June 12, 2020
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The Ad Business is Going Nowhere… But It Will Be More Contextual

It has become a common narrative on social media to say that ad-based businesses are dying. I’ve seen incredibly smart people say that the future is subscription and commerce; any publisher still relying on ads is doomed to fail.

I can understand why people think it’s true with the amount of ad inventory that Google and Facebook have claimed. Some reports say that Amazon, Facebook and Google account for two third of digital spend. How can anyone build a business when that’s the case?

The reality is, the narrative is wrong. There are plenty of publishers who have strong ad revenue. They’re not billion dollar companies, but they’ve figured out how to connect the right audiences with the right marketers.

That’s not going to go away anytime soon. Whenever there is an entity that has figured out how to acquire an engaged audience, advertisers will not be too far behind. It boils down to attention. We live in an economy predominated on people’s time. If we are not working, we are consuming media in one way or the other. For many people, that is on Facebook and Google.

To be honest, I don’t really think I want to live in a world where advertising goes away. While it can be annoying, advertising has subsidized a ton of great content for decades. It has, to some extent, evened the playing field with regard to people’s ability to get information. Moving to a world that is strictly subscription with no ads at all means there are large swathes of the population that simply can’t consume content.

While I care deeply about monetizing content and obviously believe we should try to maximize our revenue, I think there is something to be said about value exchange through either giving dollars or giving attention. For many people, giving attention—looking at advertisements—is good enough.

But there is no denying that the current system has not been working for many publishers. With the move to retargeting and tight segmentation, marketers are now able to find the exact people to whom they want to target an advertisement. To make matters worse, Facebook and Google have been able to accumulate an obscene amount of data about users, making it possible for them to monetize across the internet.

Take, for example, a publisher that uses the Google Ad Server; by default, AdX is baked into that. That means Google is collecting data on your users that it can then use for other purposes. That’s additional data about people that it can then sell to marketers, making its tools incrementally better. It’s no wonder Google gives so many tools away for free.

I digress… This tweet lays out how all the various systems in the Google display advertising stack work together.

It’s monolithic and incredibly hard to compete with. And yet, for the past decade, there has been an increasing focus on attempting to use the same tactics that Google does with its ad network. We spin up expensive DMPs, we try to pull in other data sources, all with the goal of telling advertisers that we have an audience and we can target specific audiences too.

Not to mention, the programmatic stack is downright toxic. According to a report by the FT, 50% of all ad spend goes to middlemen.

Publishers receive just half the money spent on their digital ads by premium brands such as Unilever and Nestlé, according to research which lays bare the fees taken by adtech companies and untraceable middlemen.

As well as finding that at least half of a brand’s digital marketing spend is absorbed before reaching a publisher, the researchers also discovered that almost a third of those ad-placing costs were completely untraceable.

Google is one of the big middlemen in the game, taking a cut of everything along the way. So, we can’t compete with Facebook and Google. Not on targeting.

Fortunately, the ad world is evolving in a way that can help even the playing field just a little bit. With GDPR, CCPA and browsers getting rid of 3rd party cookies, the programmatic business is going to suffer. On their own, Facebook and Google will be fine. They have a ton of usage on their own platforms, so they have data. But publishers are going to find that what used to work doesn’t any longer.

I believe this will wind up being a good thing in the long run. Hopefully, publishers start to spend more time selling their advertising based on contextual topics versus cookies.

If we think about some of the profitable media companies today that are really starting to hit their stride, we’re talking about companies that derive a large chunk—if not all—of their money from contextual advertising. The Hustle and Morning Brew are not selling ads based on consumption and personal data. Both sell ads to brands that are looking to target a specific psychographic audience—it’s not age, gender and location, but rather, psychological factors. What about Industry Dive? It has no programmatic on its network of sites and, before COVID, my guess is it was budgeting over $30 million in revenue this year. It’s all contextual advertising. Advertisers know that if they place ads on specific Industry Dive websites, they’ll target the right audience.

But the other thing that all these sites have figured out—that Facebook and Google also figured out—is the form of the advertisement. Both The Hustle and Morning Brew write fantastic ad copy. I’m envious of it. Industry Dive offers a lot of direct response opportunities, which gives marketers a true, verifiable understanding on how well the campaign did.

Most publishers don’t offer this. Yes, we offer a report that presents impressions, viewability and maybe some clicks. But for the most part, we like to call banner ads “brand plays.” No wonder Facebook and Google are picking up all the money. Those campaigns all make it easy to relate ROI. If you know ROI, you know how much you can continue spending. Additionally, the creative is native to the platforms. That native treatment makes them that much more efficient.

Now think about the average website you visit. Perhaps it has a series of 300×250 boxes on the site, the random pushdown ad and an outstream video that, hopefully, is playing sound off. I went to a Gannett site recently and it pains me to look at it.

Here’s a great Twitter thread to show it in action:

The reason these sites do this is because they are scraping the barrel for CPMs, so the idea is if they put more ads on the page, they’ll make more money. The problem is this makes it really hard to keep people’s attention.

It all comes back to attention.

Publishers are competing on attention. The remarkable thing is, we’re built to bring audiences to our sites. We have entire teams who are responsible for creating exactly what prospective audiences want. So, we have no problem getting them.

Think about it this way… If I’m a marketer on Facebook and I want to target people that live in New York City, I can do that easily. But if people on New York City are not spending time on Facebook, I will go elsewhere. Now it’s not so cut and dry, but again, marketers chase the audience. We can capture that audience.

But over the past decade, we haven’t built the tools necessary to actually monetize them. We’ve left all that to Facebook and Google and then it’s a wonder that we’re not making much money. So, let’s break down what those tools need to be:

  1. Self-serve: Ever bought an ad on Facebook and Google? It’s self-serve. I control the spend. I control the start/stop dates. I control everything. Other marketers will want that as well. That’s why so many want to sign PMP deals.
  2. Contextual: If we’re not going to offer marketers the ability to target specific people, we need to let them target specific topics and themes. But that means we need to know exactly what our content is about and make that part of the self-serve selection process.
  3. Viewable Impressions: I can’t tell you how many sites I go to where there are ads loading below the fold. Why? Only marketers paying pennies would ever bid for those impressions. Our ads need to all be viewable.
  4. Reporting: We need to provide far better analytics. That also means we need to return to the discussion of clicks. Whether we like it or not, marketers are paying for performance. Our ads need to perform. Let’s show that they are.
  5. Unique Creative: We can’t just offer boxes. We need to be able to offer new types of creative that will get marketers more excited.

We hosted our second Zoom call on Wednesday and Jarrod Dicker, VP of Commercial at The Washington Post, was in the room. It got me thinking about the Zeus tool that he and the team announced last Fall.

The tool is broken into three chunks, which I am stealing right from the Zeus website:

  • Performance: Zeus Performance is a next generation advertising framework and rendering engine that drives higher partner revenue by reducing site latency, increasing overall viewability and placing performance at the center of every technical decision.
  • Prime: Run automated real-time ad formats across your site and throughout the Zeus Network. No design work needed. No development work needed. No ad creatives needed. No launch delays.
  • Insights: Zeus Insights brings the power of artificial intelligence and machine learning to advertisers. Focused on being cookie-less with privacy and security at its core, Zeus Insights uses content and behavioral targeting for ad delivery to customers.

Now Zeus doesn’t offer everything. But it offers a ton of what I’m talking about. Impressions are viewable, they’re in context, the creative will be unique and the reporting, I am sure, is top notch. I’d like to see them introduce the ability for an individual publisher to offer the unique creative as a self-serve product.

I think this is critical for local publishers because it introduces the opportunity for businesses to advertise in an easier way. If I’m a lawyer working in that city, I can spin up a Facebook or Google ad quickly. On the other hand, many of these publishers make it difficult to advertise. These geographic publishers should be spending time thinking about how to engage local businesses. Their ad buys may not be large, but because it’s self serve, there’s no need to manage it from a sales perspective.

By offering a self-serve, streamlined, unique ad type that is guaranteed to be seen, publishers can start to pull marketers that are spending all their time on Facebook and Google. It’s certainly not going to be instant and I’m not suggesting either of those platforms are going to die. But we have audiences; marketers should want to talk to them. We just need to do a better job giving these marketers the tools they need to do it efficiently.

I believe in a world where some content is free and supported by ads and other content is backed by subscription. I also believe in a world where diversified media businesses can have both. But that does mean that we need to build stronger ad businesses. These are some ways to do that.

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