The digital media world was a rocked yesterday by news that Buzzfeed is going to miss revenue targets by 20% and Mashable was sold for $50M when its valuation last year was $250M.
What is going on? The short answer is a lot.
Buzzfeed is actually right in their statement where they put blame on 2017. It has been a terrible year for digital media. This all started of course last year with the election. After Trump won pocketbooks were closed on ad spending everywhere and digital was hit really hard.
I saw this at Yieldbot where “No Digital Dollars” became a big reason for lost deals followed only by “Budget Cut.” January and Q1, traditionally the weakest periods of the year anyway, were the worst the ad industry had seen in years. Brands and retailers were holding budget.
For good reason.
Large segments of consumer attention were on the post-election craziness. Brands had no interest being associated with that and understood pocketbooks were not going to open easily and audience was not going to be receptive to their messages. The plan was to hold their spending until things died down.
Unfortunately for digital media things did not die down. The focus instead shifted onto media itself. Buyers already skittish from the ANA report on digital transparency and kickbacks got even more validation when P&G rocked the IAB meeting in late January declaring digital a mess to the faces of the industry. Six months later this bell weather cut $140M from the digital budget citing ineffectiveness. Ouch.
While this was going on YouTube and Facebook announced a string of major fuck ups that included Google admitting Brand Safety is a global problem. More digital budgets were put on hold or removed all together from plan.
This just gets us to Spring!
With Agencies seeing the continued decline of revenues and profits the programmatic brew continued to take hold of ad spending through the summer. Agencies pushed more and more spend (and thus margin) through the pipes at lower and lower CPMs. Publishers already swamped with issues like viewability, bots, ad blockers and fake sites duping their URLs were left holding a heavy bag, with not much inside.
That brings us to Autumn…and everything after.
Some quick math shows where we are and how far the value of content has fallen even for someone like Buzzfeed, that arguably is doing it in digital better than anyone.
Buzzfeed self reports over 9B content views a month. At an estimated $290M in annual revenue that is an RPM of $2.68.
No wonder Buzzfeed is ready to plug into programmatic. A single slot on the page will probably go for $0.50 to $1 CPM and still greatly increase overall RPM.
To give you some comps I’ll throw out everyone’s competition.
Facebook’s average CPM for the year is about $7 but is trending higher.
Google is likely netting out at $6 RPM on YouTube.
How do they do it?
This is the value of having your own ad tech that can optimize yield and performance. Basically it doubles your RPM. This is something Jeff Bezos is smart enough to know and support at WaPo.
Most media companies can’t execute technology this advanced. They basically are just operating as a brandless square on a page in a programmatic world that is really owned by Google’s DFP (DoubleClick for Publishers) ad server (though Amazon and Facebook seem primed to give them a run for their money). They are bought not based on the content or brand but based on targeting the person through an id match. Simply put the content doesn’t matter.
So assuming you don’t have your own tech where does this leave digital media?
Not in a good spot obviously.
Programmatic will continue to proliferate because it is in the agencies best short-term interest. Brands will want continued validation that these digital spends are driving results and they are not going to be happy with the results. Consumers are going to keep hating on digital ads because they suck. And publishers – they will continue to bear the brunt of this.
Smart publishers are now moving away from ad-supported businesses and looking at commerce and direct/affiliate marketing, long a strategy I have espoused. But this will not be an easy transition and there is no magic bullet as we saw from the Thrillist /Jack Threads attempt.
There are a few other problems for digital ads looming on the horizon worth mentioning.
That content that everyone is trying to create. All that video, all those stories, all of it costs money to produce (except for Google and Facebook). It costs more money to put online. It costs even more money to monetize. With the ad dollars that support it leaving, with the traffic that supports it being siphoned away by Google and Facebook to their O&O, and with the cost basis of what’s left is shrinking, this is a big fucking problem.
Making matters worse, much of that content is now being created by the agencies and brands themselves. So what is the purpose of media companies anymore? Maybe just to compete against agencies to make branded content that most people don’t want to consume anyway.
The other issue is even larger. Advertising is not necessary to build a brand anymore. The largest and most popular brands that were built in the last few years, companies that are worth billions, Uber, Airbnb, Snapchat didn’t need to advertise in the traditional publishing sense to acquire customers. They went out and hired growth hackers. Something every brand will need to do in order to survive the future.
At the end of the day none of this helps the value of digital media. That of course has major implication on an ad supported free press but that’s a blog post for another time. The only thing that helps is the one thing nobody except Google and Facebook seem to be able to do. Prove that buying digital ads deliver business results by growing sales and customers. If that sounds more like marketing than advertising you’re right. For publishers that can make it through the ad Winter, that is the thaw.