvard’s Nieman Journalism Lab asked me how concerned I was about ad blocking on a scale of 1-10. I answered “eight or nine.” And one year later, the situation has not improved: As of today it’s still a nine.
In the spirit of transparency, I thought the time was right to look at where we are in terms of ad blocking, if for no other reason than I don’t want my silence on the topic to suggest that the issue is less dire than it was during the flurry of discussion around it in 2015. Since then, DCN has conducted research on the ad blocking ecosystem – some of which has been released only to our member companies. We have also posed many questions about Google, the ad tech ecosystem and the actual flow of the monies.
The state of ad blocking today
Unfortunately, the ecosystem remains every bit as murky. The ambitions and fate of those profiting and suffering from ad blocking (including Google) have not yet been fully revealed. But one thing is crystal clear: The companies that create original content are being hurt the most by ad blocking because it prevents them from monetizing the audiences they attract. And the two companies, now known as the “duopoly” are likely hurt the least.
As predicted, the adoption of ad blockers continues to grow linearly according to PageFair’s latest Ad Block Report. While the sky is not falling, the U.S. desktop penetration did grow from 15% to 18% last year and this number matters … a lot. Despite this growth, the IAB oddly recently claimed victory over ad blockers “rendering them toothless” and suggesting the risk of “network-level ad-blocking has virtually disappeared.” This kind of thinking is where things get dangerous.
We have won neither the battle nor the war. In fact, PageFair’s report—which we have every reason to believe—clearly points to the contrary. Frankly, it’s for this reason that I’m writing now in parallel to our continued participation and support with other organizations on the new Coalition for Better Ads.
The danger is real
Here are three reasons we need to remain focused on ad blocking in order to maintain our ability to monetize audiences attracted by high-quality content:
- The companies in the ad tech ecosystem—where many of the ad blocking issues are forged—have very little incentive to be concerned about ad blocking. Their collective migration to the latest ad tech craze, header bidding, has increased their inventory and revenue access by an order of magnitude. It’s also widely recognized to have increased latency, data leakage and other vulnerabilities. So potentially good for revenues, arguably bad for consumers. The additional inventory dwarfs any modest increase in ad blocking so the ad tech companies’ incentives are in many ways at odds with consumers and content creators.
- Consumers are shifting to mobile, where ad blocking penetration is estimated at an immaterial 1% in the U.S. However, the value proposition of a mobile ad blocker is significantly higher (heightened concerns for security, user experience, data charges, privacy). So it’s risky to expect penetration to stay at 1% given that it’s currently 60% in parts of Asia, where ad blocking is built into the browser. The same functionality is already available in the States (through the Brave and Opera browsers). And not incidentally: In China, mobile users know how to change the proxy servers on their phones, so I’d expect Generation Z may soon be doing the same, in droves. And this is just one of the numerous ways in which ad blocking may rapidly impact mobile apps.
- Network-level ad blocking concerns will likely grow. The number one goal of the new administration’s FCC is to throw out the net neutrality rules. Yes, there is a rational argument against the current regulation. However, nearly 100% of the public wants something in place that protects the neutrality of the Internet against blocking, throttling and other nefarious practices. I’m pretty sure it is not a good idea to fight the Internet. To the point of ad blocking, if the FCC rules are thrown out and not properly replaced by Congress, there is nothing to prevent a carrier (why hello there T-Mobile!) from launching its own ad blocking plan. Meanwhile, the most powerful trade bodies in our industry have yet to take a stand in support of net neutrality (other than DCN, which is not conflicted on the issue).
Burning questions
So now that we’ve established that victory has not yet been achieved against ad blockers, here are some of the questions keeping me up at night:
- The financial impact of ad blocking trails its penetration mostly because advertising supply greatly outweighs demand. As long as there is considerably more desktop inventory than demand, then the financial impact is mitigated. But what happens when it doesn’t?
- The largest advertising company in the world, Google, is virtually untouched by ad blocking. Google has avoided most of the impact by paying to be whitelisted – as they’ve publicly disclosed – giving them a privileged position that, as far as I know, none of the nearly 80 companies inside of DCN have. Let that sink in. When a monopoly gets to set the rules…
- Privacy continues to be the third rail in the industry. The CMO of the largest advertiser in the world, Procter& Gamble, clearly expressed this concern a few weeks ago. The Chairman of the largest media buyer in the world, GroupM, has also called out this same concern. Meanwhile, the industry is aggressively pushing to keep the bar as low as possible, while cloaking the rapidly increasing level of tracking in darkness. This is happening through policy, as much of industry pushes to remove the FCC privacy rules on ISPs. It’s also happening through technology, as tracking has moved into digital fingerprinting and server to server sharing of browsing history. I know many people want to ignore it, but what if data leakage in the ad tech ecosystem is actually the common thread across the performance, security, transparency and consumer privacy issues that have resulted in a loss of consumer trust and rising ad block usage? There are both industry advocates and executives who make this argument.
- Facebook has opted to engage in a tech arms race against the very same engineers who are paid by the ad block whitelisting program. Facebook continues to fight a desktop war against ad blockers by circumventing the technology. Almost all of Facebook’s ad revenue growth on desktop came as a result of this tech hacking, according to their CFO during their earnings call. In mobile, Facebook is aggressively shifting content experiences away from the open web, reportedly even ignoring their browser experience, so that they can keep consumers in their app and fight back against ad blockers. Who is monitoring this?
- Who owns the number two blocker, Ad Block? At the very least, it’s dubious that a company with undisclosed ownership can block this much advertising. At the worst, it’s a clear-cut antitrust or national security issue to have that much control in the hands of an unknown actor. Can no one solve this riddle?
In the face of this uncertainty and looming unanswered questions, industry leaders need to refocus on meeting the underlying consumer needs. Yes, many articles have been written and many committees created. However, I challenge the industry to work with us, to dig deeper into the dynamics of ad blocking. As much as you might want to believe ad blocking to be a 2015 meme that’s now under control, that is entirely incorrect. Sitting idle while one company, whether it be Ad Block Plus or Google, controls much of the current future ecosystem could be the most dangerous failure of the Internet yet.
Media companies lured by the promise of subscription revenue
Media companies are in the midst of a massive shift in revenue strategies from one primarily focused on advertising to one that is more diversified. Without a doubt, subscriptions are highly attractive, given that they guarantee a steady stream of income that is far less volatile than the digital ad market. Ads probably aren’t going away anytime soon, but media outlets are looking for new ways to monetize beyond the traditional ad, and subscriptions offer one way to do that.
As Facebook and Google dominate the ad market, media companies have had little choice but to look for other ways to make money. The Wharton School’s Knowledge@Wharton blog published a post in November, The End of Digital Advertising as We Know It, which suggested that even Facebook could be facing an ad revenue shortfall sometime in 2017. “Facebook has said that ‘ad load,’ or the relative volume of advertising versus content on its pages, isn’t going to be able to fuel revenue growth as much as it has to date,” according to the blog post.
Certainly issues like “ad blindness” and the rise of ad blockers has contributed to worries about ad-driven revenue. However, the attraction of incorporating subscriptions into the mix also reflect the practical limits of the ad model and the advantages of securing a steady stream of income from loyal subscribers.
Certainly, software companies have seen the subscription light and heeded the siren’s call of recurring revenue. As an example, Adobe has completely transformed from a company that once sold boxed software to one that sells subscriptions – and has thrived under the new approach.
Moving to a subscription model
Media companies believe they can get a piece of that recurring revenue action and gain the same advantages as software companies. Robbie Kellman Baxter, principal at Peninsula Strategies, a firm that works with companies making a shift to subscriptions, says subscription revenue works best for media outlets with a specific focus. “Subscription models are the answer for many of the best content providers, especially those with content that is targeted for a specific audience. The more specific the audience, the more likely subscriptions will appeal to them,” she explained.
The New York Times is a great example of a company that is making an aggressive push to grow its subscription revenue. It recently published a report that shows subscription revenue has surpassed advertising as the company’s primary revenue source. The company now has 1.5 million digital-only subscriptions, up from one million a year ago, and from zero just six years ago.
While the New York Times doesn’t see ads and subscriptions necessarily competing, the company is clearly putting more focus on the subscription business and is hoping the quality of its content will drive more interest over time. “We consider ourselves a subscription-first business. We believe that the best business strategy for The Times is to provide journalism so strong that several million people around the world are willing to pay for it,” a New York Times spokesperson said.
And The Times is not alone. Eric Hellweg, executive editor at Harvard Business Review, says that focusing on subscriptions is really about facing the reality of a changing ad market. “It’s pretty tough out there for ad-based media businesses if you are not Google or Facebook. And I think that it’s becoming clearer to media executives that the ad market is goIng to get tougher in the foreseeable future. It makes a lot of sense to look at subscription models as a possible way forward,” he said.
Shifting focus
Baxter says that the shift to subscriptions requires a fundamental focus on audience by media companies. “It is not enough to have eyeballs, they need to attract the same eyeballs, day after day, making their content a habit for their subscribers. This means that they really need to know their audience, and to tap into their changing needs,” she said.
HBR’s Hellweg sees it in similar terms. “To get a subscription business right requires some pretty significant changes, that in many ways cut to core of many media businesses. First, you need a product people will pay for in a meaningful way. Then you have to shift to being user-centric, rather than an ad based business, because it’s essential to understand your users and how to serve them,” he said.
When you shift the focus to the audience, it opens up new business opportunities, Baxter says. “When you look at what the audience really needs, why they consume your content, you realize that they aren’t just consuming in a vacuum—they might be trying to be successful in their careers, or to look smart to their friends, or to be in the know about their favorite sports teams. All kinds of new options for features emerge including online community, events and advisory groups,” she explained.
Converting from free to fee
Realizing that the subscription model could be the best way to go is one thing, but getting people to subscribe is another. It can present a challenge to media companies as they make this change, especially since online audiences have come to expect free content.
Jonathan Anastas from The Enthusiast Network, a media company focusing on action sports and automotive enthusiasts, says in 2017 it’s not that difficult to convert people to be paying customers if you appeal to something they’re passionate about. “People seem more willing than ever to pay for access to the content they love. So, the answer seems to be some combination of super high-end quality in the programming itself or how it’s delivered, a reasonable value proposition, an exclusivity window and passionate content or passion around the content. Give people three of those things and you have a paying customer,” he said.
Andrew Sollinger, EVP for subscriptions and events at Business Insider, agrees that if the content is good enough, people will pay for access. “Readers have grown increasingly sophisticated when it comes to understanding what makes for high-quality content. So our strategy of converting prospects to paid subscribers is a simple one: we provide enough access for readers to get a real sense of it. Ultimately our coverage sells itself,” he said.
As the ad model becomes more difficult to sustain as a primary revenue generator, media companies are seeking alternative ways to make money. While eCommerce, conferences and other means of income certainly offer a way, the subscription model with its recurring revenue stream is one that could be increasingly attractive moving forward, especially for specialty media with something unique to offer the audience.
Could in-image ads be an answer to ad blockers?
With increasing competition across various verticals, digital brands are always looking for ways to engage potential customers. However, the average online consumer often feels bombarded with ads and intrusive pop-ups on both their desktop and mobile screens. Tech savvy users simply download ad blockers to streamline their internet browsing experience, a move that has been increasing in popularity in recent years.
According to a report conducted by ad-recovery startup PageFair, “The number of consumers using ad blockers in the U.S. increased 48 percent during the last year,” referring to 2014-2015, which resulted in a loss of more than $20 billion in advertisement revenue for publishers on desktop computers alone.
Today, advertisers aren’t just focused on creating and disseminating their ads across various channels. This is simply not enough given consumers’ low tolerance for interruption and considering the viewability and engagement demands for their
ads. Publishers must act in order to tackle the reasons why they are “blocking ads and tailor their messaging accordingly,” according to the head of Condé Nast’s Food Innovation Group’s Eric Gillin. Meanwhile, Mike Hofman, Executive Digital Director of GQ claims that people are increasingly looking to control the time they spent on a website, which provides a challenging environment for ads to sprout across screens.
With all these points in mind, publishers have to be increasingly creative in order to monetize their web and mobile sites. One way of going about this is to focus on creating personalized and relevant ads, ones that will remove the desire for adblockers in the first place. According to James Avery, CEO of Adzerk, “If we want to stem the growth of ad-blocking installations, we have to deter people before they click the install button.”
In-image advertising technology steps in
But one of the newer and more innovative monetization solutions for publishers directly helps them meet the needs and demands of both advertisers and users, namely in-image advertising technology. According to Optimind Technology Solutions, “Articles with images get 94% more views,” and this technology could help address the challenge posed by adblockers, as it addresses personalization and relevance, as well as engagement. Based on user behavior and contextual analysis, it provides users with a more natural exposure to advertisements rather than an impersonal and intrusive experience.
The reason that in-image ads can be very effective is because they are superimposed over prominent images on web pages that attract the most attention from users. Because in-image ads are personalized for their audience, they are typically more relevant to what the audience members are interested in. In turn, this means these ads are far less disruptive than traditional display ads and more engaging.
As such, in-image ads provide users with a natural experience and highly targeted ads, thus reducing the incentive to even download ad blockers. Below is an example advertisement on a publisher’s website from a leading in-image ad platform Imonomy. It offers a more compelling option to users as well as to advertisers.
Additionally, by exposing users to highly engaging and contextually-relevant images, such technology increases ad viewability and provides additional monetization opportunities (for instance, by triggering CTRs) for publishers.
While the world of advertising will always be a complex business, publishers will need to play a major role in bridging the gap between advertisers and tech savvy users that are always short on time. To help in this process of countering adblocking technology, publishers need to focus on improving the user experience by providing an added value for both users as well as advertisers.
For instance, by encouraging users to continue with the browsing experience in the most natural way, while simultaneously exposing them to advertisements that are cleverly embedded as in-article images, publishers can meet the needs of all parties, while creating additional monetization channels resulting from improved viewability.
How trust drives success—takeaways from the 2017 DCN Next: Summit
It’s a brave new world. As the media companies experiment with quickly-advancing technology amid the duopoly of Google and Facebook, tight competition antiquates the notion that only “content is king.” In the meantime, according to the 2017 Edelman Trust Barometer, consumer faith in four pillars — NGOs, business, media and government — fell since last year, with the trust in press falling the most.
But challenge also presents opportunity. Through careful planning and innovation, Digital Content Next (DCN) CEO Jason Kint believes that DCN’s members are in a unique position to find success. The key? Building and sustaining trust — not just in news, but also in brands. As Kint pointed out during DCN’s members-only Next: Summit, held Jan. 19-20 in New Orleans, it is “universally understood” that trust arises under conditions of uncertainty and vulnerability.
“I believe that there’s never been a better opportunity to create trust with consumers and advertisers,” Kint said.
Over two days, amid a backdrop of the French Quarter in the Crescent City, Summit speakers urged focusing on brand, product and shared community-centric experiences to allow companies to survive, and even thrive, amid shifting media sands. This theme continued, from the kickoff by Harvard Business School professor Bharat Anand, who explained how connectivity promotes loyalty during digital change, to a closing session about how to manage a subscription business amid wide-spread content distribution on third-party platforms with Kinsey Wilson, Editor for Innovation and Strategy at The New York Times.
DCN member-company executives from around the globe reflected on how to retain and build consumer loyalty by marrying “customer first” mentality with smart, technology-driven strategy. Here are three key takeaways:
1. Embrace change — even if it means being radically different. So-called “best practices” may be antiquated and dangerous to follow. In the current environment, it can pay off to establish a unique identity.
Steve Cook, Contributing Editor of CMO.com, said time today is more valuable than money. To appeal to clients, companies need to have brands or services that are “excellent,” usually because “they’ve managed to differentiate themselves.”
Publisher of Vox Media, Melissa Bell, challenged the audience to embrace fluid business models. For Vox, that meant softening the barrier between revenue and editorial teams to create premium — and enjoyable — advertising as part of the full package. “We think of ourselves as publishers,” she said. “We need to think of ourselves as in a conversation with people. How do we hear from them what they need from us?”
Justin Smith, the CEO of Bloomberg Media Group, said it’s essential to be gutsy when building digital-first brands amid change. As a vertically-integrated company that uses media to drive value to its core business, Bloomberg’s role has been that of “big disruptor” and “innovator” in the industry. But for success to happen, Bloomberg had to be open to failure. Whenever an employee “tries and fails,” Smith added, Michael Bloomberg himself will go to the department and “pat the person on the back.”
2. Dare to examine paid subscription. Don’t be afraid to demand more for higher quality.
Nearly 77 million people are expected to use ad-blockers by the end of 2017. Yet, the majority of digital media revenue still comes from advertising: a sign that companies need to focus on user experience and leverage quality. “We must find a way to use our brands as wellsprings for new revenue opportunities,” Kint said. “We can’t be beholden to the advertising market.”
According to Wilson from The New York Times, by its nature quality journalism “has always, in some form, been subsidized.” Testing a “leaky” paywall can both generate revenue and be flexible enough to drive conversation on social platforms.
Financial Times CEO John Ridding said his company is always examining ways to reduce reliance on advertising. The key? Superior content that readers trust. “Some information isn’t as worthy as others,” Ridding said. “I think the internet is a liberating force for inclusion and access, but at same time there has to be a role for quality information, which costs money.”
Marta Tellado, the CEO of Consumer Reports, underscored that even an older, paid-subscription company can become relevant in today’s market with some effort. “You have to reintroduce yourself,” Tellado said about their focus on reinvention. “We have to show up where consumers are.”
3. Diversify. Creativity can be harnessed to drive additional revenue.
Maya Draisin, the associated publisher of WIRED Media Group, said the company has invested in live events, branded content with Netflix, executive membership and a promotional t-shirt collection to help drive revenue. “We look at everything.”
President of The Atlantic Bob Cohn said that, in addition to digital, print and video, the company has launched highly-successful live event and consulting businesses, fast-growing ventures that help individuals connect and organizations “strategize digital thinking.” He advised directing business ventures into “open space” as you would a game of ultimate Frisbee: “Where is the audience going and where is business going?” he challenged. “Send the disk in that direction.”
And, rather than taking a digital-first, or mobile-first approach, Cohn said that The Atlantic is “audience-first.”
In a similar vein, Viacom EVP Ross Martin said that they take a “fans first” approach, which has motivated unique promotional techniques. One example? Turning Airbnb into a native advertising platform with a Teenage Mutant Ninja Turtles experience. Martin showed a three-year-old’s reaction a “Ninja Turtles lair” they created to look like turtles digs in the movie set. The child’s face was lit up, eyes wide: delight personified. “Do you call that marketing?” quipped Martin. “I don’t know what you call it.”
Ultimately, all of the DCN Next: Summit’s major themes circled back to that audience relationship and, above all, maintaining their trust. “Sometimes called consumers or audiences…for us, fans are the north star,” Martin said. And that mindset is a healthy one that should guide this industry forward.
The power of focus: building a strong niche publishing business
The media industry is in a time of great transition, in part due to the proliferation of digital publications and the growth and popularity of social platforms. While industry consolidation might threaten the independence of some publications, there is also an unprecedented opportunity for publishers to communicate their unique perspective to underserved, targeted audiences.
With this in mind—and with the help of funding from the Knight Foundation—Digital Content Next worked with Ascolese Associates on the research report Niche Publishers: How to Create Sustainable Business Models in a Digital Marketplace, released January 18. This niche publisher research examines how 11 digital publications each capture a unique space, attract audiences, and monetize those audiences.
“I know firsthand that we’re much more nimble than larger news organizations. We can try things out quickly. You know, we can try things out and fail fast, or we can try things out and see some early wins and then build on them. I really appreciate our ability to be nimble and flexible and measure our results and make quick decisions.”
Mary Walter-Brown, Voice of San Diego
The research identified two core focus areas for niche publishers that are vital for their success: content strategy and business strategy. According to the report, these core focus areas are made up of seven tactical components, which are discussed in detail: content development, editorial brand, audience development/ delivery, data, KPI’s, revenue streams and operational efficiencies.
Publishers interviewed agreed that superior content is the core deliverable, but content alone can’t drive a publication to success; an integrated business strategy is necessary. While a quest for scale dominates many digital strategies, niche publishers focus on providing distinctive, even unique content that meets the needs of a very specific audience.
Almost universally, these niche publishers emphasized something that has become a common theme across digital media: the importance of revenue diversification. Additional revenue streams give non-profit publishers more independence from corporate and individual sponsorships and for-profit publishers some independence from advertising sales.
“The number one mistake that media companies make is that they have a journalistic idea, and it’s not done in tandem with a business idea that operates in synchronicity with the journalistic idea.”
Jim Vandehei, Axios
Many niche publishers interviewed cite repurposing content and digital or live events among their revenue streams. However, other avenues include outsourcing internal talent, a “data store,” and a marketing membership program. Notable among these publishers is a willingness to collaborate and create partnerships that allow them to fight above their weight class in terms of staffing and data resources.
Ultimately, the report finds that a niche publication’s smaller size translates into a flexible and nimble environment and, often, a more entrepreneurial approach to their business. Notable among these publishers is a willingness to collaborate and create partnerships that allow them to maximize their staffing and data resources but also to ensure the viability of this segment of the digital media industry.