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June 07, 2009

What's Wrong With Old Media Thinking On Online Revenues

The headline is bigger that my thought, but...

What really strikes me about the issue of how much money newspapers (and the rest of us) are able to make on ads online is that the Old Media thinks that the ad rates they have gotten forever were not dramatically inflated by the limited number of advertising opportunities in the world.

Television, unlike any single newspaper, delivered a much larger audience to one place and allowed for a more complex pitch then a newspaper ad. When the medium went to :30 and 1 minute ad blocks, prices were according that much higher than newspaper or magazine ads for a clear reason... cost per impression.

What is the difference between a banner ad - even without a click-thru - and a newspaper ad? Not much. Size. Owning a whole page can be a unique proposition. On the other hand, how much more valuable is an inside full page of a daily newspaper with 500,000 readers than a banner on a web site with 200,000 readers that people go back to 5 times a day? The same million impressions on the web are assured (assuming top of the fold placement) while page 6 of the A section of the newspaper is read by... who knows how many people?

But advertisers, understandably, have seen web ads as a less valuable commodity, in no small part because there is so much more of it available than printed pages.

My question is, are the numbers for online ads the "right" numbers and the old print numbers the inflated ones?

In Hollywood terms, it will take a few more years before studios stop paying lavishly for the cover of Variety every day of the week. The buy is, essentially, for 50,000 copies of the paper to be on the street for one day... with the rationalization that those newpapers sit in view of more eyeballs - a specific group of eyeballs - for days and/or weeks after publication. The other element, one which the web cannot match in any way right now, is that it signals a level of seriousness from the company promoting those films.

But...

If a website can deliver 60% of those specific eyeballs being targeted by the very expensive front page of Variety and it can deliver it multiple times a day, 5-6 days of the week, how valuable is that space?

60% of the cover cost? Discount 10% for lay-around value? Another 10% for impression value? 20% for a smaller ad running? We're down to 20%.

And when you find a website that gets 20% of the cost of a Variety cover (about $10,000) for a day, let me know. You won't find one that gets that per-week either, unless it's some unusual deal for NYT space.

Now, if a site could get that $10,000 for each of the prime 15 weeks of the awards season, we would be looking at a much more workable conversion of old media to the web. But those numbers aren't close.

And let's get back to the trade... how can a media buyer reasonably argue that they should spend $50,000 (or more) on one Variety cover anymore? And they will. They will.

Something in between seems reasonable to me. If someone paid double what the high rate on New Media for awards season is now... and half of what Old Media (and OM-based sites) is still getting, the studio would still be spending less than they are now. And New Media would have a shot at behaving in many of the ways that Old Media claims we cannot or will not or childishly, don't want to.

To my original point, it has to be terribly scary for Old Media to consider the possibility that even if they can right their ship, that ad prices will eventually balance out with New Media ad prices. Worse.. they should be on par, as ads are not about the quality of the content they appear next to, but about quantity and the quality of eyeballs.

The one place Old Media still has a legitimate advantage is, in a bit of semantic irony, older people. If you want to deliver the message to older people, print and OM websites are a good bet. There is an earned legitimacy that is generations old and may not last another generation.

This is why Showtime cable decided not to advertise in the trades for Emmy and to stick with the LAT. Emmy voters tend to be old. Older readers tend to read the newspaper. That, and you can be sure that Variety tried to stick them with a step up from last year's prices... then last year's prices... and would not go any lower than that. But an ad in 12 pages of Variety... not so exciting.

Welcome to the future. You can get the ads, but OM will have to be price competitive and earn the right to get the ads because they are no longer A Must. No one is.

The internet is a medium of earning your place. Turnover is fast and brutal. Sites like Huffington Post are in the business of stealing content from originating outlets because it's good business for them, as they cannot afford to create that many pages for viewing on their own and originators like the AP have a legitimate beef in a world in which 200 words can be all people want to read, meaning that AP never sees the click-thru they earned (or might under a new system). But I don't believe that there needs to be some exemption for news organizations so they can conspire against the web to charge for all content. If AP just changed their overall model and could monetize their business based on, literally, hundreds of millions or page views of their content every day, they would be fine.

The problem remains that Old Media doesn't want to change how they do business. They want to keep as much of that past as they can. And that is over. Done.

One last note... a lot of new media is under the thumb of aggregating ad sales companies that take anywhere between 40% and 60% of the ad sale in most cases. Obviously, a steeper price must be paid by people who can't afford their own ad teams. But this kind of excessive charge is really keeping the New Media down.... keeping some businesses that could be "real" in the "hobby" category.

It's not a revolution. It's just a new model. And it's not going away. Everyone will end up adjusting or dying. But those who don't kill themselves by 10,000 cuts will be a lot happier along the way. The sooner they hit bottom, the sooner they can get healthy again.

Posted by dpoland at June 7, 2009 05:02 PM

Comments

Posted by: Martin S at June 7, 2009 07:12 PM

Posted by: digitalhit at June 8, 2009 01:40 PM

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