Yes, the headline would have worked in 2004. It’s still appropriate, most unfortunately for the P&L statements of major publishers, but there’s hope.
HOW WE GOT HERE
The New York Times Co. Magazine Group created a staff to pursue online media in 1995. As the publisher of Golf Digest, Golf World, TENNIS Magazine, and related B2B publications, the company knew these properties were the authorities in their topics and the Internet was starting to catch on. The mothership (newspaper) already had developed resources to support the exploration of this new frontier, so it was the magazine group’s turn. Even though the division president that year still refused to use a computer and deemed the Internet “a fad” that would soon pass, the resources were put into place to hire a team leader and one editorial producer per sport (golf, tennis, sailing, mountain sports). I got the tennis gig.
The pioneers of this new medium generally were drawn from two camps: technology (avowed “computer geeks” toying with html) and editorial people from traditional media (TV and magazine publishing). There were a few designers thrown in there, too. It’s no wonder that the paradigm for profit was “sell space” and “sell subscriptions.” That’s what we (traditional media) knew. While tech people sold products on a one-time basis — such as hardware or software licenses — it was the media model that took off faster. (Now we have SaaS and transactional experiences, but that’s been years in the making and only hit the mass market in the last decade. I’d call iTunes the tipping point for small transactions. Share your tipping point by commenting.) It started with fixed banners, then when metrics were discovered and understood, it moved to banners sold by impressions. Then cost-per-click and cost-per-acquisition, etc. The CPM dove.
Yet we were charging — and getting — $50 CPM on TENNIS.com in those early days of selling banners. It dropped to $30 CPM when other tennis sites — not media websites but official sites of tennis organizations — entered the market. For the first time, our business partner, the US Tennis Association (owns US OPEN), and colleagues ATP Tour and WTA Tour were our competition — for audience and for sponsors, and, eventually, for ad dollars. I’m sure TENNIS.com struggles, like most publishers, to get $1 CPM on run-of-site display ads. The days of double-digital CPMs are long gone since the market is so crowded and information is a commodity.
Real-time bidding (RTB) and programmatic buying have come to the rescue. Nice CPMs are reportedly being earned because super-targeting individuals based on intent to purchase demands premium pricing. It’s working swimmingly for Hearst, CTO Phil Wiser told the Internet Week audience yesterday. “RPM” (revenue per thousand) is the new buzz among clients, Allie Kline, CMO of AOL Platforms, commented during a panel at Internet Week.
Just because the falling CPM has been happening for about 15 years and RTB has arrived doesn’t mean those basic display CPM rates are any less of an emergency. Randall Rothenberg, who heads the IAB, discussed this with me last year. I wanted to learn about efforts, if any, around measuring engagement and how that played into their vision. [I believe charging premium rates across a variety of platforms for the quality of engagement with a brand is the next frontier.] We chatted about a variety of aspects of the media marketplace and trends, but R2 was crystal clear on one thing: “We are focused on getting the highest CPMs we can.” That’s still the game. Media companies need to generate the highest rates possible, and advertisers want value. Agencies are driving down CPMs.
WHAT TO DO?
The solution has to work for everyone: Media, advertisers and agencies. In order for it to work for all of them it has to work for audiences. Yes, they are the boss. Why? Because in this metrics-driven world, greedy advertisers want guarantees that their online spend will have offline impact. I heard this directly from Lisa Valentino, who was heading ESPN‘s digital sales operation until she recently joined Conde Nast Entertainment as Chief Revenue Officer. I also heard this from Elliott Nix at Google, who told me, “If you can figure out attribution from ads to real-life action, let me know.”
Agencies, who I believe are desperate to stay relevant, are in a great position to chase this. I was very interested to hear at Advertising Week 2012 that Starwood was launching an experiment with a media partner and their agency to carefully track the offline impact of these combined elements: Print ad, email to loyalty program members and online advertising. By precision-timing that effort, would they see a bump? (I’m working on getting an update from the marketing head.)
One thing that is being done today is measuring the influence of messaging on the audience; but that’s a bulky and interruptive process generally through surveys so measuring sentiment through social media is a shortcut. Until we can find a way to quickly gain feedback from the audience, we can only tie together the results of our online performance with offline performance, even though there may be a lag.
Could the solution be a tiny widgit (such as a green, yellow, red radio button element) that becomes part of the website experience to gain feedback on “relevance” or “sentiment.” Again, that’s disruptive. And we already have disruptive. And interruptive. Usability testing has proven that ads get ignored by the audience. I think display ads do have a place, but let’s recalibrate our expectations and look to other sources.
BEYOND THE BANNER
What the media has that others don’t is ACCESS to people and events and EXCLUSIVE CONTENT. Here’s a roundup on alternative revenue sources for publishers.
Access to experiences: The publishing business model is all about the media property leveraging their access of a cultivated audience to marketers. But publishers can sell access to experts/celebrities and velvet-rope events to consumers. They can sell live experiences. The New York Times’ TimesTalks events are a great example. The Wall Street Journal runs conferences and has held free talks with panels of journalists and experts. Many media companies use experiences as prizes to drive social media campaigns and site registrations.
- Paid attendance by selling tickets for admission or a ‘cover charge.’ Tickets work for events such as live streaming seminars, concerts, tours or talks. The ‘cover charge’ model is the toll phone call (1-900) where the participant pays a flat fee to join the live call. I have not seen this in action, but it was a product that is offered by telecommunications companies and part of my offerings to clients by TennisWire.org media services. It would work for exclusive interviews with celebrities, business leaders, or self-help gurus. Skipping the visual presentation (webinar) makes the event accessible to everyone and makes for a more intimate experience.
- Ecommerce: Selling unique, one-off experiences — such as an autographed magazine cover by a celebrity guest editor (such as Bono’s 2007 stint at Vanity Fair) or attendance at a photo shoot — is something media titles are in a great position to offer. More on selling objects below.
Exclusive Content: Beyond the usual written, visual and audio content, there are media assets that the publisher has the exclusive right to sell. Photographs are a perfect example and the good news is traditional publishing companies have tons of this content; the bad news is that it’s on film in the form of negatives and slides. With the rise of photo agencies, publishers generally no longer employ staff photographers so they don’t own the exclusive rights to photos unless they are willing to pay a premium. Still, publishers who do own photos can make a business of selling products featuring those images. The New Yorker has a long-standing online business of selling their copyrighted cartoons in various formats.
- Paid Content: Sell access to regular, premium or archived content through subscription monthly fee or micro-transactions. The New York Times is one newspaper publisher that successfully meters its content with 10 free article views per month (loopholes exist!) and ESPN was one of the first to offer premium content subscriptions.
- Display Ads: This is what media know best — selling space in the form of run-of-site banners, sponsored buttons and modules, native placements (“brought to you buy”), search, and video ads. All various forms of display and text advertising are the core drivers of revenue for publishers. RTB and programmatic are styles of purchasing this inventory. It’s essential to understand the technology and separate out your sponsorships from the run-of-site ads. Sponsors often want 100% share of voice in sections of a website, but if it’s a high-traffic zone frequented by in-demand segments of your audience, it might be worth keeping it open as RTB inventory.
- Branded Content: Pay to play. For example, Fortune 500 CEO writes a twice monthly column for a business publishers’ site. Brands or companies pay the publisher to run their relevant and high quality column. Disclosure must be made to readers, either at top or in the fine print ‘about the author.’
- Content Marketing: This is more generic than branded content and companies like Outbrain and Contently are winning big here. So are the publishers, as my Time Warner friends tell me: Sure those headlines drive people off-site, but it’s worth the cha-ching each month. It’s dependable revenue…but for how long? Will audiences fatigue?
- Ecommerce: Beyond a publisher’s own branded goods, selling products is a tricky game. It can position you as an adversary to advertisers. In 1998, I faced this issue at TENNIS.com when we explored making our gear guide more useful by adding a “Buy Now” button to each racquet and pair of shoes.
Would it serve the audience? Absolutely!
Would it serve our manufacturing partners (Wilson, HEAD, Prince, etc.) who advertise? Absolutely!
Would it serve retailers who advertise? Absolutely.
It would be simple if (1) only one retailer existed and (2) the manufacturers weren’t competing with their own retail partners.
In theory, it was a mess.
Solution: My strategy adding two buttons to every product review:
– “Store Locator” produced geo results of the manufacturers’ database of retail partners (some online, some brick-and-mortar shops).
– “Buy Now” linked to the product on our retail advertisers’ sites. Sometimes we had one retailer, other times we had more. It was similar to what Kayak.com offers now.
- Marketing Services: This is largely incremental revenue as publishers offer to handle creative production of ads and other materials, yet it’s still an add-on to the primary ad buy.
- Research: This is an area of growth for so many publishers, who spend plenty of their own budget on market research, general consumer behavior and media consumption habits. I believe every media company should have a research division dedicated to performing research on demand by clients and for themselves to sell reports to the trade.
In 1996, for example, a couple of manufacturers of tennis apparel and gear paid TENNIS.com to conduct original research on behavior and preferences. (I majored in sociology and minored in journalism so I was trained to write research surveys and conduct interviews that were neutral.) The surveys were administered online and the confidential reports were shared with each of our clients. This was a new revenue stream for us. While it was secondary to advertising — because that’s what our traditional media company knew best — it showed fantastic promise and it should have been developed further.
There are great opportunities for media to diversify beyond selling space for revenue. We’ve focused to greatly on time and space, but experiences are a burgeoning business.
The digital media space is still nascent. I believe ultimately all media will best serve audiences and marketers by valuing the quality of engagement with content. First, though, we need to define how to measure online engagement (meaningful interactions), sentiment and offline behavior. More to come on that…