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Issue for May 2010

Why We're Not Seeing More Online Ad Revenue -- Part I

Posted on Wednesday, May 05, 2010 at 3:30 PM

It comes down to this: online ads just aren't working for too many advertisers.

By William Dunkerley

How many times have you heard that advertising money is migrating to online? According to Advertising Age, during 2009, print and broadcast advertising was down, but Internet advertising was up. J.P. Morgan is forecasting more growth in online advertising for this year.

According to Bill Keller, executive editor of the New York Times, "...Web audience is growing at a great clip, while print circulation is not. And online revenues are growing faster, too, albeit from a smaller base. If the trend continues, there's little doubt that -- eventually -- online becomes the main business."

At the same time, other publishing executives are throwing up their hands on online ad revenue, and looking for ways to monetize their content. Media mogul Rupert Murdoch has been especially outspoken in his belief that future prosperity for publishing will be dependent upon selling content, not ads. "The old business model based on advertising-only is dead," he resolutely proclaimed. Murdoch seems to believe that his new pay-as-you-read model will lead to salvation of the industry.

So there you have it. The future is in online ad revenue. But, then, it's not.

Who's Making Money Online?

Perhaps the most relevant question is how many fellow publishers have told you that they're making enough money from online advertising to support their operations and produce a good profit? I'm talking about money on the bottom line, not hype, expectations, or blind hope.

One answer comes from Hearst Magazines president Cathie Black. She's said that "...digital advertising revenue is still pennies on the dollar." For many publishers it seems hard to get a good price for online ads.

But think about it. If advertisers were making good money from their online ads, wouldn't they be willing to pay good money to advertise? What's wrong here?

Advertising That Bears No Fruit

Advertising Age for January 27, 2010, ran the headline, "Why Most Digital Ads Still Fail to Work." The story goes on to list seven mistakes found in today's digital ads. They include excessive complexity, ambiguity, and meaningless use of techno bells and whistles. A PEW study of online users found that "79 percent say they never or hardly ever click on advertisements." In February, Bokardo, a social media design blog, published a piece on "Why Social Ads Don't Work." The gist of it is summed up in one line that asserts it's "because people are being social, not searching for something."

The idea that online ads aren't working isn't new. Back in 2003, BBC News carried a story, "Why Online Ads Do Not Work." It quotes technology analyst Bill Thompson saying, "...when I am online, looking for information, reading the news, or simply surfing around aimlessly, the ads are in the way and I block them out."

The story told by these articles is basically that most online users don't want to see ads, they try to ignore them, but even if they took to time to read them, they'd find them confusing, intrusive, not pertinent, and pointless.

Contrast that reaction with the experience of print ad consumers. For many print readers, the ads are a desired part of the publication. For the newspaper reader, that may mean seeing ads trumpeting sales at the supermarket or the car dealership. For the specialized magazine reader, it may be ads announcing new products or just showing what's available. Some print readers even report in surveys that they read a magazine from back to font because they want to see the ads first!

But if ads can have such intrinsic value to readers, why should they lose that value online?

There's More to the Story

The business function of any advertising-driven publication, print or online, is to connect buyers and sellers. How well that is done has been the dividing line for some time between many successful and unsuccessful print publications. The same rule applies to online. However, many of the online content providers may not be operating with this concept in mind.

The fundamental strategy here is that the publication's content is used to attract readers who in turn will be attracted by the advertisements. The readers need to have a propensity and proclivity to buy.

If an online publication seeks to attract readers just to build traffic statistics, it is not fulfilling its responsibility to the advertisers. You can't blame the publication entirely, though. Advertisers clamor for more and more metrics that are by nature quantitative, not qualitative. And that's what the advertisers get: quantity, not quality. That can result in an audience made up largely of non-buyers. Regardless of whoever is to blame, this is one reason why online ads don't work. And in the end, it is both the advertiser and publisher who suffer as a result of this malfunction of strategy.

Another factor is that much online advertising ignores some of the basic principles that have been known to make advertising successful. They've been identified through extensive research with print advertising. What are they? They are color, size, and repeat exposure. They create effectiveness for an advertisement. Many online ads make ample use of color. There's no disadvantage there (except that some of the color usage may lack aesthetic appeal).

The idea that a banner ad, small as it is, can be effective, however, evades good sense based upon proven advertising practice. Indeed, effectiveness is proportionate to size.

Then there's the matter of repeat exposure. On one hand you might think that online has it all over print in this respect. Who doesn't have a recollection of seeing certain online ads over and over again, almost endlessly? Many of those ads are dynamically served on a rotating basis. That certainly offers new possibilities for targeting.

But consider this comparison: A print publication reader may see an ad as he or she reads through the publication. Moments, hours, or days later, if the reader wishes to return to that ad, it is a relatively easy task. And when the reader does, it is very valuable repeat exposure. For the advertiser, it is a repeat shot at a reader whose interest in the ad is active. Repeat exposure to consumers who lack that motivation and interest is certainly worth far less. Even worse, it can annoy and irritate the reader. What about the online ad that a reader wants to return to? Have you ever tried to return to an ad that was dynamically served? It can be an impossible quest. An ad without a specific spatial location in the publication has a serious disadvantage when it comes to a reader seeking a repeat exposure.

The Story Gets Worse

These are some of the reasons why online advertising isn't working out of deficiencies in the ads themselves -- and why publishers are failing to see the kind of ad revenue they're looking for. In addition, though, there are other qualities that are present in online advertising that are actually off-putting to consumers. In Part II, we'll describe them, along with the dark shadow that they cast across the whole online ad industry and its development. And, finally, we'll offer recommendations for concrete steps you can take to improve your online ad revenues.

William Dunkerley is principal of William Dunkerley Publishing Consultants, www.publishinghelp.com/consultant.

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Posted in Advertising (RSS), Online (RSS)

News Flash: Newsweek Publisher Throws In Towel

Posted on Wednesday, May 05, 2010 at 3:30 PM

The Washington Post Company has given up on Newsweek. It put the publication up for sale. Chairman Donald E. Graham, in announcing the move on May 5, admitted, "we do not see a path to continuing profitability under our management."

The Washington Post's failure with Newsweek underlines a point about business strategy. If a publication is operating with flawed business strategies, when the economy hits a downturn, the publication can experience potentially insurmountable problems. Even the mighty Newsweek was not above that basic principle.

Graham said that they are looking for a rapid sale to a qualified buyer. STRAT has learned of interest from a group of Russian investors with experience in publishing. (Newsweek actually has a Russian edition, which is operated by licensee Axel Springer and reportedly in deep financial trouble, as well.)

Graham's statements make no mention of whether an independent valuation of Newsweek has been conducted. The business itself may indeed even have a value of less than zero, given "reported losses in the tens of millions for the last two years." That said, there may be residual value in the Newsweek brand if it can be divorced from association with the Washington Post operation.

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Posted in News (RSS)

Lawsuit: Perils of Ad/Edit Combo Deals

Posted on Wednesday, May 05, 2010 at 3:30 PM

Selling advertising with an editorial tie-in is a risky publishing strategy.

By Andrea Obston

Just last month, Calibra Pictures filed a lawsuit against Variety magazine for giving their film a bad review.

In its suit the production company claims that it agreed to pay about $400,000 for an "exclusive promotion partnership" to support its movie, Iron Cross. However, Variety's film critics seem to have had the temerity to pan the film. The crux of Calibra's claim is that Variety's advertising and editorial departments both promised positive publicity. And, Calibra said both departments claimed this agreement would help secure distribution for the film and a chance at one or more Academy Awards.

A Sale or a Sell-Out?

Wait! What? Variety's being sued for doing its job? Do I have that right? And do I also understand that they sold away their right to do unbiased movie reviews because the editorial department of the publication went along with this $400,000 deal?

As a business owner in the marketing communications field, it baffles me to think that any company would consider selling off its competitive advantage. (That is especially perplexing when others in the publishing industry are dropping like flies.) But, if you believe the charges in the recent lawsuit against Variety, that's exactly what they are being accused of.

Isn't the ability to be an unbiased observer the most important thing that any legitimate publication brings to the table? Isn't that what readers expect from it? Indeed, it is the reason most publications still exist, and is what they are supposed to do best. In my world, that's called a competitive advantage. It is something a company does that makes it stand out among its competitors.

The fact is that the competitive advantage that print journalism has over some blog-ified, twit-ified competitors is its promise of unbiased observation. It's why lots of readers still turn to magazines like Variety for the whole story, even though they peruse the blogs and check their Twitter accounts.

Drawing the Line

Unbiased observation comes from the "Chinese Wall" between the editorial and advertising departments. Yes, I know the economics of keeping a publication alive and journalists fed has been stretched to the limit. When journalists and critics can't do their jobs, however, because sales people have "promised positive publicity," that should make anyone who depends on them question their judgment. And that in turn can tarnish your brand.

The outcome of this lawsuit is probably years away. I'm sure this is just the opening salvo of publicity bombs slung by both sides. So there's no final lesson yet. Nonetheless, the fact that it's been filed should give us all pause.

Once advertisers believe they have the right to dictate editorial content, I believe many consumers who depend on journalists will stop turning to them for information. And when that happens, newspapers and magazines will have sold their competitive advantage down the river, with no ultimate rate of return.

Andrea Obston is the president of Andrea Obston Marketing Communications, LLC (www.aomc.com), a firm that helps businesses grow through a B2E (Business to Everyone) marketing communications strategy. The firm provides strategic marketing services, brand development and marketing, public relations through traditional and social media outlets, media training and websites. Its subsidiary, Andrea Obston Crisis Communications (www.crisismasters.com), is a reputation and crisis communications firm that offers workshops and seminars on a variety of contemporary marketing issues. Andrea's writing has been featured in the Hartford Business Journal, where the original version of this article appeared.

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Posted in Advertising (RSS)

STRAT: Inaugural Issue

Posted on Wednesday, May 05, 2010 at 3:29 PM

We're pleased to bring you the inaugural issue of STRAT, the newsletter of print and online magazine publishing strategy.

For many publishers, the future of their publications is at risk. Advertising and print readership are down, and making money online remains a problematic enterprise.

These critical times raise a lot of questions for publishers:
--Do you and your magazine have a positive future ahead, or will you go the way of other magazines that have folded?
--What can make the difference for you? What can keep you afloat while others are sinking?

STRAT newsletter is here to help you succeed. As a subscriber, you’ll receive insightful expert advice every month. You’ll learn how other magazine publishers are solving the very problems you face now. You’ll also learn strategies to help produce immediate results.

Click here to subscribe to STRAT.

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