Digital Ad Revenue

I just finished reading the Pew Project for Excellence in Journalism's study on the survival of newspapers. My conclusion: if online publishers don't start to understand digital advertising and advertising technology more fully, they deserve to go out of business. According to the study, its "research reveals an industry that has not yet moved very far down the road toward a business model to replace the once-thriving legacy model--even though overall newspaper ad revenue has fallen by more than half in just a few years. The industry has pushed back against those losses by increasing the price of subscriptions. Even with that, overall newspaper revenue is down by more than 40% in the last decade."

And it's not because good new models don't exist. It's because newspaper culture is exceedingly slow to adopt them. For every dollar it gains in digital advertising, the newspaper industry loses about $7 in print. And that's because newspapers still don't understand how to explain or sell digital advertising, even 15 years in.

Advertising technology is still a highly specialized subject, and many newspaper ad reps don't truly understand the new formats available to help them monetize assets that they hadn't focused on before. They are still stuck on display ads above the fold, even though Google has begun to downgrade sites that place too much advertising at the top of the page between the consumer and content.

"The majority of papers studied focus most of their digital sales efforts on the two categories of digital advertising that are the largest but are not growing--conventional display (such as banner ads) and digital classified. Those categories account on average for 76% of digital revenue at the papers studied. These are the same two categories that have provided most of their revenue in print. And 92% of the papers studied said display was a major focus of their digital sales effort."

But these are not necessarily the categories that work best for consumers. The response rate for display advertising has gone down over the years, while new forms of advertising (mobile, in-page video) are increasing. I've been lucky enough to work with an ad tech company that partners with publishers, and I have learned from them. They've been developing new formats in conjunction with Comscore which has developed new measurement methods for ad campaigns.

These formats are called "InView," and they only appear when a reader is there to see them. Thus, on a long page like the home page of Huffington Post, the ad will slide into view only when the reader scrolls down the page. Comscore's new "Validated Campaign Essentials" tools measure campaigns not on whether ads have been served, but on whether they have been seen.

Knowing more about these new metrics and formats would give newspapers an opportunity to charge more for their digital advertising. Truthfully, ad agencies are not any better educated on this than publishers, and neither are brands. What appears to be needed in much more education.

In the technology community, where many of the new digital methodologies were invented, entrepreneurs know there are metrics to prove value, and they strive to master those metrics. Why have newspapers and ad agencies been so resistant?

I suspect 2012 will be a watershed year, partly because of the shift to mobile, which is happening faster than anyone would have predicted, borne along by the tremendous success of the iPad. ZEDO, the ad tech company I work with, can show you that news consumption on mobile devices soars on weekends, as people sit in the living room on the couch with their iPads, reading the news and watching the game.

You can advertise to these consumers, because they're still reading the news--but first, you have to know how.