Social media ends the ad race to the bottom
Content platforms evolve, splitting and dissipating audiences as they do. This has been happening in the UK ever since William Caxton’s printing press put the town crier out of work. Fast forward to Channel 4 competing against ITV for advertisers in 1982; the rise of 24-hour news channels; then the competition from digital TV, web; and today from mobile.
Digital technology sped up the process so fundamentally — allowing ad networks to offer ever-cheaper inventory from proliferating aggregators, leading to ‘low-rent’ click-throughs. These make the media buyer look good by driving down the cost per click.
Finally though, social media has dissipated audiences to their lowest possible value – moving in to the lowest-rent space of personal blogging and news aggregation.
You must pay the rent; but I can’t pay the rent
Perhaps the final leg in the race to the bottom came when Tim Armstrong took over as AOL’s CEO. At that time, the portal’s online ads numbered a whopping 14 per page, yet still failed to pay the rent. He tore them all out, and then partnered with the Huffington Post – bringing in higher-quality content credibility to improve brand value – and attract higher value ads.
Now the only way is up. Content providers can stop chasing those low-rent click-throughs and return to the old school principle of advertising: the value of the brand.
Our clients such as Bloomberg and Spotify, and any number of other dating and gaming websites, demonstrate that customers are happy to pay good money for good content, provided by a good service. They will pay to download music, they will pay to read glossy magazines on their iPads, and they will pay to access on-demand movies and TV shows. They’ll even pay for Angry Birds.
And where consumers will pay for content, advertisers are sure to follow.
So this week the Daily Mail announces that a drop in ad revenues has led to an increase in cover prices, but it’s not cause for alarm. The Mail should take a leaf out of The Guardian’s book – embracing the future and putting digital first. These two very different newspapers have one key factor in common – powerful brands leading to enviable online readerships. (The Guardian is the second most popular UK newspaper website, behind the Daily Mail‘s Mail Online, with 39 million unique browsers per month to the Mail’s 53.9 million.) The Guardian has already announced it’s “digital first” strategy, and the Mail would do well to follow.
Popular consumer magazine Marie Claire has recently attracted the likes of Clinique, Estée Lauder and Bobbi Brown to sponsor its Beauty Genius iPhone app in a three-month partnership. This brings us back to an old model in a new form – revenue coming from cover price (£1.19 to download the app) in combination with ads.
This is just the beginning. Early research is showing that iPad ads have 20 times more impact than printed ads, and publishers have already started charging prices reflecting that significant leap.
So, the new digital world has ushered in two reasons for the advertising sector to be cheerful:
1/ The subscription/cover price model is back in fashion
2/ The cost of advertising is going up
And quite right too. Quality content does not want to be free. A digital business relying on ad click-throughs to support a £10 million annual business must attract tens of millions of daily viewers. To reach that same revenue, subscription and virtual currency businesses need only secure 100,000 subscribers paying an average of £10 per month. And because these customers have paid upfront, they demonstrate to potential advertisers they are worth targeting.
So start your engines: Powered by the new fuel injected premium content of creative enterprises being built today, advertising is back in poll position.
Gene Hoffman is the Chairman and CEO of Vindicia, whose Software as a Service billing and marketing platforms manage relationships with 70 million customers on behalf of clients including Bloomberg, Turner, Next Issue Media, Boxee, Vimeo, Mind Candy, Symantec and Cisco.