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.