“The jig’s up, they
didn’t make more money off of it. Because guess what? Everyone else did it.
Laws of supply and demand kicked in, and everyone had tons of inventory, and
you’re throwing it through these third parties, that are giving you a penny an
ad, and it doesn’t really add up unless you get more and more pageviews. So
then you want to do more. the next thing you know, you have something that has
no value to the consumer, and so, of not much value as a brand.” – Axios CEO Jim VandeHei
If Jim VandeHei’s assertion is correct, then Judgment Day
has come for digital publishers. There are three possible outcomes under such a
scenario, where “scale” has become untenable and abandoned as a strategy for
publishers: 1) Brands pay significantly more for advertising and brand
partnerships, 2) Readers pay for subscriptions, or 3) the publisher downsizes
significantly or shuts down. We’ll evaluate each of these possibilities:
1) Brands pay significantly more for advertising
and brand partnerships
The glut of content that has followed “publishers
worshipping scale” has devalued advertising significantly. First, the infinite advertising
inventory generated by endless amounts of content has inflated supply so much
that prices for ads are pennies on the dollar from what they had been in the
advent of digital advertising. Moreover, the fact that there were simply so many
ads draping online content, they became a nuisance, and ignored (or even
disliked) and significantly less effective. Digital ads have a long way to go
to rehabilitate their image in the minds of marketers, but it’s not impossible
for publishers to achieve. By introducing digital ad formats that are sexy and
engaging, much like print advertising or TV commercials, publishers can make
their ads an attractive option once again. This is already happening, but it’s
doubtful that this possibility will sufficiently fill the coffers of capital
intensive “traditional” publishers in the digital age.
2)
Readers pay for subscriptions
This is the most likely outcome in the wake of VandeHei’s
proclamation, but will weed out all but the most desirable publishers. Already,
The New York Times has made it clear that their future revenue model is based
significantly more on subscriptions than on digital advertising. It will be
challenging to convince millennials and younger to pay for content, especially
when this generation was raised on free content via social media, blogs, and
bundled cable tv (which gives the feeling of free). The turning tides are in
the favor of subscriptions for digital publishers, with “cord cutting” moving
individual’s budgets toward a la cart media purchases, and away from bundled
content, so the possibility of this providing tenable revenue for publishers is
possible, but will only work for a select few publishers.
3)
The publisher downsizes significantly or shuts
down
The fact of the matter is that the internet has democratized
the sharing of information, so information is cheap or free. People write for
free, and increasingly provide video for free. So business models that hinged
on content being the product of an educated elite through few distribution
channels (think newspapers), are no longer viable. And publishers whose
operational budgets rely on limited distribution channels and higher payment
for the content generated are being turned upside down. This reality, that
there are many distribution channels via the internet, instead of a select few
(newspaper, magazine, tv, radio), isn’t a temporary hurdle that digital
publishers have to work through… it’s the new landscape of a digital world that
won’t go away. This will kill many media bodies, and pare down many others.
This is the inevitable outcome for publishers who can not adequately boost
revenues through either outcome 1, outcome 2, or both.
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