Advertising Unbundled

As anyone who’s been tracking the news business knows, online advertising hasn’t exactly been a boon for revenues, thanks in large part to the migration of classifieds to online marketplaces and the avalanche of inventory that keeps ad rates low.  But now it looks like it’s about to get even worse.

It’s never been a secret what most advertisers want – access to us and our attention.  Or at least, access to the right kinds of people – those most likely to buy their products.  One key way advertisers used to find those audiences was via relevant content in news publications or sites.  An advertiser looking to target men in a certain age group might want to place his ad in the sports section, for example.  But as a recent story in the New York Times shows, that’s rapidly changing. These days, the advertiser simply specifies that his ad should be downloaded whenever someone meeting that demographic visits a page – regardless of what’s actually on the page, or even what site it’s on.

 “We are not buying content as a proxy for audience,” says Paul Alfieri, the vice president for marketing at Turn, a data management company and automated buy-side platform for marketers based in Redwood City, Calif. “We are just buying who the audience is.”

And they can do that, according to the NYT piece, because of the masses of data available that tracks consumer behavior and demographics – so if you’re looking for men on the East Coast aged 18 to 35, that’s what you look for, not people who read news about New York sports teams.  You don’t end up with women who like the Yankees and don’t miss out on 25-year-old men who don’t like sports.

But even more importantly, advertisers can track user behavior after they’ve seen ads, and further refine the campaign by concentrating on groups that seem more prone to buying.  The article cites an example of an ad campaign for sneakers, and how it dissected early feedback on groups that clicked on the ads, or went on to search for shoes later on.

“It turned out that Republicans in certain districts of Texas basically did not exercise. We were able to adjust the campaign to try to aim more at Democrats,” (Turn CEO Bill) Demas says. Without analyzing those user profiles, he says, “who would think that party affiliation would be an influence in advertising campaigns?”

In a way, that’s a vindication of the power of Big Data and how it can unearth useful insights that conventional wisdom overlooks.  (As Nate Silver’s 538 blog effectively did during the recent US election.)  But it’s not much fun when Big Data works against your business model.

So what does this mean for news sites – fundamentally, content creators who have traditionally used their content to attract audiences that advertisers find valuable?

It doesn’t mean content isn’t important; after all, those coveted demographics still do want to read stuff they’re interested in.  But it does mean that content is increasingly unbundled from the people who read it, at least in the eyes of advertisers – the folks that used to provide much of the revenue that news organizations depended on.

And as it gets unbundled, that means even less leverage for news organizations as they negotiate for ad rates. It’s true that news organizations are less dependent these days on ad revenues. and few manage to make it as pure ad plays online.  But it’s still one of two major revenue streams (alongside circulation) that news organizations still turn to.

There are exceptions, of course.  Not all advertisers simply want access to demographics.  Some want to be associated with a high-end news brand.  New news site Quartz, for example, has sponsorships rather than advertisements, including ‘sponsor content’ embedded in its sleek endless scroll of news.  That’s a smart way to get around the relentless pressure for more and more page views for lower and lower ad rates.  But not everyone can pull that strategy off.

Nicholas Carr wrote a great piece a while back dissecting what he called “The Great Unbundling” of content, which accurately diagnosed the problems with the news business model.  Now we’re seeing the unbundling of ad content as well.