Last week at the WAN-IFRA India 2018 conference, I said the marriage of convenience that has existed between journalism and advertising has been broken.
I want to go into a little more detail about that.
Much of what I am going to say here may seem elementary and will come as no surprise to senior managers, but journalists (who are rightfully focused on journalism and not on the business side) may learn a few things.
What’s wrong with the advertising-based business model for journalism? Many things, but let’s begin by looking at your advertising customers. Who are they?
This will differ by market, but in many countries, locally owned businesses have been decimated, first by “big box” chain stores and giant discounters (Walmart, Asda, Tesco, Big C, etc.), then by Amazon and ecommerce in general. The big indoor shopping malls of the 1980s replaced advertising with location as a marketing tool. Now, especially in the United States, those malls stand nearly empty. The remaining retail is divided into big corporations that make decisions at central headquarters (and brutally negotiate pricing), and very small local/neighborhood businesses with small budgets.
Regardless of size, though, the retail business or service provider is looking to get messages not just to people, but potential buyers. Roof repair companies aren’t looking for people who rent apartments. Tire dealers aren’t looking for people who don’t have cars. And the buyers of advertising are a bit more sophisticated today than they were a generation ago.
There’s an expectation of targeting and efficiency and results that is poorly met by the traditional mass-circulation, single-product, print-oriented newspapers, especially when print circulations are in rapid decline. Retirement-age print loyalists are poor candidates for buying whatever is being offered by many would-be advertisers. (If you wonder why Monday’s newspaper didn’t have any display ads other than hearing-aid companies, that’s why.)
So where did the ads go? To the Internet? Some did, but consider also the highly targeted nature of format-segmented radio and direct mail. And as any ad salesperson knows, there’s no shortage of competitive options for the advertiser -- coupon books and billboards and “advertising specialties” like pens and coffee cups. The decline of print is an opportunity for all of these competitors to move in, the way weeds grow in disturbed soil.
But let’s say a lot of that money goes to the Internet. You have a website, right? So isn’t that the solution?
Begin by looking at reach and frequency, the most basic metrics of advertising. How many people did my message reach? And how often did they see it?
Frequency is important because effective messaging requires it. There’s a marketing adage, the Rule of Seven, that says people need to see an ad seven times before they’re motivated to take action on it. Like most adages, it’s not really scientific, but there’s a kernel of truth there. A big kernel.
What does frequency look like on your website?
Of your nine gazillion visitors, how many are there seven days a week? Five days? Two? The answer is there in Google Analytics, if you spend enough time wrestling with it, and you may find the answer to be both shocking and depressing. News websites do have a core base of loyal users, but it’s not the big number you’ve been getting out of your analytics software.
Now take a look at advertising networks. This is where things really get bloody.
Digital advertising isn’t delivered like print advertising, where an ad is nailed to the page and everybody sees the same thing. It’s delivered dynamically, with ads chosen automatically by software that can “see” information about you that is useful in choosing which ads to show.
But it’s bigger than that. On top of the basic ad-server technology there are advertising networks.
If you can’t fill your advertising inventory (the available ad slots), an advertising network can do so, giving you a stream of revenue that you didn’t have to work for. So naturally everybody participates in one or more ad networks. Free money, right?
There are more than half a billion websites today, generating a mind-boggling number of available ad slots at any given moment. And every one of those ad slots is potentially targetable.
That dynamic advertising delivery software (and layers built on top of it) will know where I am, and in many cases who I am, what I like, what I dislike, what ads I saw yesterday, what I may have clicked on … and so forth.
Yes, I’m just an anonymous web user, but there’s probably a UUID -- universally unique identifier -- associated with my web browser, though a cookie that I haven’t blocked.
For the newspaper, the toughest competitor isn’t the local radio station, or the direct mail company, or the ad specialities company peddling T-shirts and inkpens.
It’s the ad networks that can reach specific people in your local market who have shown an interest in a specific item or service in the last seven days. It’s Google and Facebook and a list of other networks delivering advertising every second of every day that anyone looks at anything on the Internet.
For a brief moment in the 1990s, we all thought that targeted advertising was going to be the mother lode of riches. Department-store magnate John Wanamaker famously said: “Half the money I spend on advertising is wasted; the trouble is I don't know which half.” But the Internet solves that problem. We can track users. We can report on results.
Surely we should be able to reap the benefits.
Adam Smith proved to be smarter. The law of supply and demand wins out. Half a billion websites, all that advertising inventory, all of it targetable … it’s a commodity.
Here’s the thing about commodities. Consider the chicken and the egg. Eggs are eggs are eggs. A commodity.
Sure, we have white eggs, and brown eggs, and you can package your brown eggs as “natural” and “free range” and maybe charge extra, but at the end of the day, and egg is an egg. All you need to make more eggs is some chickens and feed. Anyone can play this game.
The egg market is brutal. In all commodity markets, the natural forces of economics will relentlessly drive prices down toward the cost of production.
Let me say that again: In all commodity markets, the natural forces of economics will relentlessly drive prices down toward the cost of production.
You aren’t competing just with the radio station across the street. You’re competing a millions of websites and cat videos and Google and Facebook. They don’t have your cost of production. They don’t have journalists digging for the truth.
This is why putting ads on your website isn’t going to save your bacon.
So the “solution” being pushed today is to recognize this reality and become a player in it. Rather than selling ads to be displayed on your website, the “ad sales” department becomes a “consultative marketing partner” to the businesses and helps plan, construct and execute marketing programs that are delivered across advertising networks.
Frequency problem? Fixed.
But here’s the thing:
Journalism is not an essential part of this process. It’s an expensive luxury.
Yes, it created your powerful brand. It’s the brand that your “agency” business model is trying to leverage into profit. In the long run, though: what is journalism, and why is it needed to make money?
The marriage of convenience that has existed between journalism and advertising has been broken.