Sips from the Firehose
A blog that seeks to filter the internet into a refreshing, easily-gulped beverage


Jan 19

Predictions for 2015: Ad v. Subscription Journalism Fight Gets Deadly

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As the “New” wears off of “New Media,” investors start to expect results

Years ago, I did the first big case study for the NAA, back when newspaper revenues were in free fall, and publishers were desperately flailing around for a revenue stream – any revenue stream – that might provide a lifeline with their news organizations. At the time, paywalls were still a very dirty word with the digerati, as they seemed to reflect the very worst of Old Media Thinking.

Annenberg Media Center converged newsroom

Is the modern newsroom going to turn into something of an ad production studio? Or will there be some other way for it to survive?

Information wants to be free after all, and back then, there were some very prominent failures with trying to get people to pay for content. El Pais, which had been the market leading national newspaper of Spain, put up a paywall in the early 2000s, and then three years later, took it down after it had basically destroyed their standing in the marketplace. El Pais spent millions of dollars trying to win back the audience that had deserted them.

But then along came the crash in 2008, and the bottom fell out of the ad market (again). This time, unlike the dot-com crash of 2001, the revenues did not bottom out in 6 months, and then start climbing back again. No, this time there were insidious new technologies on the rise that have pretty much destroyed the value of the banner ad: the rise of RTB (real-time bidding) or “programmatic ad buying.”

In a nutshell, RTB allows an advertiser to reach an audience, no matter where it is on the web. Say you want to reach housewives under 35 with kids in school, who looked at washing machines in the past year. No problem. Just sign up with a programmatic bidding outlet, and you can buy banner ads across the internet that will deliver you that audience.

Great for advertisers. Disastrous for publishers.

Why? Well, because the supply of space on the web is basically infinite. That means our old friends supply and demand kick in – with a vengeance. The result has been that CPMs for ads are on a race to rock-bottom. Banner advertising is essentially going to be utterly worthless soon, which means that there is going to have to be yet another shift in how premium content publishers support themselves.

And no, we cannot just crank up subscription rates to the point where the readers pay for everything. Even at the mighty New York Times, with its much-lauded paywall, there is a recognition that doubling the subscription rates will pretty much kill the business. Not to mention the fact that putting all good & decent information behind a paywall pretty much ensures that anyone without means – that is, ordinary folks – are going to have to subsist on a diet of cheap&shoddy news. Yep. Find the flaw in that plan.

The situation gets even more dire when we consider the headlong rush to the mobile web. Banner ads are even less effective and valuable there – here, take it from the New York Times again:

The appeal of being able to buy targeted audiences at scale and the simple efficiency of automated advertising makes it a no brainer for most advertisers, and thus most publishers.

Meanwhile, the shift to mobile makes developing effective native ads even more important because, as Levien says, “we have not yet arrived at an effective interruptive format, a banner format, in mobile”.

Social media companies such as Facebook and Twitter are taking the lion’s share of mobile ad revenue in part because their ads come in the same container as the rest of their content, which works better on mobile devices. The thinking is that publishers need to do the same to compete.

…and here at last we arrive at what is shaping up to be the big fight of 2015. Call it “native advertising,” call it “content marketing,” call it what you will. It’s advertising messages that are inextricably mixed into the news content on news sites. You’ve already seen it in your Facebook feed, on Twitter, on blogs, hell, for the longest time, even in the midst of radio shows.

Why is this going to be A Thing? Well, check out what John Oliver has to say about it:

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