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How do you turn $77 million in advertising revenues into $3 billion dollars?

Why Publishers Should Ditch Advertising

Pub­lish­ers are leav­ing bil­lions of dol­lars on the table by focus­ing on adver­tis­ing as their pri­ma­ry rev­enue source.  In real­i­ty adver­tis­ing rev­enue should be the last chan­nel of rev­enue they rely on.

With words like view abil­i­ty, fill rate and Ad block­ers (the real­ly bad word) the adver­tis­ing eco sys­tem has become a mine field with many obsta­cles to over­come.

In a July 2014 study by Google the search engine giant deter­mined that the aver­age website’s ad view abil­i­ty is 50.2%.  That means half of the aver­age publisher’s ads are not seen and do not earn any income for the pub­lish­er.

With the steep growth of Pro­gram­mat­ic ad buy­ing site spe­cif­ic pur­chas­es are becom­ing rar­er for tra­di­tion­al ad units.  Adver­tis­ers are pur­chas­ing audi­ences using behav­ioral data and are match­ing that to the cheap­est inven­to­ry they can find to cher­ry pick the best audi­ence for their prod­uct.

So CNN gets a low ball ad buy and the adver­tis­er only buys the ads viewed by the opti­mal prospects for their prod­ucts.  If a Pub­lish­er can attract a pre­mi­um audi­ence per­haps they can max­i­mize their ad rev­enue.  But even the most pre­mi­um Pub­lish­ers (ie: Wall Street Jour­nal, Time Inc., Vogue etc) can­not con­sis­tent­ly attract an audi­ence of “buy­ers”.

As the sys­tem gets bet­ter at max­i­miz­ing ROI for online adver­tis­ers the spe­cif­ic web­sites will become less and less impor­tant to their media plan­ning.  At the end of the day the adver­tis­ers only care about mak­ing sales and, except for ille­gal or adult sites, don’t real­ly care where the buy­ers come from.

Where Ecom­merce is 300% of Adver­tis­ing Rev­enue

For Thril­list, rem­nant adver­tis­ing is non-exis­tent and ads aren’t sold pro­gram­mat­i­cal­ly. Instead, the dig­i­tal pub­lish­er embraced ecom­merce ear­ly on and that busi­ness is now three times the size of its ad busi­ness.

If today’s dig­i­tal pub­lish­ers are tru­ly look­ing to build their busi­ness they should begin imple­ment­ing the most lucra­tive rev­enue sources.

Turn­ing $77 mil­lion into $3 Bil­lion

In the first quar­ter of 2015 Ama­zon took in $17 bil­lion from mer­chan­dise Ama­zon itself sold to con­sumers. Of the $17 Bil­lion in sales Ama­zon kept 33.93% after deduct­ing their cost of goods (the gross mar­gin) so we’ll con­sid­er the num­ber of $5.76 Bil­lion. The sales were attained when 569 mil­lion unique vis­i­tors went to their web­site.

Dur­ing the Q2 2015 the Time Inc net­work of web­sites, usu­al­ly one of the 20 most vis­it­ed sites in the world, had about 312 mil­lion unique vis­i­tors and gen­er­at­ed about $77 mil­lion in adver­tis­ing rev­enue.

Time Inc. gen­er­at­ed about $.25 for every unique vis­i­tor in the 3 month peri­od while Ama­zon gen­er­at­ed $10.11 for every vis­i­tor to their web­site dur­ing their quar­ter.

Had Time Inc. been sell­ing prod­ucts at the same rate as Ama­zon it would have gen­er­at­ed over $3 bil­lion dol­lars dur­ing its quar­ter. That is 40 times more!

As for prod­ucts that pub­lish­ers can sell look­ing to their exist­ing oper­a­tions for oppor­tu­ni­ties would be the best place to start.  For some pub­lish­ers books could be a good choice.  The New York Times is mar­ket­ing vaca­tions based on editorial/educational themes.   Joint ven­tures with exist­ing ecom­merce orga­ni­za­tions could also be lucra­tive.

Sub­scrip­tions as a Glob­al Busi­ness

Adver­tis­ing rev­enue is coun­ty spe­cif­ic.  Pub­lish­ers need to solic­it dif­fer­ent adver­tis­ers in each coun­try.  Glob­al ad cam­paigns are rare.  Cou­ple that with major mar­ket deter­mined Inter­na­tion­al print dis­tri­b­u­tion and the Inter­na­tion­al ad rev­enue becomes tougher to come by.

How­ev­er the same dig­i­tal sub­scrip­tion can be sold world­wide. It’s a much more ver­sa­tile prod­uct. It is sold direct to con­sumer.

The Wall Street Jour­nal was one of the ear­li­est tra­di­tion­al news­pa­pers to add online sub­scrip­tions and now has about 700,000 dig­i­tal sub­scribers, the New York Times recent­ly announced they had exceed­ed the 1 mil­lion dig­i­tal sub­scriber lev­el, the Finan­cial Times has over 500,000 and the list goes on.

Dig­i­tal sub­scrip­tions have the poten­tial to gen­er­ate much greater prof­its than print sub­scrip­tions once Pub­lish­ers learn how to opti­mize their mar­ket­ing there­by min­i­miz­ing their sub­scrip­tion acqui­si­tion costs.

The Wall Street Jour­nal is gen­er­at­ing $41 mil­lion dol­lars a year based on their $59 annu­al sub­scrip­tion price.  Not the kind of rev­enue nec­es­sary to replace the adver­tis­ing but it is a good start. Espe­cial­ly con­sid­er­ing dig­i­tal sub­scrip­tions can be sold world­wide while print dis­tri­b­u­tion is lim­it­ed to set geo­graph­ic areas.

The $125 mil­lion Dol­lar Email

Prob­a­bly the most valu­able email busi­ness, or at least the first most valu­able, was Dai­ly Can­dy.  This start­ed out as a deals newslet­ter for fash­ion­able finds and built into a busi­ness that was sold for $125 mil­lion dol­lars to Com­cast years lat­er.  The entire busi­ness was a dai­ly email.

Email is the dig­i­tal form of direct mar­ket­ing and many great for­tunes have been made in direct mar­ket­ing. With mil­lions of vis­i­tors dai­ly Pub­lish­ers are miss­ing out in build­ing out anoth­er lucra­tive rev­enue source.  Pub­lish­ers could offer paid email sub­scrip­tions for super pre­mi­um con­tent, such as secret hide­away trav­el newslet­ter or an invest­ment newslet­ter, or they could use the free email lists to sell prod­ucts and ser­vices.  At a min­i­mum an email list serves as a source of traf­fic back to the web­site.

The $23 Mil­lion Dol­lar Job Board

Lau­ren Tou­by built the site MediaBistro.com as a news and infor­ma­tion site for the media busi­ness.  How­ev­er what most like­ly start­ed out as a great idea turned into almost 80% of the rev­enue, a jobs board.  Many Pub­lish­ers see job boards as an “add on” and do not ded­i­cate any sig­nif­i­cant resources to the ini­tia­tive.  The job board at Medi­a­Bistro earned Lau­ren $23 mil­lion when it was sold in 2007.

Oth­er rev­enue sources include resource direc­to­ries, smart­phone appli­ca­tions and soft­ware down­loads to name a few.

In the future the most suc­cess­ful pub­lish­ers will be diver­si­fy­ing away from adver­tis­ing and some may elim­i­nate adver­tis­ing entire­ly.  Those same suc­cess­ful pub­lish­ers will also have rec­og­nized that to be suc­cess­ful in ecom­merce they need to hire ecom­merce experts and to not try to do it them­selves.

Who knows per­haps in 5 years some of the largest ecom­merce busi­ness­es will be named CNN.com, People.com and the New York Times.

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