What would you rather do, support a business model on the declining value of the display ad market or build customized ad solutions while running a live event and subscription-based data service on the side? For online publishers these days, that choice may be less preferential and more of a requirement. For sites any size, diversifying beyond display revenue is increasingly important, and publishers are evolving their models with an alacrity that their print cousins will find very familiar.

From a strictly ad-supported perspective, online publishers have been experimenting with a variety of different formats and contextual placements for years.

Slate.com, a subsidiary of the Washington Post Company, made a move towards a more independent sales operation by separating its sales team from the Washington Post late last year. The site, which now averages about 10 million monthly uniques, per comScore, has been solely responsible for its own sales, and revenues have been tracking up ever since. Slate GM and publisher Matt Turck says sales revenue is up 30 percent through October 2012 compared to last year.

The site has long been positioning itself as a brand that offers custom and creative approaches to ad formats. Custom articles have appeared alongside standard editorial content. And Turk adds that custom videos have been created for a variety of customers, such as Adobe, Mastercard and MINI.

“The key to Slate is we take advantage of some of these spaces on the site where our readers would normally go for editorial content and direct them to this content,” says Turk. “Again, this is all labeled as sponsored content. These are not necessarily rules, but principles: The reader does not confuse ad content for editorial and ad content does not involve editorial content.”

Display ads are still an important part of the business, however. “I talk to a lot of people who say they are moving away from banners, but I’m torn,” says Turk. “I think we need banners. They’re still part of some of the programs we do and we need to backfill with networks and exchanges to add to our revenue at the end of the day.”

Turk says that average CPMs for network buys have actually been increasing, at a rate of up to mid-double-digits since January. “But that’s not to say our standard banner prices are going up,” he adds.

But what’s interesting is online publishers are building out broader revenue models that are beginning to resemble the print publishing market, which also scrambled to diversify beyond a strictly ad-supported model.

In the meantime, the custom or native ad programs that Slate runs are not yet the primary money-makers, accounting for about 20 percent of all ad revenue, but Turk says these kinds of programs are part of almost every campaign the team develops for their customers. “Most everything we do is program-based,” he says. “Some of them are edit programs that line up contextually, some of them are unique ad units. And we created an ad unit that incorporates our Trove technology, which can aggregate as well as personalize content and information. We use it to pull in contextually supportive content and have it surround a unit.”

The click-through model has become secondary for many of today’s online publishers. “It’s not click-throughs anymore,” says VentureBeat founder Matt Marshall. “It’s highly customized, targeted efforts and campaigns.”

In September, VentureBeat moved out of the Federated Media family of sites to run its own direct sales operation, and simultaneously hired Ken Beach as its first chief revenue officer to oversee it. Part of the reason the site formed its own sales team was to focus more closely on native, or custom, ad program development.

Not long after, Federated Media itself shut down its direct display ad sales operation to also build out program-based and native sales, noting that its banner display sales were on the decline.

“If you want to go rich, get real engagement and do something that’s more like a $15 cpm, don’t just run ads. Run sponsored posts, conversational pieces with authors—native ads,” says Marshall.

Marshall adds that native ad projects were never really discussed on a cpm basis, rather they were billed on straight fees in the tens of thousands of dollars.

Digital Goes Face-to-Face
But where many online publishers, especially of VentureBeat’s audience size (about 5 million monthly uniques), are finding significant revenues is events. Marshall says roughly 50 percent of VentureBeat’s revenues come through face-to-face events and the company is doubling the number of events it produces to seven or eight in 2013. “You have to be clever with not just having an event, but with how your advertisers get woven into that offline process. There’s only so much you can do with online. The event side allows for very rich conversations,” he says.

Taking the revenue diversification theme even further is Skift, a recent launch led by Rafat Ali, who sold his previous startup ContentNext, which included the media site PaidContent, to Guardian News and Media in 2008, which then sold it to GigaOm early this year. (GigaOm, it should be noted, runs about a half-dozen events and the paid subscription-based GigaOm Pro data and research product.)

Skift focuses on the business travel industry, from b-to-b and b-to-c angles, and Ali has avoided the network ad buy from the start. “I don’t see us doing any ad networks. [Advertising has] to be super-targeted and relevant for us. The reality is it has to be very contextual. And with any of the networks, even if they’re doing some lifestyle stuff, the cost of us trying to implement it will not offset the revenue we’ll get out of it.”

From there Ali is planning a data sales component along the lines of what GigaOm is also doing. For a monthly fee, subscribers will have access to a dashboard-based product that aggregates industry-relevant research.

In his previous companies, events were also part of the mix and certainly something Skift could also do. “There’s always the possibility we’ll do an industry conference, that’s not rocket science,” he says.

Yet, just beneath the surface is another key motivator for online publishers to diversify—investment and, later, a maximized divestment. Ali notes that advertising is only one leg of the stool and ads alone won’t impress the investment community. “It’s also about what works for investors. That’s more of a selfish motive of what will raise money, but just ad-supported businesses won’t.

Most of the content-based startups could potentially raise seed and angel rounds, but it gets harder to raise further rounds down the road.”

Likewise, future buyers will appreciate more diverse revenue sources. “Any online publisher that is reliant solely on advertising is at risk, and those that have built event businesses and/or e-commerce businesses in addition to their advertising businesses have a leg up,” says Jeffrey Dearth, a partner at media investment bank DeSilva + Phillips. “From an investment or M&A perspective, businesses with diversified revenue streams (the old ‘in person, in print, and on the web’ idea) are considered more valuable than those that rely on just one main revenue stream, i.e. advertising.  The current mantra for publishers should be:  ‘The more digital revenue, the better’ and ‘the more diversified types of revenue, the better.’”

Creating Killer Awards Programs and Recognition Events
Check out this related session at The Folio: Show, November 1-2 in NYC!

Awards programs and shows should be the most festive times you interact with your market. There are dozens of must-do…