Getting More From Advertising
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As it turns out, online advertising has not been enough to cover the cost structure of traditional news gathering, amounting to just one tenth of newspapers’ overall ad revenue, and not growing fast enough to replace losses in print advertising.
In the long run, ads alone may be insufficient to sustain online journalism. The average CPM price (cost per thousands) dropped in half from 2007 to 2008 to just 26 cents for newspapers’ online ads, an average that includes both high-priced display ads as well as low-end text ads. Although many publishers (including Media Consortium members) earned six to eight times that amount on average, the trend is still declining. While niche-targeted ads can command a higher price, the real problem is that 30 to 50% of ad impressions often go unsold on websites. Publishers simply have too much advertising real estate on their sites to fill at reasonable prices. To make matters worse, local advertising is not necessarily going online. In early 2009, Business Week reported a big slowdown in local online advertising that they do not expect to rebound when the economy recovers.
Three opportunities stand out for getting more from online advertising:
- Build the capacity for constant innovation. Online ad products are not static; new types of ads that attract advertisers will continually emerge. As a result, Adam Berrey, Senior Vice President at Brightcove, explained that the most successful online media companies have ad product managers who focus on creating new ad products rather than just selling them. “It’s like a magazine saying, ‘We’ve got the back cover. We’ve got a full page, a half page’,” he explained. “But when you move online, there is infinite number of different combinations.”
- Experiment with “performance-based” ads. Performance ads now represent the largest portion of online advertising, yet independent publishers primarily use “display” ads based on number of impressions. Although many advertisers still prefer display ads, the market is shifting to performance ads, which are based on the measurable results of users’ actions. From 2006 to 2008, the proportion of total online ad revenue for display ads declined from 48 to 39%, while performance ads increased from 47 to 57%. Advertising experts expect this trend to grow, and independent media organizations that innovate with these types of ads may leverage greater value in the future.
- Multiplatform sponsorship. As independent media companies become multiplatform, they have greater opportunity to attract advertisers with broader sponsorships than simply giving them a rate card. Publishers can give an advertiser access to their audience in a multi-faceted way that creates a deeper relationship with an advertiser’s brand. By combining online, print, TV, radio, co-sponsored events and online advertising in a packaged deal, media organizations can build advertising relationships that will contribute more to their bottom line.
In the end, advertising still has great potential to generate the resources that independent media-makers need to have a much greater impact, as well as reach new audiences. Many publishers of political content will increasingly need to tap advertising to support their missions, even if they do not depend primarily on it.
Diversification and Tension
No emerging model is the panacea for journalism, yet together they might be. A diversity of revenue sources not only makes independent media more stable and sustainable, but can also make it more independent.
In fact, deliberately mixing for-profit and non-profit strategies could have great promise for the future of journalism. Advertising revenue will grow by publishing popular stories, which are by definition relevant to many users. Yet, publishers can also push other important stories with foundation and major-donor funds. The right balance enables publishers to stay highly relevant to online audiences, reach their social mission and scale their organization at the same time—a feat that could surely be one solution for journalism.
This blog is an excerpt from The Big Thaw, a guide to the evolution of independent media, written by Tony Deifell of Q Media Labs and produced by The Media Consortium, a network of leading independent media outlets. Learn how your organization can use this report. For more information and recommendations from the study, click here.
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