April 10, 2020
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Shift to More Direct Revenue Models Will Only Accelerate

If you spend any time reading articles about advertising—including here on A Media Operator—much time is spent discussing ad spend contracting.

In many respects, it’s true that this is happening. As I wrote about in Tuesday’s post, digital spend has dropped 38% in March and April from where marketers had initially budgeted.

However, not all advertising is the same. More broadly, not all revenue is created equal and I believe we are going to see an acceleration toward more direct revenue models for publishers. Those that are unable to adapt are likely to continue experiencing aggressive volatility to revenue during these sorts of crises.

These thoughts have started solidifying for me after reading a variety of stories over the past couple of weeks. First, this story from Digiday:

The abandonment of advertising is a wake-up call to publishers. One newspaper executive noted to me that a disturbing conclusion about the blocking of news sites by advertisers is this: “If it was insanely valuable to [advertise on news sites], they wouldn’t stop.”

Marketers have become smarter when it comes to allocating marketing budgets. Although advertisers like to say that “brand marketing” matters, it’s the squishiest budget because it’s not a direct channel to revenue. Brand is important, but when you have to decide between an ad that will drive a sale and one that will spread a message, which would you choose?

In that same story, there’s this part about podcasting revenue:

Another bright spot has been podcasting. There, downloads have dropped as much as 25% as people’s routines are disrupted and less time is spent commuting. The pain isn’t broadly shared here, however. One publisher theorized that podcast advertising’s large direct response base, particularly among digitally native brands, has insulated it to a degree.

Since most podcast ads are just live reads with a unique coupon code, a brand knows exactly how much money it earns from its spend. If the spend is less than the revenue, there’s little reason to stop advertising.

However, it doesn’t stop with just advertising.

The Atlantic added 36,000 new subscribers in March. Bloomberg told Digiday that it is seeing 3x the subscriptions than it normally does. I would wager that many publishers are seeing this increase in subscriptions because they are promoting them more aggressively than they have in the past.

This makes sense. Historically, publishers have been almost ashamed to ask for money. However, over the past few years, we’ve seen these same publishers get more comfortable doing so. It’s paying off for them.

Subscription products across the board are seeing growth. Rameez Tase from Antenna shared this deck with me that shows March numbers for many of the largest streaming companies.


While it’s not a true apples to apples comparison, I wouldn’t be surprised to see these same numbers across many media companies.

Still looking at consumer revenue, Digiday wrote a story on how Food52 saw a boost in sales in March.

Commerce-focused Food52 saw double its average daily sales of kitchen, cooking and home products after the start of self-isolation actions to mitigate the spread of coronavirus.

On some level the growth came with more traffic. Food52 CEO Amanda Hesser said unique visitors to the site were up 36% during the last two weeks of March versus the first two; the site attracted 7.3 million unique users in March, according to Food52. Food52 has also created promotions for equipment and products needed to cook at home during this pandemic.

There’s obviously a caveat here in that Food52 owns the products it sells. There have been many reports from publishers that rely on Amazon for commerce fees seeing the percentages get cut deeply. Since Amazon is likely overwhelmed with business while also dealing with supply chain issues, the supply/demand economics just don’t warrant paying affiliate fees.

Let’s break this all down into a few bullets:

  • Standard advertising is down
  • Podcast advertising has remained sticky
  • Subscriptions are up
  • Owned commerce is up

Going more direct

Any revenue that is directly related to the consumer in some way is up while indirect revenue is down. None of this should be surprising, but sometimes it helps to reiterate. Let’s break it down…

For B2B media, direct marketing has always been the process. Brand marketing isn’t as big for these companies, so any campaign typically results in leads that the advertiser’s sales people can target.

For those brands that have leaned a little too much on the brand side, here are a couple potential products you could start offering:

  1. Webinars: This is an opportunity for an expert from the sponsor company to discuss a specific topic. There has obviously been a huge rush in the number of virtual events, but super focused presentations can still be a good opportunity.
  2. White paper: Similar to webinars, this is an opportunity for companies to demonstrate thought leadership and expertise around a specific topic.

Both of these result in direct leads. You’ll want to be smart about who you market these webinars/white papers to, though. You don’t want to pass poor quality ads to your partners, so have a conversation when selling to understand their target audience.

For consumer brands that don’t deal in “leads” per say, the conversation has to change from impression-based advertising to results-based advertising. If you’ve got a DTC brand that is willing to advertise on a podcast, offer them a no-risk digital campaign on site. It’s not a guarantee like with an insertion order or programmatic (can we even say these are guarantees anymore?), but it’s also tied directly to a response from your audience.

Push back I may get on this is that some revenue from programmatic is better than no revenue from performance-based campaigns. I’ll entertain that. Instead of just getting rid of your current ads, set a floor on these ads and experiment with it.

Let’s say your average programmatic CPM is $1. Set the CPM on these performance ads at $0.99. Whenever a programmatic ad bids $1 or above, you earn revenue from that. But below that, deliver the performance ad. You want to try and glean a CPM from these advertisements.

Go back into your ad server and set the floor for these performance ads at the updated CPM. If the CPM comes out to $5, set the floor to $5. If the CPM comes out to $0.50, set that as the floor. The reality is, your programmatic business will still earn you some money either way, but this way, you’ve got a floor in there that is tied to performance.

When we get to a post-pandemic environment, we can start to bake in minimum guarantees to these sorts of deals again if we want; however, the premise remains the same.

Why is this different than what brands have historically done with Amazon? Leverage. Amazon has such a strong brand, it doesn’t need publishers to drive traffic. These smaller DTC brands, on the other hand, rely on it. The other difference is that it requires a more active approach. Amazon gives you the tools and sets you free. Here, you’ve got to work with the DTC brands on creative and tracking.

I know of one publisher that is already going down this path. They’ve partnered with an education offering and their audience will have exclusive access to one of the courses. Is it guaranteed revenue? No. But the incentives are aligned between the two partners and that means both parties win.

For local advertisers, work with them to offer these same sorts of direct response opportunities. I was on a Patch website the other day and there was an oil company that included in its ad “Say Patch and save $10 on your oil.” This proves Patch’s value to the advertiser.

Changing course, let’s talk about direct reader revenue.

Every publisher obviously wishes that it could introduce a subscription, but now’s the time to really lean into paid products and figure out what opportunities exist to earn reader revenue and what your audience might find useful.

Let’s say your audience is comprised of young professionals. They want to learn from those that have gone through these sorts of crises and are farther along in their careers. Set up a webinar and charge for admission. $20? $40? In this case, allow people to submit questions and set aside a solid chunk of time for that Q&A.

The nice thing about a webinar is that the margins are incredibly high and they scale pretty nicely. Could you get 1,000 people to spend $20 per webinar? They obviously won’t all get the chance to ask a question, but the access is a big part of this opportunity. Would they come to more than one a month?

The key part to this is that you want to have that Q&A. That’s what makes it unique and, in my opinion, incentivizes the participants to pay for access.

Another option is to use a platform like Brella, which facilitates 1:1 networking. Now your audience is networking with each other rather than just listening to a talk. A huge reason people come to events is to network, so I imagine people would pay for these sorts of opportunities.

It all comes back to proving your worth

I believe that publishers are going to have to prove their value to their partners—advertisers and readers—more than they ever have before.

With advertisers, that means you have to prove you’re driving business. Business publications have grown very comfortable doing this, but for consumer brands, it’s more uncharted territory.

With your readers, that means giving them premium content that they can’t get anywhere else. It doesn’t have to be news. If you know your audience well enough, interview series and other educational content can be a possible driver of revenue.

The big brand budgets may one day return, but I think what we’ll find is the publishers that figure out how to tie their revenue more closely to the consumer dollar will wind up having the most success post-COVID.

Are you already planning new ideas to monetize your audience or better partner with your advertisers? Leave a comment and let’s discuss.

Otherwise, have a great weekend and I’ll see you all next week. Stay healthy and safe!

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