This post is reprinted with permission and originally appears here.
In the pursuit of earnings, publishers have done two things – intensified SEO efforts, which creates fly-by ad revenue and established paywalls, which create fan subscription revenue.
Remember these definitions:
• Fly-by – Someone who visits once.
• Occasional – Visitor to the site two to three times per month.
• Regular – Visitor to the site one to two times per week.
• Fan – Visitor to the site more than two times per week.
Some fans are willing to subscribe through a paywall, and fly-bys are commodity impression to be bought and sold through exchanges, but what about the other 15-25 percent of the audience?
The barbell focus on fans and fly-bys for revenue optimization overlooks a significant untapped opportunity in between the two groups. The regulars and occasionals as we call them represent an opportunity for publishers to create differentiated advertising products for advertisers such as an adwall.
Users have to give time to get time, that is the underpinning of attention economics and online advertising. Advertisers underwrite user access to media or other digital goods in exchange for a moment of their attention.
I was reminded of this exchange on a recent flight from New York. After take-off, I decided to use the in-flight Internet access which normally costs $9.95 for that route but was being offered for free if I would watch an advertisement. For me, the exchange of 30 seconds of my time for four hours of Internet access was a no-brainer. In gaming, companies like WildTangent are allowing users to watch advertisements in exchange for virtual goods to extend their playing time online. In exchange for watching the latest episode of a TV show, the Hulu user watches advertisements.
These are all examples of adwalls where there is an exchange for watching an advertisement, i.e. the user is given access to digital media, games, etc. Unlike interstitials that are frequently dismissed, the adwall requires viewing and acknowledgement or no access is provided. Adwalls are intended to optimize revenue from the regulars and occasionals that make 15-25 percent of the audience. To illustrate the idea, let’s consider a couple of different scenarios of how fly-bys might react to an adwall vs. regulars.
The first scenario is Demand Media. Demand Media is a company built on SEO. The Demand Media audience is mainly fly-bys. How much is an article on "how to window shop" worth? Would a fly-by be willing to watch a 30 second advertisement in exchange for access to the article they are likely to look at for at best a couple of minutes? For most people, the answer is likely to be no. In this case, the adwall turned away traffic that could have been served by commodity ads from an exchange.
The second scenario is The Times of London. While some loyal fans have signed up through the paywall, many others have not. Surely, many non-subscribers and previous readers would be willing to watch a 30 second advertisement for a one day pass. In this case, the adwall extended the revenue stream that otherwise would have been a lost opportunity.
Finally, ad units like adwalls are unlikely to erode any existing paywall revenue because the fans that would pay for access would also likely pay to avoid the adwall for convenience sake. It actually has the chance to generate paywall revenue. As our CTO stated, he would gladly pay Google $10 a year to get rid of the ads in YouTube.
This post is less about the merits of an adwall per se and more about the merits of targeting higher value ad units to engaged audience members to optimize revenue. An adwall without targeting would most likely end like slate.com. The slate.com adwall probably failed because it did not target the adwall to certain audience members or around specific differentiated content. Consequently, the give-to-get equation was out of whack.
Digital media cannot rely on a paywall to generate all the earnings for shareholders. Advertising needs to generate more revenue and an adwall is an example of just that. It creates a differentiated product for advertisers, a reasonable value of exchange for the audience and incremental revenue for the publishers.
Matthew Shanahan is the SVP of strategy for Scout Analytics, which creates actionable revenue opportunities for digital publishers by tracking and
targeting user engagement.