Fixing the News Business (For Now)

Jeff Jarvis, former founding editor of Entertainment Weekly and creator of Buzz Machine, and now professor of Journalism at CUNY,  has written a very profound article on how to save newspapers. The article is relevant not only to newspapers, but also to any publication that seeks to maintain its life in the current digital environment. In this environment, there is competition for attention, and an almost infinite supply of news, both fake and real, and entertainment.

As an experienced partner to publishers (since 1999), we would like to recommend that they think about some of the points Jarvis makes in his article. He begins by setting the stage:

The burning house sits on the foundation of media’s old business model, which is built on volume: reach and frequency in mass media terms, unique users and clicks online. This house is doomed to commoditization as the abundance and competition the internet spawns drive the price of the scarcity we once controlled — media time and space — toward zero. Yet this is the model that still makes us our money and so, just to survive and perchance to invest in an alternative future and home, we must still feed that fire with cats, Kardashians, and every new trick we can find, from programmatic ads and so-called content-recommendation engines (which commoditize media yet further) to native advertising (which, when it fools our readers, only depletes the seed corn that is our trust and brand). We know where this ends: in ashes.

Well, we all know that. Now what do we do about it? Jarvis says we have to build our businesses on value over volume, and we must develop relationships that go deep into communities. And by communities he means not just localities, but affinity groups and other self-identifying niches and segments — perhaps parents, perhaps, transgender young adults, perhaps cancer patients. The key here is self-identifying.

This means not buying data, but developing our own — first party data that comes from talking to our current customers, subscribers, visitors, and finding out more of what they want. For some publishers, this is more difficult than it would seem. As publishers, we’re used to putting out content and assuming we can target the audience from outside. We can target, for instance, Hispanics. But Hispanics don’t necessarily define themselves as Hispanics; they have characteristics that cut across the obvious label.

Note well that in each of these situations, we must shift from media-centric products — our newspaper, our content, our home page, our comments — to public-centric services: a place for people to come together with residents of their town; a place where seniors can find the right adult development for them; continuing alerts about developments in an issue a high-school parent cares about; a means of connecting with others who are concerned about filthy park to get it fixed; and so on. I am not talking about personalizing the serving of the content we already have (though that would be a good and necessary start). I am talking instead about building new products to serve specific constituencies in new ways.

And what do we do to solve this?

Start with advertising. At the most basic level, if you are making products and services that are more useful, engaging, relevant, and valuable to people, then you will get greater loyalty, engagement, and usage, and even under the old, CPM-based advertising business, you will have more ad inventory. More important, knowing about people’s interests and needs — at an individual level — will enable you to sell higher-value and highly targeted advertising.

The only way we can fight media’s commoditization at the hands of programmatic and retargeting advertising and the large platforms is by gathering our own first-party data. And the best way to gather that data is not by forcing our users to give it to us through registration, by inferring it through demographics, or by sneakily compiling data from privacy-pillaging services such as Acxiom.

This is your decision, publishers. What kind of publication do you want to be?

Brand Safe Outstream Video for Publishers

We have been offering what the market now calls “outstream video” ads for almost three years.  As one of the earliest experimenters with the format as we knew it — as a video ad placed on a text site — we found the ads well-received. Indeed, when we began offering this format, we called it “instream,” because it was a  mobile video that showed in a stream of text content. It was a way for publishers to get the higher CPMs for video advertising without having to produce their own video content.

We have no idea why the industry re-named this format “outstream,” which has caused confusion about what the format really is and whether it has advantages for publishers. Now EMarketer has done a study showing that this format has a future, if certain obstacles can be overcome. These obstacles do not apply to the way we sell outstream, because we are not an open exchange; we use our ZEDO secure premium platform.

Here are eMarketer’s reservations about the future of outstream  along with our responses:

Concerns over potential ad fraud

When we sell an ad format to a brand, we do not put the ad on an open exchange. Instead, we go after publishers in our network who we think will want the ad, and fill from our internal publisher partnerships. We have been measured as 97% fraud free, and we have purged our network of suspicious “publishers.” We will only do business with premium publishers, which is why we are smaller than some of the open exchanges. Most of those open exchanges will eventually have to change their business models to accommodate new IAB and Trustworthy Accountability Group certifications coming next year.

A relative lack of measurement data to corroborate its value

On a private platform, it is easier to see where and when an ad appears. We have partnerships with measurement tools so we can provide information on completion rates

A perceived disconnect between text-based content and video-based ads

Again, in our case we use a partner to scan all our publisher pages for appropriateness of content and brand safety. Truthfully, it’s possible to track many of the things that have given digital advertising a bad name if people will just try a bit harder. All the brand safety tools are out there, and have been out there for the past five years. In the past, we partnered with a company called Proximic, which was eventually sold to comScore, and now we are partnering with AmplifyReach.

The possibility that out-stream ads could be detrimental to media brands in the long term.

This has more to do with design thinking on the part of media brands and the way they present ads on their own sites than about outstream itself.  Fewer ads at higher CPMs appearing within a stream would naturally upset visitors less than obtrusive takeover ads that appear before a visitor even begins to interact with a site. A big reason for us to develop outstream was our desire to get away from takeovers and interstitials, which brands loved and publishers hated.

 

Highly Differentiated Offerings Survive

We recently listened to Terence Kawaja, founder and CEO of Luma Partners, our industry’s investment bankers. Kawaja participates in many of the mergers and acquisitions now occurring in the industry, and he had some interesting information that made us believe ZEDO and ZINC are moving in the right direction — toward highly differentiated offerings.

We are no longer defining ourselves as an ad tech company, because we are no longer simply a middle man in transactions. We are a private platform that services a premium publisher network on the one hand, and major brands who want innovative formats that generate high engagement on the other. Our latest innovation is “Watch and Engage,” designed for affinity groups and fans on mobile devices and made to run within apps.

Kawaja says that the dark night of ad tech is occurring in the pullback of undifferentiated companies, many funded during the ad tech hey- day by venture capital.  Some of those companies, which he declined to name, “are zombies, under siege but hard to kill.”

There are currently 4000 companies in the Lumascape. (We remember when there were fewer than 2000.) In the current environment, you can have a company with $20, $50, or even $100 million in revenue and not be safe, because most ad tech companies are not SaaS and they do not have continuing revenue. To succeed, a company today needs scale, growth and profitability.

One company Kawaja mentioned favorably is The Trade Desk, whose IPO was highly successful even in what has been called the dark hours for ad tech.

When questioned about the “duopoly” of Facebook and Google, and its effects on the future of the sector, Kawaja was surprisingly optimistic. There will still be market opportunities, he said, even when everyone is perceived to be fighting about scraps, because the industry is now so large that a good company can take market share from another, less technically astute and customer-focused company and grab a slice of  the $34 billion market remaining after the duopoly has soaked up 75% of the ad spend. Behind Google and Facebook,  Amazon has the best shot at being a credible #3, because with its Alexa devices, Amazon has made every house into a Trojan horse for information.

Another cause for Luma’s  optimism is Kawaja’s belief that ad tech will see multiple exits next year over $100 million each. He says ad tech is like any other tech sector, although it has more “false positives,” by which he means companies that appear to be innovative and successful, but are actually not differentiated enough in their product offerings to compete in the marketplace. Those will continue to be acquired next year.

In the media industry itself, Kawaja sees the beginnings of a big migration from I/O to programmatic that we have been seeing and participating in for four years. When he spoke of the beginnings, we thought he must be referring to the video end of the business, convergent TV, or streaming over the top, because display went to programmatic years ago. But the convergences of TV and video, happening as we speak, disintermediates a market that consists of $75 billion in cable and network TV spend, and another $75b in paid TV.

So there’s plenty of money for companies that can truly add value, as we believe we can.  Get in touch with us at adsales@zedo.com to find out.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For Publishers, Tomorrow Has Come

Advertising was born as a way to introduce consumers to new products. It was placed in a mass medium through which  consumers got both information and product knowledge. Because consumers had to go to a store to buy, advertising was often separated from the buying experience by hours, days, weeks. The goal of traditional advertising was to keep the name of the product in the mind of a consumer until that consumer was ready to buy. That was called branding.

However, today information about products is everywhere, especially on e-commerce sites like Amazon.  You may want to ask whether we even need advertising in a world so full of product information.

We do. We need it to distinguish between one product and other in the same space. And we still need it to keep the names of products top of mind until we are ready to buy. 99% of the time people are online, they’re not there to buy anything.  That’s the big  mistake digital advertising made in its early years. Every time an ad appeared, it tried to sell someone something.  This annoyed the non-purchasing visitors.

We are entering a different world for advertising. The app store now has 2,000,000 apps that have been downloaded 130,000,000,000 times. $50b has been paid by Apple directly to developers. There are now four separate Apple platforms, each of which is world changing, and each of which has its own apps. And we haven’t even talked about Android, which has the lion’s share of the mobile market.

Every app developer is a publisher, and each is competing with traditional publishers for attention. If you are playing Candy Crush, you are not consuming news. And if you are consuming news, chances are its curated within an app. The open web has lost ground to the application economy. The audience is fragmented beyond belief.

What does this mean for advertisers? It means many opportunities to bring a message to potential customers, but in a different environment with different affordances. It’s not about the masses anymore, it’s about the niches.

To reach niches, engagement is key. Advertisers need to be clever about how they attempt to engage people who are not online to buy. Their goals need to be changed from performance to branding, and their strategies altered accordingly.

 

 

Facebook’s Day in the Sun May be Over

For publishers, Facebook is no longer the darling it once was.  To be honest, it was never a darling; it was more like a force that had to be reckoned with, as all the publishers who jumped on Instant Articles thought they knew. For them, once Instant Articles launched, it was damned if you do and damned if you don’t. Now, with display advertising largely being replaced by video, Instant Articles isn’t worth the loss of control over their own sites.

The Times is among an elite group of publishers that’s regularly tapped by Facebook to launch new products, and as such, it was one of the first batch of publishers to pilot Instant. But it stopped using Instant Articles after a test last fall that found that links back to the Times’ own site monetized better than Instant Articles, said Kinsey Wilson, evp of product and technology at the Times. People were also more likely to subscribe to the Times if they came directly to the site rather than through Facebook, he said. Thus, for the Times, IA simply isn’t worth it. Even a Facebook-dependent publisher like LittleThings, which depends on Facebook for 80 percent of its visitors, is only pushing 20 percent of its content to IA.

But what’s happening with video? Sites like Bloomberg are launching tech demo offerings that publish video to Facebook live. But like everything else Facebook, Facebook Live arrived with the promise that it would solve monetization problems, but no one knows for sure (yet) how well it works.

Mark Gurman, the expert from 9-5 Mac who got hired away by Bloomberg because he had so many contacts at Apple who fed him rumors, has just started a gadget show that will stream live on FB live. This follows the successful sale of the Wirecutter to the New York Times, and the launch of Circuit Breaker by The Verge. Apparently everyone thinks unboxings, demos, and reviews of gadgets will be the best way to monetize video on Facebook.

We don’t think so. One of the problems with Facebook is that no one goes there to buy things, or even to look at branded content. Rather, they go to connect with other human beings in Facebook Groups, or to respond to invitations to Facebook events. We think that as time goes on and Facebook’s numbers get audited by third parties, we will all learn that Facebook, although it has such amazing scale, does not produce proportional results.

And all of this may be further complicated by new tools Facebook has just released that allow users to suggest that specific articles and sites might be fake news.

We’re pretty sure that the days of sheer scale are numbered, and advertising will go back to more sensible goals — reaching the right potential buyers.

 

 

 

 

Ad Fraud Ruins Analytics

Ad fraud. The gift that keeps on giving.

Marketers are beginning to understand that ad fraud affects their actual spend (they get less for their ad dollar), but they haven’t yet caught on to the fact that it affects their metrics as well.  Fake traffic and clicks generated by bots throw off analytics and can cause a marketer to optimize a campaign for the wrong things and waste even bigger dollars.

One way to make ad fraud less lucrative for the fraudsters is for marketers to stop paying for “each,” or volume, and start paying only for quality. That would mean coming to terms with the fact that low quality traffic is even worse than no traffic at all. At the recent IAB Annual Leadership Summit, P&G Chief Brand Officer Mark Pritchard announced that his company, one of the largest advertisers in the world, will only pay for traffic if they can see where it is coming from and whether humans actually viewed ads. Since P&G spent $7.2 billion last year, his announcement caused more than just a slight ripple in the industry.

A casualty of the big wave that rolled over the media supply chain happened to be Facebook, which has always provided its own metrics, and has announced this week that it will allow its ad platform to be verified by the Media Rating Council’s standards.

This will be fun.

And you can’t blame this all on the rise of programmatic. It’s not how the ads are sold or bought, but the kinds of sites selling inventory on the exchanges. Most of the bots happen to be in programmatic ad exchanges, because, as fraud researcher Augustine Fou says, “when those bots cause an ad impression to load on a “long tail” website, they earn ad revenue for that site. Bots don’t make money by causing ad impressions on mainstream publisher sites.”

This is the drum we have been  banging for what seems like forever: buy smaller, higher quality audiences. Again, from Dr. Fou,

one key thing for [marketers] to realize is that there are only a finite number of real human beings. So when they target real human identities, the volumes of ad impressions will probably be far less than they are buying now—but that is a good thing, because they want their ads to be shown to real humans, not bots.

Marketers know who has purchased from them before, who has signed up for email newsletters, or who has visited their website.

By onboarding their own data, they can more easily achieve the identity targeting we just talked about—and thus make their media much more effective because they are actually getting their ads in front of real humans.

We are not sure why this is such a difficult lesson for marketers to learn.

 

 

 

 

 

 

 

 

 

Facebook Faces Competition from Snapchat

On the day Snap, Inc.(SNAP), the parent company of Snapchat, became a public company, its stock soared 44 per cent.  That’s because Snapchat reaches a demographic everyone wants to reach: young people who are just forming allegiances to brands. But it’s also because there’s a dirty little secret out there: Facebook advertising doesn’t work.

The Copyranter blog from Digiday says it best:

 You know who knows better than anybody that Facebook advertising doesn’t work? Facebook! Of course they do! All that proprietary data they’ve got on 1.8 billion people, they know pretty much everything about brands, consumers, and interactions between the two. That’s an unprecedented level of lying, even in the skeevy ad industry. Or maybe you think this is all just conspiratory “truther” talk?

We’ve always loved Copyranter because he calls it like he sees it. Last fall Facebook ran into trouble three different times over incorrect or incomplete numbers:

Facebook has always been very purposely opaque and doesn’t share its methodology and algorithms with anyone, which makes it impossible for anyone to do any objective reporting — or regulating — of those numbers.

Then last September, right about the time it was announcing that its first three quarters profit was near $6 billion, up from $3.69 billion in 2015, it also reported a big whoopsie: It had been inflating video view numbers by 60-80 percent (94 percent in Australia).

Facebook has now been forced by P&G at least to allow third parties in to verify its numbers, and perhaps that will help. But Facebook has done its job: it has soaked up advertising dollars not only without producing accurate and verifiable returns, but with at the same time destroying the creativity that made brand ads bearable for viewers. Facebook does not have engaging formats; its entire value proposition is targeting. Well, guess what? It’s difficult to engage attention without creative, especially on a site where people do not come to buy.

The shift from brand advertising to direct advertising that accompanied the dream of “metrics” has forced advertising agencies and brands to change their models and their goals. No longer do we expect advertising to create either brand lift or sales — instead we show the boss meaningless metrics, such as Facebook “likes.” At the end of the day, those do not move the sales needle.

On the other hand, Snapchat filters are really countable; when a person sends a snap with a sponsored filter, that person has actually made a choice to engage with a brand. It’s a very different energy from the energy used to click on “like” on Facebook.

We’re watching publishers drift away from Facebook live, and we predict they will continue to drift away from Facebook as it continues to fail both the sell side and the buy side.

Depth Replaces Reach for Small Publishers

With the coming of  2017, expect native advertising to take a sharp turn to e-commerce. Buzzfeed rolled out its gift guide newsletter in late September, but now we expect all new product reviews to include ways to buy the product that’s reviewed. And actually, this kind of native advertising makes a lot of sense, because it doesn’t annoy the consumer. Presumably, if someone is reading a product review, they’re considering whether to buy the product, and if they decide to buy it, an affiliate link or a shopping cart might just simplify things. And both publishers and advertisers are looking for ways to stop consumers from blocking ads.

This Christmas is going to be the big “tell” for both mobile advertising and e-commerce. Not only will Buzzfeed, whose readership is primarily young women, use native ads to sell products on its site, it will go further into tailored newsletters, moving into verticals like medical, grammar, and even people whose vocabularies include curse words.

And Buzzfeed is not alone. Before Gawker Media was sold, Nick Denton admitted that he got about 25% of his revenue last year from e-commerce.

What does this mean for traditional advertising? Not much, because the percentage of ads that are amenable to e-commerce is limited. Most large advertising spends are focused on branding. However, what it means for publishing is another story.

It means every publisher doesn’t need to go to Facebook to find an audience. Small publishers who go deep into verticals with affinity groups can do very well with small audiences that are very faithful. Take Brian Lam, a former journalist who now publishes The Wirecutter and Sweet Home. The Wirecutter uses product reviews to drive sales. Here’s what Lam, who used to work for Wired and Gizmodo, says:

Everything we choose is an award-winner, and we don’t focus on presenting you with anything but the things we love.

Consider them billboards for electronics and everyday things. The point is to make it easier for you to buy some great gear quickly and get on with your life.

Lam is transparent about the fact that he gets an affiliate commission for every product he sells. While his business model wouldn’t support a large organization, it does fine for his small team, and it earns him a loyal following among gadget geeks.

And what’s at the top of his site? A single banner ad for an HP laptop. And on Sweet Home, a single ad for an air purifier. Nothing to turn readers off, and something the readers might also want. Everything else on both sites is a product review.

We think this represents the future of advertising. Fewer ads, well-targeted, not looking for gigantic reach, but for depth of targeting.

 

 

EMarketer Says Programmatic Has Won

The latest eMarketer roundup on the programmatic marketplace tells us that more than two thirds of all digital display advertising will be bought programmatically this year.

In 2016, US programmatic digital display ad spending will reach $22.10 billion. That’s a jump of 39.7% over last year, and represents 67.0% of total digital display ad spending in the US.

It’s hard to believe that programmatic, for all intents and purposes, is only about three years old. It took a while for marketers to figure out that it was a work flow solution and was safe to use. It was also a bit complex, but now everyone’s comfortable with it, and pleased with its efficiency. This year, programmatic will take over mobile, and next year will be the big year for programmatic mobile video.

Mobile is driving growth of programmatic ad spending. This year, mobile programmatic spending will reach $15.45 billion in the US, representing 69.0% of all programmatic digital display ad spending. Next year, mobile video programmatic spending will exceed its desktop counterpart for the first time.

With respect to programmatic video, 2016 will be a pivotal year. More than half of all digital video ad spending in the US will be programmatic. This year, programmatic video ad spending will reach $5.51 billion, representing 56.0% of total digital video ad spending. That figure represents in turn 24.9% of total programmatic digital display ad spending.

Next year will be the tipping point for programmatic mobile video ads, as mobile surpasses desktop for the first time. By 2017, programmatic mobile video ad spending will reach $3.89 billion, representing 51.0% of total programmatic ad spending in the US. By comparison, programmatic desktop based video ad spending will reach $3.73 billion, dropping to 49.0% of total programmatic digital display ad spending…

That being said, programmatic isn’t growing quite as quickly as it has in the past. We think that’s because, although media planners may recognize that programmatic is efficient, there’s a difference between efficient and effective. So far, there isn’t enough experience with mobile video ads, programmatic or direct, to prove how and where they’re as effective as other channels.

And the landscape is further complicated by header bidding, which has been gaining momentum and will be rolled out by Facebook’s ad network this month.

On Being the “Tortoise”

I read another post recently about the Armageddon coming in the ad tech space. There are still 3000 companies on the Lumascape, and the author of the post refers to “obliteration rather than consolidation.”

That’s because the capital markets are drying up, and most of the companies in the space rely on outside capital. Those should go away. If you haven’t gotten to sustainability by now, and you haven’t been acquired, you are probably going to be out of luck.

ZEDO does not rely on outside capital.  That’s why we aren’t as large as some of the VC funded companies. On the other hand, we have had far fewer hiccups along the way, even as the industry changed. We were founded in 1999, and we have learned to stay nimble and responsive.

We are funding the company the old-fashioned way, with good products that bring us customers. We have the ability to look out into the future, which is what our marketing department does, rather than simply create pretty pieces and figure out how to spend more money sponsoring conferences.

When we see a customer need, we have a strong development team to respond to it, and we put it on our product road map. That’s now we came to develop SwipeUp, our mobile ad format. SwipeUp came from a meeting we had between marketing and development to talk about formats mobile consumers would tolerate and respond to. It accompanies our already successful inArticle video format.

Our goal is to create formats and innovations that are fundamentally better advertising, not to make VCs happy with exponential growth. In the advertising industry, if you grow to fast in one direction, it makes it harder to pivot to the next change. We really want to remain responsive, and use our technology leadership on behalf of customers.

We have always been known for our outstanding support as well.

Now that we are private platform for buyers and sellers with a clean supply chain, we are interested in meeting people who want to deal with a “real” company, rather than a creation of marketing and PR that’s out ahead of product and customer service.

I rarely write one of these posts about our virtues, but as I look around at the landscape and read the industry trades I can’t help but feel fortunate that we chose to be the tortoise.