Advertising Trends for Premium Content Providers

CC image courtesy of kevin813 on Flickr

Digital content providers are experiencing increasing success charging consumers. Examples extend from music and news to movies and mobile. Advertising, however, remains the dominant source of online revenue for content providers. In their quest to maximize profits, content providers constantly seek the optimum balance of the two revenue streams.

The symbiotic relationship between charging consumers and advertising revenue was vividly illustrated in late 2007 when Rupert Murdoch acquired The Wall Street Journal. He considered razing the successful wsj.com paywall to take fuller advantage of the strong advertising market.

As the digital advertising market continues to evolve, content providers will need to reconsider periodically if, what, and how to charge consumers to optimize total profit. Three emerging advertising trends – Viewable Impressions, Programmatic Buying, and Native Advertising – should spur content providers to re-evaluate content presentation, packaging, and pricing.

Leading advertising trade groups have come together to form Making Measurement Make Sense, which – among other things – is spearheading the adoption of Viewable Impressions to replace Served Impressions as the industry standard. Viewable Impressions promise to increase CPMs by reducing the number of ad impressions. Premium publishers should benefit most from removal of low-quality inventory and questionable practices that drag down prices across the board.

Armed with higher CPMs, content providers would rebalance revenue expectations from advertising and subscriptions. Any content producer using a metered paywall could increase the amount of free content. The New York Times, for example, would generate greater revenue by increasing the number of free articles per month.

Programmatic Buying, real-time bidding and other automated approaches to target individual ad impressions, is growing fast. According to IDC, in 2011 RTB accounted for 9.8% of display sales. In 2015, the figure should rise to 27%.

The balance of display advertising is sold directly by publishers, who demand a premium for association with their brand and content. comScore 500 publishers, with large ads sales forces and established advertiser relationships, selectively choose if and how to use Programmatic Buying. ESPN only sells digital advertising direct. And Conde Nast and Hearst have created private exchanges to participate in RTB in a controlled way.

Programatic Buying creates a different opportunity for content providers without ad sales experience. As the liquidity, control, and transparency of Programmatic Buying grows, it presents a new revenue stream for content providers whose primary revenue stream is charging consumers. Book publishers, for example, may look to Programmatic Buying as a low-cost way to include advertising within digital editions. Likewise, mobile app publishers can supplement download fees with advertising revenue.

On traditional Web sites, the content – in the form of text and images – is presented on a Web page surrounded by banner advertising. In Native Advertising, the advertising takes the same form as the content, which is typically presented as a stream. Promoted Tweets and branded Spotify playlists are prime examples.

Twitter, Spotify, Facebook, Pinterest, and the other Web apps that publish content streams are hugely popular among consumers. However, they monetize that traffic at very low rates. So despite calls to “Stop Publishing Web Pages,” it’s premature for traditional publishers to do so until Native Advertising matures.

In the meantime, the stream holds immediate appeal for the growing number of content providers who, like The Wall Street Journal and The New York Times, wish to charge consumers “everywhere”. Stream content lends itself to cross-platform distribution because it’s easier to optimize than pages for every mobile, tablet, and television screen size and operating system.