Anyone in the ad-supported-blog business knows sales and revenues are on a downward spiral. Some people would argue this is a sign that advertising isn’t a viable business, but I think it’s not so much a problem with what is being sold, rather how it’s being sold. What was once a largely creative realm has been boiled down to a simple numbers game, one that everyone playing loses.
Lets start with a little history: It wasn’t too long ago that blogs were completely free of advertising and blogging was seen as nothing but a hobby. As the medium developed, blogs grew in popularity. Some incredibly talented people found blogs to be the perfect outlet for their creativity, and many tried and true writers began to embrace the freedom of self publishing. Readers began taking note as well and started turning to blogs because of their unfiltered voice and transparent biases. The more popular some blogs got, the more they cost to keep online. Sooner or later people started putting ads on their sites to help with those costs. As more blogs began to implement advertising there were cries that this would ruin blogging (a claim that might end up true though not in the way the protesters had predicted).
Over time acceptance grew to the point that not only do many off-the-shelf and hosted blogging platforms include built in advertising options, but there are also legions, well, at least a few “professional bloggers” who make a living from the ads on their own sites. Additionally there are many companies (like my own) that are supported almost entirely by revenue from ads on blogs.
Today, a publisher generally has three main options to sell ad space on their site:
- Direct Sales: This would be when a site has an on staff sales team whose job it is to sell ads on that site alone. This option generally produces the most income from ads (more ads sold, at a higher average price, with 100% of the price going to the site) but it also has the largest overhead – at the very least the salary of that sales team but often rent on an office too. This is the best option, though the cost of barrier to entry puts it out of reach for most publishers.
- Ad Networks: This is the option employed by the majority of blogs to sell the majority of their ads. Kind of outsourced direct sales. The way this works is one company represents a collection of sites and sells ads across all of them. The ad network becomes something of a representative by acting as a go between for the sites and the advertisers, and takes a commission for this work – generally 30-40%. Again, the bulk of ads on blogs right now are likely sold through ad networks.
- Remnant Ads: While the previous two options are ‘active’ in that a living person is specifically selling those ad spaces, this is a ‘passive’ option in that unsold ad space is being filled at the last second from a pool of ads waiting for just such an opportunity. Remnant ads are often sold by ad networks as well, but I differentiate them because the spaces aren’t being sold so much as filled when there is no better option, and the prices are usually rock bottom, sold for pennies on the dollar. An advertiser might get an ad space that normally sells for $10 CPM for under $1 via the remnant route. Think of this as the bargain bin at a department store – sure there are deals, but generally it’s just one step above giving away things no one wants.
While some ad networks ask for exclusivity, it’s not in any publishers interest to agree to this and most likely a site will use some combination of all three options.
Online ads are nothing new and a good deal of content has been ad supported since before the first bubble. Originally web ads were sold largely in the same fashion as print ads, and websites were just considered digital magazines. Between 1998 and 2001 I worked for playboy.com. I remember one of the ad guys telling me that advertisers didn’t understand the internet and the more he told them the more confused they got. Traffic and hits and clicks meant nothing to most people at that point and he had to explain what he was selling in the context of the print ads they were already familiar with. Though print ads weren’t completely straight forward either because “circulation” is kind of a made up figure as well. In the magazine world there is an assumption that one single printed issue will be seen by several people. This means actual readership is some number x the copies printed – that “some number” depended on a whole host of other factors (largely what was on the cover). He said most of the advertisers still didn’t understand but bought the ads anyway because they wanted to reach people reading Playboy no mater what form it was taking.
This is an important bit – people bought the ads on the website for the same reason they bought the ads in the magazine, they wanted to reach people who were fans of that specific brand.
Since then we have gotten a lot smarter about web traffic. Hits are now ignored and impressions, page views and uniques are looked at more closely. Many sites not only charge for how many times an ad is seen, but how many times its clicked or even how long it’s visible on a screen. We pat ourselves on the back saying this is better, and in some ways it is, but just because you have new information at your disposal doesn’t mean it’s the most important thing to consider. New doesn’t always mean better. Focusing on traffic alone actually causes problems as it directs the attention of the sales teams towards generic numbers and away from the power of the individual brand. Remember, the main reason people were buying ads on playboy.com was not because of how many people where reading the site, but because of who those people were.
It’s common sense that showing your ad to 5 of the right people is more valuable than showing it to 100 of the wrong people. Old school advertising people knew this and that’s how they sold ads. Getting your ad in front of a specific audience was what was important, how many issues of that magazine were printed was just icing on the cake. The web used to be the same, you wanted your ad to be associated with a specific site because of who else was reading that site, how much traffic it got was just bonus info.
I have first hand experience with this from the buyer side of things as well. When doing marketing for bands while working at various record labels throughout the 90’s, we knew which magazines the kids we were trying to reach read and bought ads in those. We rarely asked how many issues were printed – that info didn’t matter. We knew that some of the most popular magazines had limited and exclusive print runs ensuring that only the coolest of the cool even knew the magazine existed. The audience was the important thing to us and we spent a lot of money on ads with that focus.
Getting back on topic, and present day. To people selling the bulk of advertising on blogs, who is reading isn’t very important – it’s all about how many. Sure the occasional demographic info is tossed around but really the headcount is what matters. And from their standpoint this makes sense. If you want to sell ads on a site it takes a lot less time to spit out traffic numbers then it does demographic info. Rattling off a few figures is easier than explaining the content of the site, what has been said about it, the passion of the writers or the dedication of the readers. And if the numbers alone for one site aren’t big enough, combining tens or hundreds of other sites multiplies those numbers into serious wow-land. 10 million eyeballs is better than 25K, right?
Wrong.
Not when you consider the earlier logic about right and wrong people.
Or if you consider that higher numbers doesn’t always mean more readers.
The problem here is cyclical and self encouraging, driven by short term goals. Reps are ignoring brands/content and selling ads based on numbers alone, which leads advertisers to think that numbers are the only important thing, which encourages publishers to ignore everything except their traffic in hopes of selling more ads. High page views does not equate to good content, useful design, or a quality site – don’t believe me? Look at MySpace. Gimmicks like breaking an article or photo gallery up into 10 pages multiplies traffic but doesn’t make the content any better. Multipage logins filled with ads increase numbers but not the quality of the site. Putting more ad units on a page increases the impression count but does anyone really believe those ads are being looked at? Focusing on numbers alone doesn’t offer a very good ROI, which leads to disappointed advertisers which leads to slashed prices from the reps in hopes of cheering up the advertisers. But they continue selling the same ad spots based on the same numbers so the returns continue to disappoint and prices continue to drop.
The industry has a short memory and this mindset quickly becomes universal – if advertisers are buying ads for 5 campaigns based on traffic alone, when they get to the 6th they aren’t asking about who reads the site, all they know to care about are numbers. The sales people have trained the buyers to focus on one single issue, so much so that they don’t even know there are others to consider.
The reps either don’t understand or don’t care about the value of the brands, and thus don’t pass that on to the buyers. This is a huge problem because loyal readers are actually the most valuable thing and the hardest to create. The authors and publishers of blogs work very hard to craft their content to develop a community that is interested in and cares about a particular set of topics. The better blogs can quickly become the premier source of info for many niche topics. This is an invaluable community to reach if you have a business catering to that niche. You might even be willing to pay a premium to reach them because those are the right people, and you know getting your ad in front of them will result in much more business for you then having it in front of any other audience.
This asset is being trivialized by the numbers only approach. You might think there is no way this could really be getting ignored, but it is. I’ll give you a few first hand examples from my own experience selling ads for Metblogs over the years. Keep in mind that with Metblogs we publish local sites, written by people in a city for other people in those cities. It’s local for locals, and if you want to reach people who are obsessed with their cities, Metblogs is a damn good place to find them.
- When we direct sell ads, we regularly get anywhere from $25-$45 CPMs. This is hard proof that advertisers will pay those rates to reach our audience. The most we’ve ever gotten from an ad rep is $16 CPM, but more often the CPMs range between $6-$10.
- We’ve had advertisers tell us they approached our reps with a budget and expressed interest in some of our specific local markets, but the reps told them their money would be better spent on a package of sites covering a wider range. They later found that under 20% of the ads they bought ended up on sites with a targeted local audience. This didn’t make those advertisers demand better targeted ads, it showed them poor returns on the investment in blog ads and they cut their budget for the next round.
- We’ve had ad reps tell us they have advertisers who want to reach blog readers in Nashville, TN but until we get over a million uniques on our Nashville blog in a month they can’t sell the space. There are only half a million people who live in Nashville. Nashville is only one example, this exact thing has happened in many cities – reps requesting traffic numbers greater than the entire population of a specific city.
These aren’t isolated instances, and in talking to other blog publishers, local and otherwise, I hear similar stories again and again. What this tells me is the reps either don’t understand the assets they are selling, don’t believe in the value of the assets they are selling, or don’t care to learn about those assets. None of those options paint a good picture, and it’s easy to see how over a long enough time line prices will continue to drop as the sites are devalued over and over again.
Going back to the beginning, the reason I say that direct sales are the best option is because publishers can explain exactly who their audience is and why someone should advertise with their brand. Unfortunately that is very time & labor intensive making it impossible to do that and run their sites, which is why I say it requires a dedicated sales staff. But that isn’t the magic end all solution to make this all better. A dedicated sales staff is trying to sell ads to the same people as the ad reps, and if the ad reps – industry wide – are preaching the numbers only gospel to advertisers, then not only do the staff sales teams have the job of selling ads on their own sites, but now they also have to either try to reeducate the advertisers or just pay by the same rules as the ad reps. Again, neither of these options are ideal in anyway.
I don’t want to sound like I’m blaming the ad reps for this, even though that is kind of what I’m doing. What I’m attacking is more the model and approach. Reps are in the business of selling ads, but the problem is the tools they have, especially the CPM concept itself, focuses on selling ads right now now without consideration of how that will effect selling ads next year. They are also in the business of selling a whole lot of ads, so its much more efficient to do package deals and boil many individual sites into one traffic pot. This is great for selling one batch of ads right now, unfortunately it’s the worst thing you can do to promote long term value and growth.
This decline will continue until everyone goes out of business unless something changes. Something needs to change, and honestly there are too many smart people involved in this business to just let it die without trying something different. Funny enough, as I was finishing this article TechCrunch published a piece by Shelby Bonnie called ‘Lets Kill The CPM’ which I think comes to the same conclusion I have though via a slightly different route, and ends with the same call to action. Something has to change. I’ve been talking about this problem with people for a while now and standing around on the street corner complaining hasn’t worked out so well for us so we’re going to take the steps and try to provide a solution. Or at least an alternative option, that we believe will be better. We’re still finalizing some of the organizational structure but I hope to have an announcement about that soon. I’m excited to see Shelby talking about this, and hope this leads to more announcements by more people in the very near future.
(For more history on advertising as a medium I highly recommend this wikipedia article or the AMC series Mad Men.)
What if ads aren’t the way at all? Do you think blogs should sell their own products, services, memberships, etc?
Oh I didn’t mean to imply that there aren’t other revenue streams worth exploring. I just meant that ads can’t continue the way they have been, and if they are going to keep being a viable option we’re going to have to rethink some things.
Wonder if the self-serve ads might be more attractive if they were pitched as sponsorships instead of ads? Something like “sponsor this site” instead of “buy this ad”? The sponsor model has been pretty interesting in some Seattle hyperlocal sites.
A very interesting article to read / shows us an insiders perspective on what the big boys have to go through to make end meet in the online arena
Sean – I have new found respect for you, after I read that you worked at Playboy – I bow down / heck I kneel in respect
Sean – if you ever want to do a case study about direct sale advertising, we should talk. I’ve been doing my own ads (well Manny fields them) for two years now and it’s worked out very well. Partly because my blog is in a unique position that 90% of what I write about is available for purchase on the web – so advertising adjacent to that is desirable for the right company (web candy stores).
Most of my advertisers understand that impressions are as important as click-throughs & purchases. Partly because they are the company owners, not some middle man ad-booking guy and they’re talking directly to the publisher of the content. We don’t inflate their expectations and because they’re booking directly we keep all the money and can price competitively.
I still have blogads on my site, but they’re used very rarely. Blogads might work for some folks just fine, but I find the system frustrating and don’t feel like they’re working as an agent for me, just a service.
An interesting conversation opener especially at a time when I’m nearly ready to start selling ads on my cycling blog. Will take some good points away for when I start contacting: stress the value of the readership who are likely at the cutting edge of the cycling world, show case studies of how they will earn back their ad spend in no time and stress the importance of reaching right audience not lots of the wrong audience.
I knew to do this anyway but your article has stressed it in clear terms. Also I will aim to provide far better ways to connect with my 1000s of readers rather than just a 125 x 125 box in the top right
I think Andrew is right on. The model for advertising on your site does not always work for the startups. A more dirrect approach on selling the product or service directly through the blog is a lucrative option.
I came via Tim Ferriss’s tweet. Interesting article that I agree with to an extent as I’ve had connections with some Ad networks. I run a travel website and a pretty popular one so I get ad requests a lot. Most of the big brands only care about page numbers or will use commission junction but the smarter brands tend to focus on the right traffic. They know that site X has the quality traffic and so are willing to spend the $ to reach that traffic. They don’t really care about the numbers. While people want to know them, most of the time they are most interested in the demographic. Do I reach their market?
I always think what will be relevant to my readers too. Bloggers really only have their relationship with their readers and if you start ad spamming your own site, you lose that relationship. In the beginning I just sold ads and was like yay! money! but now I kick myself because it probably lost some of that trust so I’m letting contracts expire and not renewing.
I don’t think blog advertising is dead. I think eventually these people will realize brand advocates and the right traffic is more important than numbers.
I’ll throw in my very slanted and jaded opinion formed by working solely in online advertising for the past 9 years.
I agree that the traficking, placement, and measuring components. But I fear there are deeper problems to blame. Deeper problems that the metblogs may not have to deal with so much but, IMO, it trickles down to everybody.
It has lead me to a beef I have not with just online and/or offline advertising but with the idea of advertising in the early 21st Century.
We have become so unhinged from the actual ideation, manufacture and sale of a good/service that, even if we wanted to, we couldn’t possibly make the right decisions.
This leads me to believe
1) Until TV ads stop being The Safe Bet, the internet advertising market is going to suck. Hundreds of millions of dollars a year are going to 30 second spots. Not because they work, but because no VP of Marketing at any company is going to get fired for picking TV ads over Internet ads.
Internet ads and integrated campaigns are also not what C-level execs brag about. It’s the TV spot. The dick-lengthening power of “I had drinks with Payton Manning after the shoot.” on hole 3 of the golf game should not be underestimated.
This also will change, but not anytime soon.
2) Most people in an advertising dept at insert-fortune1000-company-name-here don’t really care about advertising. They care about not being fired, looking engaged at the 8 meetings they have that day, surfing facebook, their new baby’s doctor appointment and trying to keep their budget from getting whacked. It’s hard to blame these people. Those jobs suck.
The real bummer though is that those people also really don’t give a shit about the product/service the company they work for makes. It would be easy to say yes well “How excited can you get about tampons, breakfast cereal, phone service, etc?” but I’ve seen some people get PRETTY FUCKING EXCITED about rice cakes and toaster strudels.
What isn’t exciting to them is that at most of these places the “teams” get all busted up and switched around every year or so. So the person you used to scrap with is now your partner, or vice-versa, you have no loyalty, you have no career path. All you’ve got is either keeping your head down and hoping you get promoted, or waggling your stinking attitude around and hoping you get promoted. Either way, it sucks.
Director’s of Marketing at insertcompanynamehere – the people who control the ad budgets – want the easy and safe bet because they are jammed up with the aforementioned concerns listed above.
3) So… Enter the ad agency. A group of people who, in large part, actually DO really really care about advertising, (funny that. and kind of scary.) so much so they, many times, want to do really exciting things that make the client nervous or get all jazzed and come up with something that sucks because of their own politics, or their engagement with their client is extremely highly mitigated by middle management, and/or lack of access to the thing they are supposed to be schilling.
arg. modernity’s a bitch.
I think blogs are the advertising for something else such as a lifestyle, a book, or what have you. Additional advertising is worthless. My guess is less than 1% of readers actually click on the ads on any particular blog. But blogs can sell a lot of books as in the case of Tim Ferris.
I have my reasons for including zero advertising on my websites. Unfortunately, in the mind of the audience, I’ve come to understand that having advertising somehow legitimizes personal/artist blogs. We’re used to seeing ads, I suppose, but this skewed assessment of value troubles me.
It’s a semi-unrelated thought, but I hadn’t yet found a useful forum to discuss non-advertising driven approaches to supporting content or audience perception around ad-supported blogs.
Good piece.
I think the problem also is that because webstats are available, its the only tangible way advertisers can measure success and, thus, justify their jobs safely. I think most of them “get it,” but corporations with the money to advertise don’t want to hear it.
My own site, CreepyLA.com, is as niche as they come – a blog about Halloween events in Los Angeles. Last year we had around 250,000 hits. Not shabby, especially considering the majority of visits came from locals looking for stuff to do and spend money. In spite of numerous hours spent contacting every Halloween attraction in LA, nobody purchased an ad… and they were cheap. On the other hand, these same attractions will advertise on national websites, even though only a small portion live in the cities where the events take place. Frustrating.
(on the flip side, I was contacted out of the blue this year by a major nonprofit to run an ad for their annual Halloween drive, and didn’t flinch at the numbers… glad somebody gets it).
There’s a nice fact in the middle of Rob Roy’s comment that points out a major thing that’s wrong with advertising: ‘The dick-lengthening power of “I had drinks with Payton Manning after the shoot.” on hole 3 of the golf game should not be underestimated.’
Advertising feeds the narcissism of business decision makers, big and small. If you’re an accountant or restaurant owner, you get such a thrill seeing the name of your business in the newspaper or hearing it on the radio that you don’t rationally address the question: “does this ad pay for itself?”
Newspaper ads in the (small) city I live near are frightfully expensive: a small shop owner could rent a storefront or hire an employee for what a year of newspaper advertising costs. No wonder the daily paper seems to gradually be going out of business; the weeklies are doing just fine since they give similar exposure at 1/7 the cost.
Our family is one of a growing number of families that don’t get broadcast, satellite or cable TV. We surf the web, play video games and watch plenty of downloaded or otherwise recorded video, but see TV ads only when we’re out at a pizza restaurant or visiting family. One of these days we’ll get one of those big-screen TVs, but it’s going to be used as a computer monitor. Businesses who stick with “safe” TV ads are going to be stuck with a shrinking, aging and eventually impoverished audience.
The fact is that the audience is moving online faster than advertisers are, and eventually successful businesses are going to catch up — hopefully the rest will go out of business, so long as the government lets them.