For Publishers, Pennies Don’t Build Empires

christianbaeslerThe Sell-Sider” is a column written by the sell side of the digital media community.

Today’s column is written by Christian Baesler, president at Bauer Xcel Media.

Nobody cares about pennies. Just ask John Oliver, who famously called for the US to ditch this worthless currency.

Yet in today’s digital advertising market, content publishers are stuck dealing in pennies. The average CPM for online inventory costs less than $3. The average value per user for many publishers is worth mere pennies. And the profit that many content publishers make in this environment can also probably be calculated in pennies compared to the industry’s behemoths.

The way advertisers spend their media budget has created this penny economy. Media buyers looking for scale and cheap CPMs have encouraged publishers to focus on increasing the number of impressions they have. And publishers have followed suit to their own detriment.

Their answer to consumers blocking ads? Show more ads to those who don’t. Do ads need to be viewable? Reload the page every two seconds with more ads. Are consumers using mobile to read content? Sell lots of tiny banner ads. Are publishers lacking in scale? Buy cheap traffic and show ads to robots.

In 2016, publishers need to take a different approach.

The Non-Publisher And The New Publisher

The impression obsession started innocently enough. In traditional print media, the average circulation of the 20 largest magazines is only 5.9 million. In a business with a relatively finite audience, the best way to increase revenue is by increasing the number of pages being sold.

Online, the average circulation is 140 million. The companies that dominate the top rankings online are new media sites, including Google, Facebook and Yahoo. While they all have content, such as Yahoo News and YouTube, they’re focused on building consumer businesses that fall widely outside of traditional content monetization, including shopping services, travel, classifieds, social media and email.

Each of these businesses is judged by the value it generates from its audience, not from the number of impressions it can generate. The metrics that matter are not the number of impressions that they serve, but the amount of revenue that they make per visitor, which means that instead of earning only pennies per consumer, they earn more than $1.

While these digital giants have left traditional publishers in the dust, many publishers have stuck to producing premium content and haven’t branched out to more lucrative businesses.

More recently, a new type of publisher has risen online that is also focused more on audience value than impression volume, but actually looks a lot more like traditional content publishers. Companies like Vice have largely shunned the programmatic and ad network ecosystem that encourages impression volume, instead focusing on creating custom advertising that fits seamlessly with their content. Vice knows the value of its audience and builds its business by value instead of volume. They will go so far as to integrate advertisers into the planning and filming of their videos to create a valuable product.

Audiences Make Money

As publishers put together their 2016 strategies, they must make the shift away from maximizing impression quantity and focus on new monetization strategies. To truly change their businesses, publishers should stop only looking at metrics like impressions per month and average CPM. Instead, they should be looking at the average revenue they earn per user per month and increasing their long-term average value per user, across all channels. By doing so, it is likely that they’ll develop more diverse business models and new advertising products.

If publishers insist on sticking with the content game, they still need to shift their focus. Creating opportunities for native advertising as an afterthought is not as valuable as integrating brand new types of advertising into the content in the first place. Publishers should focus on dynamic content created specifically for digital channels, with audiences and advertisers in mind. It doesn’t require a major investment, just a change of strategy. Many popular pieces by Vice were created very inexpensively and quickly based on trending topics and advertiser demand.

To really profit, traditional publishers should explore more varied monetization strategies. While Condé Nast is probably not going to create a map service that competes with Google, there are many retail opportunities that it could be offering. The fact that Lucky failed online is a lost ecommerce opportunity. Newspaper publishers should be all over Facebook with local information or create a more reliable competitor to Craigslist in order to regain relevance with classifieds. There’s no reason why a travel publisher shouldn’t be integrated with Airbnb in the near future.

Publishers that only sell impressions to advertisers when what they really want are consumers are missing an opportunity for growth. By changing course and building new transactional businesses around consumers’ interests, publishers will regain relevance and a larger share of the advertiser’s budget. And that’s something that any scale-strapped publisher has wanted to hear for a long time.

Follow Bauer Xcel Media (@bauerxcel) and AdExchanger (@adexchanger) on Twitter.

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