Why media company revenue flounders online

Borrell’s latest data (see below) shows that nearly six in ten local media revenue dollars are going to outside web pureplay companies. Add to that the reality that nearly all of the national online revenue goes to the top ten sites in terms of audience, and you can see that there’s something inherently wrong with traditional media’s approach to online advertising. At this week’s RTNDA backgrounder in Chicago, I heard over and over again that web revenue accounts for less that 5% of a station’s overall revenue, so it’s hard to motivate people to do the job of selling online.

I am increasingly convinced that this is due to the blending of two ad metaphors that don’t belong together, and until this is addressed and remedied, we’re going to continue to flounder online.

The Page Metaphor — the paradigm upon which the print industry is based. It’s understandable that this would form our foundational understanding of the Web and its sites. After all, early iterations of the Web were only text-friendly, so a metaphor was needed, some fundamental way of understanding what was seen in a browser. The reality, however, is that web documents aren’t necessarily pages, so entrepreneurs not bound by this metaphor have been able to do remarkable things.

Most of the sales terms used to sell online display advertising come from the newspaper business: the idea of a fold, valuing ads based on location on the page, banners, skyscrapers, etc. In such a metaphor, tactics used to grow revenue demand the creation of more pages and that “driving” people to interior pages is the logical thing to do from a business perspective. Unfortunately, many media companies find themselves hitting a wall, because content for all those pages doesn’t grow on trees, and there’s increasing evidence that digging through “pages” isn’t the way consumers want to engage online media.

The Static Audience Metaphor — the paradigm upon which the broadcast industry is based. As broadcasting matured — and audiences were abundant — the ad industry decided (and broadcasters went along) that a stable mechanism (metric) could be created using Arbitron or Nielsen audience estimates. Since audiences were very large, it made no sense to use a cost-per-person measurement, and so was born the CPM or “cost per thousand (persons)” method of pricing ads. The foundational necessity for this method is an audience that is passive, static and stable.

This model has been with us for a long time, and it’s something everybody in traditional media understands. When the Web came along, it was natural to view it through this metaphor. Hell, we’re all lazy, and if we could simply transfer the CPM model from one to the other, it would make life so much easier. Unfortunately, web audiences are not only smaller, the measurements aren’t based in estimates; they’re precise to a fault. And the bigger the site, the more reliable the numbers, which helps explain the ad world’s inclination to the top ten sites in terms of reach.

Moreover, web “audiences” are fluid, like a river flowing through the media landscape, picking up bits and pieces of the flora and fauna along its path. Like the audience, our news products need to be river-like, but that’s another story. The point is that the metaphor of a static audience is simply wishful thinking when it comes to the Web.

And the problem, of course, is that the Web is neither print nor broadcasting, and it certainly isn’t enough of a combination of the two to justify what we have today. The existing ad world — with its vast agencies and creative types — wants needs a stable mechanism within which to play, but from both structural and practical perspectives, the Web resists such bonds. Those media companies who are making serious money online have been able to cut themselves free from these metaphors and through hard work, outperform everybody else.

We’re all talking about culture changes within our newsrooms, whether it’s print or broadcast, but until there is a similar culture change within the business side, we’ll likely just spin our wheels. The local media company of the future will be web-centric, but not until making money online fits the medium. What we need is a Web Metaphor.

Comments

  1. It was interesting to read that news folks at RTNDA have some interest in the “business side” of the operation. I believe news & sales operations need a new combined focus. What if a media outlet created teams within their organization made up of sales folks, a reporter and a tech/graphic artist? That team would be responsible for the local dining/entertainment content site. The reporter produces daily content combining picture/video and text. This site has search capability. And the tech member of team is tasked with testing new technologies to keep the site relevant and accessible. Now, perhaps, there could be four or five such teams. Those content sites would be created to tap into good, local revenue pools so sales folks focus on a specific ad category and become experts at selling and delivering results for those advertisers.

    Would that mean that a news department could not cover “breaking news?” Yep! Would that mean that covering “general news” would go away? Yep! At some point you need to ask yourself if 5 television stations, a newspaper and couple radio stations all covering “breaking news” is a long-term business model. Would it kill the local news folks not to cover a shooting at their local college? Yes. But on a day-in, day-out basis more people are interested in finding good, local dining/entertainment. It does not create the same adrenaline rush as covering the breaking news story, but long-term it makes more money.

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