October 6, 2016 5:00 pm
This post first appeared on 22 September 2015.
A while back I asked my team at the large online publisher I worked at to imagine how the business would function if we made no money from display advertising. This was only about five years ago. But everyone pretty much thought it was a hypothetical exercise. We didn’t find an answer that day and there was no real urgency to change – we still made 90 per cent or more of our money from advertising and the main clients and agencies that spent with us weren’t sounding any alarms.
Fast-forward to the present day and this is no longer just an exercise for many publishers online. As if making up for drops in offline revenue streams wasn’t enough pressure for some of them, now they are faced with something of a perfect storm on the ad front.
They need to deal with (and I’ll keep this brief):
- Increasing ad blindness – we don’t just skip through TV ads on our DVRs or change the channel when a radio station goes to a commercial break but we literally don’t see certain parts of web pages. UX experts such as Jakob Nielsen have been talking about this for a while. Another way to say it is that too many ads have been annoying for too long. Too many online publications have overloaded pages with all kinds of units.
- The rise and rise of ad blocking software – which a seminal report by PageFair (vested interest caveat) and Adobe reckons will mean £14bn in lost ad revenue this year and £26.7bn in lost revenue by the end of 2016.
- Malvertising – the mix of malware and advertising – as a growing fear and sometimes real threat to people using the web. It might be an awful portmanteau of a word but the value of this kind of stealthy threat is big business for the bad guys. For 2015 the US Association of National Advertisers put a $6.3bn figure on the cost of the malvertising problem.
- Network operators feeling the heat – as more media consumption goes mobile the cost of loading ads on mobile devices, both in terms of data used and battery power, is annoying some users and making it more likely carriers will back some form of ad blocking.
- The release of iOS 9 – as the uber ad blocking move on Apple mobile devices, where consumption of content tends to be at the highest rate.
But it’s not all doom and gloom. For one thing, around 80 per cent of mobile consumption doesn’t take place on mobile websites but inside apps. This can still be a source of revenue for publishers and platform providers such as Apple.
And many publishers have spent the last few years shifting their revenue streams. (Hey, maybe they had the same meeting as we did a few years back and acted?) This week I read that two-thirds of Wired’s revenue is now digital, largely driven by brand content and Condé Nast’s ability to delight big brands such as Bank of New York, Marriott and Porsche is well known. While over at The Onion – yes, they’re all over this too – its in-house brand content and creative agency Onion Labs generates 80 per cent of the revenue, according to the CMI.
I was speaking to a friend last night and she told me how often she enjoyed posts on Buzzfeed only to glance that they were brought to her by an airline. I pointed out the lack of display ads on those pages. She liked the trade-off.
Publishing isn’t dying but some publications will die. Others, if they’re not as proactive as Wired and The Onion, will now be forced to make this move.
I had lunch with a CIO last week and he was scathing about the quality of brand content in some tech publications. That’s not the reaction you want from your most important readers. I spent a while explaining how it needn’t be that way.
Only it’s not just that content can be better – right up there with what regular editorial teams produce – but that it will have to be in order to support strong replacement revenue.
Whether publishers further support native advertising (here‘s one of the best recent analysis pieces on where that might be heading) or set up parallel brand studios/labs/departments that produce work for brands that is used elsewhere, never gracing their standard pages, this has to be part of their armoury.
If not, I would love to hear other ideas from people that mean we both don’t get annoyed by ads as consumers but we keep important media viable as businesses. Some say the ‘ad-mageddon’ scenario is overblown. I hope so. But I agree with others who say now is time to get practical and ensure online media is informative, respectful and commercially viable.
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