POST WRITTEN BY Brian O’Kelley
Earlier this year, I wrote an essay for Forbes that posed the question: “Can technology save journalism?” My answer was (and remains) hopeful, though by no means should we discount the existential challenge that most media outlets face in today’s digital economy. Even as newspapers and magazines manage the shift from paper to pixel, broadcast outlets are fast discovering that streaming technology may well absorb even their businesses into the addressable digital market.
In theory, the Internet – comprised of billions of interconnected devices and applications – should be a boon to the news industry. But current reality tells a different story. According to eMarketer, in 2015 two companies –Facebook FB +1.03% and Google GOOGL +0.00% – took home 44 percent of all digital advertising dollars and 48 percent of year-over-year incremental advertising spend. Little wonder that Alphabet , Google’s parent company, recently announced that it grew Q2 earnings by 21 percent, year-over-year, with 89 percent of revenue directly attributable to its advertising business. Facebook’s results were even more arresting: its advertising revenue in Q2 alone was $6.24 billion, representing a 63 percent increase year-over-year.
Of course, neither Google nor Facebook employs an army of reporters, columnists, editors, investigators or fact checkers. Instead, they effectively envelop the work product of traditional outlets in their closed distribution channels. For journalists, the outcome has been disastrous. In Q2, the New York Times NYT +1.00% saw revenue decrease year-over-year by 2.7 percent. The Guardian –one of the trailblazers in digital journalism – posted a $2.8 million decline in digital advertising revenue between 2014 and 2015 and recently eliminated 260 positions. This, even though its paid subscription base continues to grow.
Everyone should care about these trends. Vibrant, independent journalism is a core building block of civil society.
But I remain an optimist. Between 2015 and 2019, the digital advertising market – excluding search (which is by definition not likely to subsidize journalism), and even excluding the portion that eMarketer projects Facebook and Google will take home – will grow from $57 billion to $79 billion. That is an extraordinarily large pot of money, even if we assume that Facebook’s and Google’s position cannot be disrupted, which I do not.
Just in the past year, we have seen technologies and practices that augur a promising future for independent journalism. Here are a few:
Alternatives to Google’s DoubleClick: Currently, Google’s third-party advertising platform, DoubleClick, enjoys an outsized share of the publisher ad tech market, meaning, it is the advertising technology of record for many of the world’s great newspaper, magazine, and broadcast outlets. (That’s right: not only is Google a media behemoth; it also furnishes third-party monetization technology for its competitors.) I would personally argue that Google abuses its market position, taking an excessive bite out of journalism ad dollars and privileging its own proprietary demand source. However, this power structure is quickly changing, because of new alternative full-stack technologies and a solution known as header bidding.
Until very recently, publishers either had to work with Google, which runs its own media business and is therefore in competition with its customers for advertiser dollars, or stitch together a patchwork of solutions. Now, with the emergence of independent, full-stack yield management platforms, publishers can monetize in a unified marketplace where all buyers have equal access to every impression. They can also benefit from a system in which availability is based on price and bookings are biased to preserve value. In addition, they get automated control over their processes and clearer demand and supply forecasts. The opportunity and efficiency that yield management can bring to publishers is huge, and it will enable them to reinvent the way they sell media.
The industry realizes, however, that transitioning off of DoubleClick is not always an easy feat, despite the real money on the table. For those who are not familiar with the practice, header bidding is a process by which publishers that use DoubleClick establish direct integrations with demand sources to allow them to submit their own bids against Google’s proprietary demand. In effect, header bidding opens the auction to additional bidders with equal access. As one would expect, that process creates more competition for digital advertising impressions and lifts bid prices. Even better, by integrating directly with outside demand sources, publishers free themselves of Google’s steep revenue share.
The results have been astounding. Publishers that adopted header bidding have reported a double-digit revenue lift and, critically, a lesser share of dollars flowing to Google. That means more money to fund newsrooms, which is a win for everyone.
Higher value for quality content: In the early days of programmatic, buyers primarily bought inventory based on audience rather than context. In other words, advertisers preferred to follow their target users around the Internet without caring too much about the underlying publisher sites from which they were buying these ad units. While cheaper in the short-term, this also encouraged content farms and clickbait because it was the cheapest way to get a high value user to monetize. This in turn led to the problem of invalid inventory, whereby bad actors created ad farms that siphon off advertising dollars. It also contributed to a broken cycle in which publishers, in response to declining advertising revenue, loaded their pages with more ad units, often in the extreme bottom, top, left, or right of the browser – locations that the viewer was unlikely to bring into frame. This proved to be a real problem for quality publishers who wanted to maintain the value of their inventory.
The good news is that buying patterns are again trending toward content of value. By leveraging their proprietary data with more sophisticated algorithms, advertisers can better target both audience and context, which shifts the balance of power back to quality publishers.
One example of this is the increasingly popular strategy among advertisers to pay for views instead of impressions. Traditionally, one of the great knocks against digital advertising is that advertisers never knew if their ad was viewable – meaning, whether a human being actually had the opportunity to see it, even though the advertiser payed to place it. But now, by drawing on logistical regression models, new technology has made it easier to predict which impressions are viewable before an ad unit is auctioned to enable marketplaces where only viewable units are bought and sold. Advertisers – whether they are interested in building brand awareness or earning clicks and conversions – will pay more for quality units. They measure their ROI on outcome, not budget.
Media outlets that clean up their pages and offer high-quality ad units can experience a meaningful lift in revenue, if they participate in marketplaces that provide the technological ability to enable viewable transactions.
Scaling with coalitions: Partnerships also enable publishers to create enough scale to take on market leaders like Google and Facebook while maintaining their own independence and control over distribution and monetization. Coalitions like the Local Media Consortium in the United States and Puerto Rico, Audience Square and La Place Media in France, the Pangaea Alliance in the United Kingdom, RPA Media Place in Argentina and APEX in Australia help media brands leverage their collective reach for more advertising dollars and invest in growth areas like audience extension. And when publisher coalitions create data co-ops, they’re able to offer advertisers audience segments at a scale and across devices that further levels the playing field.
The end goal is not a return to yesteryear. In fact, as the saying goes, the good old days weren’t always good.
Writing fifty years ago, the political journalist Teddy White noted that Madison Avenue is “more than a single lane; it is a twenty-block-by-four-block area in which all the communications in America are gathered into the most complicated switchboard of words, phrases and ideas in the world.” Nearly all of the major magazines, newspaper holding companies, television and radio networks, and advertising agencies were headquartered there, making it the “largest megaphone” in the world. That was a lot of power concentrated in just a few hands.
Fast forward to today, and much of that power has shifted to Silicon Valley – arguably to two standalone corporate campuses in Mountain View and Menlo Park. The Internet, which should be an agent of democratization, has created more concentration, not less.
But the story does not have to end there. If independent publishers embrace cutting-edge Internet technology, they can capture a share of the world’s growing digital advertising budget. More revenue means more reporters, more columnists and more cutting-edge journalism. No one can argue with that outcome.