Driving Traffic – The Publisher Panacea

September 27th, 2012

The dream of web banners and selling impressions to large brand budgets is over. The value of audience data has surpassed the value of the ad impression. With this backdrop the future for publishers is this simple. They will get one more chance to enter the click based economy on their own terms (meaning owning their media and data) or they will lose control of their own business and become a media tool of Google and Facebook.

The last few years of rapid change in the ad tech world away from ad networks and towards ad exchanges has been a confusing one for premium publishers. First, they turned to the idea of “Private Exchanges” places where advertisers could come with their data and buy directly on the publisher inventory. The reality is there is no demand from advertisers because impressions are cheaper elsewhere. 18 months after being all the rage nobody talks about “Private Exchanges” anymore.

The new shiny object for Publishers is now Data Management Platforms or DMPs. While pubs seem to like the content optimization qualities of these platforms there are real issues using DMPs effectively with their media. DMPs add complexity and publishers are not technologists or marketers. Most important DMPs do not solve the underlying problems for publishers. Audience data is becoming commoditized and the value of their media on an impression basis continues to sink like a stone.

While Publishers have been fumbling the simple Click Economy has grown to the neighborhood of $40-50 Billon in annual revenue. This advertising economy includes Search, Contextual, Email, Affiliate. Everything that drives traffic e.g. clicks to marketers. Its newest entrants are Facebook, Twitter and Retargeting companies like Criteo – all of which are experiencing massive growth. In this economy two things stand out; the ad impressions are free and the performance-based business model drives value higher to those with the best data intelligence.

The businesses that were built to sell impressions to brands - Yahoo, AOL, Microsoft, NYT.com - have been passed by these businesses that drive traffic. Even choruses of “the click is dead” from fearful self-interested impression supporters cannot stop the basic fact that the web has always been monetized one way or another through traffic arbitrage and always will be. To she who sends the most valuable traffic goes the spoils.

The inflection point is now.

What we’re seeing from Yahoo is representative of the change that Publishers must make in order to survive. Bringing in one of the sharpest minds on Search as CEO to help save the struggling web banner company should be a beacon to all publishers. Your business is a utility. You deliver valuable content. That includes advertising. The value of that advertising is based on the quality of your audience to the advertiser as measured by a performance metric. Your ability to increase the value is based on the relevance of the message.

If that sounds a lot like Search it should. Those are the core tenants of that marketplace. A market that started later but has grown roughly twice the size of web banners. Publishers are paying dearly for missing the boat on that.

Think how much revenue the New York Times could be making had instead of web banners its digital revenue focus was to deliver traffic and conversions to sites like Expedia, Amazon, eBay, Bankrate, Home Depot, and on and on and on. It certainly would have been larger than IAC the company that just acquired About.com from them. IAC market value is 4x the New York Times. To give you another perspective the Times will do roughly $300 million this year in digital revenues. IAC will do over $2 billion.

Quietly taking advantage of publisher fumbling is Google. Google has expanded its grip on not only the publisher media through its Ad Exchange and AdSense but also their data through Google Analytics and its DFP ad server. Most publishers will openly admit that Google knows how much money they make and more about their audience then they do. When you don’t know who is coming into your store and you don’t know how much they are paying or what they are leaving with any business will die. That is exactly what is happening. Facebook is soon to take the same approach as it builds out its ad network on the back of all their javascript publishers have installed the past few years on their sites.

The fact is that publishers are already driving valuable traffic they are just not getting paid for it. A few years ago the New York Times said that 25% of its traffic leaves and goes to Google. Doing some back of the napkin math that’s about 20 million exits a month to Google and at estimated Google’s RPM rate of $80 that’s about $20 million a year in ad revenues the Times delivers to Google from intent the NYTimes themselves has generated. There needs to be an endcap.

Better yet, there needs to be a publisher controlled marketplace where the true value of traffic from premium publishers is understood, captured and passed on to marketers. Where the data is transparent and the optimizations generate mutual benefits to the publisher, marketer and site visitor. This would create a new channel. The opportunity is massive and real. Some premium publishers are already doing it and experiencing incredible revenue growth. Let us know if you want to be one of them.

Contact Us

Download Case Study