What does Medium.com’s profit model pivot say about the future of online advertising?

One of the most prominent startups in the online publishing space pivoted from its current ad model, saying publishing is ‘a broken system.’ Is this a genius move? Or is it misplaced hope? Contributor Megan Hannay takes a look at what it means for marketers and online publications.

medium-com-logo2-1920Online advertising, and especially its bulky older brother, “programmatic,” are darlings of the digital marketing world. Even folks who typically focus on the content and SEO side are dipping into the implications of bot-driven ads.

The ability to deliver highly targeted display ads and sponsored content to key consumer segments, with (literally) super-human speed and precision sounds like the data-driven answer businesses have been waiting for since the dawn of “personas.”

But what if there’s something wrong? Not with programmatic, but with the system itself: the vehicle on which ads arrive on consumers’ desktops and phone screens?

For many niche and local publications, plans for profitability already feel tenuous; if a startup with $132 million in the bank and a network of incredible talent can’t foresee sustainability in digital ads, what do the next few years look like for the little guys?

The Medium move

Earlier this month, Ev Williams, the founder and CEO of Medium.com, announced the platform’s pivot from ads and sponsored posts to an as-of-yet-undisclosed (perhaps even undetermined) revenue generation model. Williams titled the post “Renewing Medium’s Focus,” and after announcing a layoff of about a third of Medium’s staff, he went on to explain his company’s shift:

 Upon further reflection, it’s clear that the broken system is ad-driven media on the internet. It simply doesn’t serve people. In fact, it’s not designed to. The vast majority of articles, videos, and other “content” we all consume on a daily basis is paid for — directly or indirectly — by corporations who are funding it in order to advance their goals. And it is measured, amplified, and rewarded based on its ability to do that. Period. As a result, we get… well, what we get. And it’s getting worse.

By “what we get,” it’s not clear whether Williams meant clickbait, fake news or thinly written content with shameless product plugs, but it’s likely he was referring to all of the above.

So what happened? How did the internet, which has the power to reach a few billion more people than any individual print publication can, result in an unsustainable profit model for content publishers?

How digital ads ‘broke’ publishing

Advertising is always a little gimmicky. We know the hamburger in the ad isn’t the same hamburger you’ll get via the drive-thru window. But banner ads and, specifically, the page view numbers that determine their rates have brought the gimmicks to the content these ads share screen space with.

As academic journalist Frederic Filloux commented in his “Monday Note” column written after the Medium announcement, “In reality, there is absolutely no correlation between editorial quality and the revenue it brings…” Filloux explained that a 500-word local news piece is given the same rate as a many-thousand-word in-depth investigation into a foreign war.

This shift has encouraged outlets to embrace clickbait, meaning visitors to traditional media sites are confronted with the types of sensationalistic headlines that were once left for entertainment news publications: fear-provoking video clips, alligators, an irresponsible truck driver, weight loss tips and CEO “freakouts.”

Screenshot of weather.com, taken January 16, 2017

Screenshot of CNN.com on

Display ads have cornered publishers into appealing to readers’ most base interests, at best, to generate more clicks. At worst, it’s also contributed to the rise of fake news.

What’s next for online publications?

1. We’ll all wait for programmatic to get better

Maybe the problem is that the technology isn’t quite there yet. We’re only just starting to get systems that can follow anonymized users from desktop to mobile device. A few years down the road, or more, we could potentially get to the point of complete synchronicity between consumer and advertiser.

Imagine ads that predicted your wants and needs to the point that they were mostly useful, instead of pretty much always annoying. While browsing a news article: “Oh yeah, I did mean to order more toothpaste, and this brand’s offering a BOGO deal.” Click. Toothpaste order sent. While streaming a video: “I do still need to book a hotel for my summer trip, and that Airbnb looks amazing.” Click. Home added to Airbnb wishlist. 

If we can eliminate ads users don’t want and streamline programmatic to the point that almost every ad is seen as an assistant, rather than as an intruder, then, at the very least, ad blocking could potentially decrease, and the friction between a publication in need of funds and its readers would be relaxed, potentially encouraging more outlets to increase their ad services.

2. Some publications will resort to clickbait for the greater good

Consider the Jekyll and Hyde that is BuzzFeed. Celebrity gossip mag? President-elect challenger? Or investigative news outlet? While primarily funded by more viral fare, the site uses some of its revenue to fund investigative hard news pieces.

BuzzFeed has also branded itself as a viral native advertising outlet for its customers. You can’t go programmatic with BuzzFeed (at least until native orders go automated), but you can pay their team to develop a branded listicle and place it on their site.

This model is still being tested, but if BuzzFeed continues to dominate in terms of traffic and popularity, it’s likely that more publications will continue to mimic its style.

3. Publishers will find other ways to make money

Via data

In a recent digital media exec “confession” piece, a Digiday interviewee complained, “Every publisher is trying to be an ad agency and every ad agency is trying to be a data company.” The executive’s point was that agencies are not highly profitable, and they shouldn’t be business goals for failing publications. But the advice also can be seen as encouragement for publications to skip the middle step and head straight to data.

 

read the rest of the column here…

 

Some opinions expressed in this article may be those of a guest author and not necessarily Marketing Land. Staff authors are listed here.


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