Why is (Free) Content Still King

I was so excited this week. I planned my blog post out in advance, took notes, found links – I was ready to go. Then I read an article that derailed my plan, because it covers a subject I have a strong opinion about – paywalls. More specifically, paywalls for newspaper publishers.

The article, from Columbia Journalism Review, focuses on the online paywall models of the largest newspaper publishers in the US. The conclusion is that, despite being in the ‘paywall age,’ most of these publishers still prioritize ad traffic and ad revenue over subscription revenue.

I’m not sure if the general public understands how most website display advertising works, but it sucks. It’s a broken system with ineffective technology and hundreds of vendors. These vendors prey on the ignorance of legacy publishers, acting as a middle-man where one isn’t needed, taking pennies out of dollars that already offer minimal returns for publishers and advertisers.

The result?

Online advertising makes Lincoln sad.

Publishers are lucky to get anything close to five dollars per one thousand ad impressions (CPM), and advertisers are lucky if they get a click-through rate (CTR) of more that 0.25%. These figures are both generous. I’m only using them to make my example more simple.

If you play this scenario out for a single story, a publisher needs to display 1,000 ad units to get $5. There are a few ways to get there, but let’s say you put four display ad units on each story. To get your $5, you need 250 views.

That doesn’t sound too bad, but it’s more difficult than it sounds. For the 25 publishers in the aforementioned article 250 views isn’t much. Each has an audience of tens-of-millions. However, I’ve been the director for sites with over six million page views, and as little as 100,000, and most stories do not get 250 views. And it doesn’t matter if you have 100,000 views of 25,000,000, the economics are the same.

When you consider just the cost of creating a story, this is not a sustainable model. A journalist making $12-an-hour, taking an average of three hours to create the story needs at least  1,800 views to break even in my example. That comes out to $0.02 per view.

Lincoln is still not happy.

And don’t forget, you still have technology costs to consider. Despite popular opinion, it’s not free to publish on the internet.

And the advertiser? Those four ads would each average one click for the 1,800 views. One.

I could go into more granular detail and really nerd-out on this, but the point is, for a publisher to create a sustainable business using display advertising is a fool’s errand. And based on trends, this isn’t likely to change in the near future.

What’s the alternative? Easy, online subscriptions.

Well, it’s not really easy.

I’ve been a proponent of online subscription models for news, otherwise known as a paywall, for years. In 2006, when I worked for The Daily Record in Wooster, OH, long before it was cool, we had a paywall.

Do cool kids still use these?

The downside to using a subscription model is that it’s hard work. It takes time and technology to set it up and keep it running efficiently. If you want to be successful you have to work at it. It’s not a set-it-and-forget-it tactic. It’s a long-term strategy. While subscription revenue has a higher learning curve, it also has a much higher return and provides a recurring revenue stream that advertising can’t.

For example, in my experience, a general website user might view two stories a month – that’s four cents a month based on my example above. By comparison, I’ve found that the average subscriber views around 100 stories a month. If you use the five bucks I’ve used previously as your benchmark, that’s a 12,400% increase.

One final example. I saw a statistic recently that claimed only 1-2% of online readers are willing to pay for news content online. Let’s assume this is true – however, I would argue even if it’s true today, that volume will only increase in the future.

For a small news website with a unique monthly visitor count of 50,000, a 1% subscription conversion rate is 500 subscribers. At $5 per month, the annual revenue is $30,000.

While this is not a sustainable business model on it’s own, compare it to what it would take to get that same $30,000 in display advertising using my original example. The publisher needs 500,000 ad impressions per month. With four ads per page and two views per visitor, the publisher still has a 25,000 impressions shortfall per month.

Personally, I can see a much clearer path to profitability using a subscription model. And there is no rule that says you can’t have both, in fact most publishers do. However, if you do combine ads and subscriptions, focus on a user-friendly ad experience. Otherwise you’ll piss off your subscribers and you’ll have a retention problem that impacts your existing business challenges.

Is the ‘Pivot to Video’ killing websites?

If you follow media, you probably read the big news this week: Video has killed traffic to millions of websites! Hey, at least it wasn’t millennials this time.

Your traffic on video, apparently. Not pictured, millennials

Okay, maybe it wasn’t millions of websites, but the traffic losses are in the tens of millions. And there are a few notable sites that have seen substantial traffic losses since converting sites to a video-centric strategy.

The chart below has shown up in a few places, but I found this one on a post from Digiday. As you can see, these losses are no joke.

Of the four sites in the chart, the one that was most surprising was Fox Sports, but after I read more about the direction they’ve gone, it makes sense. My initial reaction was based solely on content – sports lends itself to video more than most other content types. I know I would rather watch highlights than read them.

So what happened? In the case of Fox, it’s not that video doesn’t work, it’s that they went to an extreme. If you visit foxsports.com today, it’s all video. If they could do headlines as video, they would. They have abandoned the written word.

I have to assume that all of these sites expected a drop in traffic, but I’m certain their projections didn’t look like the chart above. This is worse than what happens after a site puts up a paywall.

So do users hate video more than they hate paying for things? I doubt it. I think this could be a combination of a few factors:

  1. A miscalculation in our data-rich world;
  2. listening to advertisers rather than the audience;
  3. a lack of knowledge on the difficulties of video discoverability;
  4. trying to keep up with where Facebook and YouTube want to push publishers.

Any one of these factors, and more, could send publishers down a rabbit hole looking for answers. Or maybe, just maybe, I’m wrong. Maybe they expected this and they are playing a long game.

What if the KPIs they’ve decided on for their organizations are not based on traffic? What if they see where video is going and are looking ahead three, five or even 10 years? Maybe they have bigger, longer-term goals in mind. After all, the chart above shows how much traffic has fallen, but it doesn’t say what has happened to time on site metrics.

Think about it. What if, in 1979, Sports Illustrated decided to abandon the written word and create a 24/7 cable network dedicated to sports. Traffic metrics – however they would have been defined at that time – would have plummeted and they would have been soundly criticized. Would they have dominated TV and culture like ESPN has for the last few decades?

Who knows? What I do know is that if I’m one of these publishers, and I have a board willing to stomach short-term losses for long-term profits and growth, it’s worth a shot. It’s not like display CPMs are improving.

In media, the one thing that has been true since the 1950’s is, regardless of platform, video is not going away, and it will eventually consume everything it touches.

The next step

Like I said, “Someday I’m going to do this.” So I am. But what’s the next step?

Despite the (current) name of this project, Random Focus, I want my blog to have some focus, and, more importantly, a purpose. The last thing I want is to have a Seinfeld blog. Not a blog about the show, a blog about nothing.

My blog’s name isn’t about a blog, actually. No, the name is about how I see myself as a person, personally and professionally. I’ve never really fit into a single group, or limited myself in my hobbies and interests. Like most people, I think, my interests are diverse. The difference is that I’ve embraced this as part of my personality.

And I’m fine with the fact that I am a master of none. I feel like being so keeps me sharp. I have to keep learning to satisfy my interests.

Al Bundy
Al Bundy, king of Polk High.

Not to Al Bundy this, but even when I was in high school I didn’t fit into one group. I was an art student, participated in theater, and was part of the forensics team (I gave a great talk on the voice actor Mel Blanc). I was also a captain on the football team, ran track – technically I threw – and ended my high school career in the National Honor Society.

College was a little different, but that’s because I had no clue what the hell I was doing. I’m certain this will be a future post topic.

While my high school days are now decades behind me, the eclectic part of my personality never left. I like to keep my interests diverse, it keeps me motivated and focused on my personal goal to be a life-long leaner.

Early on I suspect my posts will be like this one, about the process I’m going through. However, my sense is that they will quickly turn to the things that I have passion for – and opinion about – professionally: media and audience development.

And to that last point, if you have some extra time, Kantar Media recently released some great qualitative research on paying for online news. It’s a little long, 48 pages, but if you’re interested in the future of media, and are wondering to what degree paid subscriptions are part of the future, it’s a good read.

Someday I’m going to do this

Every few years I get a itch to start a blog. And every few years I do. And every few years it lasts for about the lifespan of a common housefly – which is actually two to four week and not 24-hours, as is commonly believed.

The problem is never motivation. The problem is confidence.

Jake the Dog Quotes

Even if what I say adds to some conversation, why would anyone listen?

Over the past year, however, I’ve started listening to a lot of marketing and media podcasts. And they all have the same advice when it comes to writing/blogging – the only way to build and audience and get better is to start writing.

I’ve been warned, via these podcasts, that these first posts are going to suck. That five people – if I’m lucky – will read them. The audience isn’t what matters right now. What matters is that I’m writing to find my voice, to understand what it takes to build a digital community from zero, that I’m building a habit, and that I’m being who I am.

That means I’ll post about the things that drive me: media, video game, sports, mental health, and maybe some religion and politics – maybe.

My plan is to post at least one article a week, hopefully on Saturday or Sunday. Later, as I find my voice and get into a groove, I hope to supplement with links during the week.

Wish me luck.