Are You Swapping Analogue Dollars for Digital Dimes?
Digital dollars are about data not eyeballs.
This post originally appeared on Josh Gordon’s Ad Sales Blog.
If you follow the traditional publishing business model in an ever more digital world, it is inevitable. The traditional magazine business model is based on creating content to attract eyeballs, and then to sell exposure (advertising) to them. This basic plan has kept magazine publishers profitable for over a hundred years. But this model faces harsh challenges in today’s digital media world. The problem is a far more efficient way to deliver eyeballs online, called "search." Every marketer knows that they can get far more eyeballs and clicks per dollar for their website by buying “search” instead of digital media from traditional publishers. Why every publisher does not know this is a mystery to me.
To understand the problem let’s look at a rough example with the math:
Say you publish a magazine that charges $6,000 for a page of print advertising and gets $1,000 for a banner on it’s website. What if running either a print or newsletter ad gains exposure to many eyeballs and results in 75 click-thoughs to an advertiser’s website? Depending on the expense of appropriate keywords, a click-through generated by Google, or another search engine, could cost as little as 20 cents or as much as $5. So, Google would charge between $15 to $375 for the same number of clicks you are asking advertisers to pay $1,000 or $5,000 for. Argue all you want about the quality of your clicks. With this big of a price difference, it is going to be hard to make it stick.
If you don’t think the online advertisers in your niche are impressed by this math, think again. According to the Interactive Advertising Bureau (IAB) [chart below], almost half of all online ad dollars (46.5%) now go to search. A recent analysis of where Google gets its ad dollars shows penetration into niches traditionally held by publishers.
But there is a better way to compete. The core strength of digital media is not in its ability to deliver exposure to eyeballs, but in its ability to deliver interactive experiences. Why sell one-way communication (eyeballs) for what is a fundamentally interactive medium? With this in mind, a new model for publishers is emerging:
Use content to build data on potential customers. Use that data to build sponsorable interactive customer experiences.
In this context, a piece of data is either the location of an individual (address, phone number, name, company name, e-mail address, zip code, etc.) or information about the individual that explains his or her behavior (buying intentions, current products owned, income, demographics, sex, ethnicity, political orientation, type of car owned, etc.).
What can you do with this kind of data? Let’s look at that rough magazine example where they are charging $5,000 for print ads and $1,000 for web banners. With the right data, what else could they sell?
Targeted sponsored webinars.
Cost of sponsorship: $7,500 to $15,000
Live sponsored events.
Cost of live event sponsorships: $5,000 to $15,000
Market research to sell.
Cost of market research: $2,000 to $15,000
Market consulting opportunities.
$7,000 and up
Highly focused direct marketing based on opt in lists (e-blasts).
$2,000 to $4,000
These are not digital dimes.
IAB online ad revenue for 2011 shows the continued growth of search.