The economics of digital media is a broad and sometimes intimidating subject, which is exactly why we wanted to take it on as the topic of discussion at our last Summer Series event of the year. It’s the kind of dialogue that has to be had frequently in the media world in order to stay nimble and innovative when it comes to finding revenue streams that work.
As we discussed during our June Summer Series event, investors are suddenly keen on new media. In 2014, venture capitalists invested $683 million in digital media worldwide, up from $277 the year prior. But investment is just the first step. Revenue growth, and eventually profit growth, are the ultimate goals.
Event moderator Alex Leo, who has been serving as Yahoo’s Head of Audience Development for the past year, commented on the breadth of the topic of media revenue streams, indicating that there were too many to cover during the course of the evening. She was right — but here are a few that we were able to touch upon during the panel discussion:
The New York Times does it. CondÃ© Nast just started doing it this year. The Huffington Post has been doing it for several years. The big names in media are all over native advertising, often opening in-house digital advertising studios. It’s no wonder; spending on native ads is projected to reach $7.9 billion this year, and grow to $21 billion in 2018, according to Business Insider.
Some issues remain: Leo pointed out while native ads are better than lowly banner ads in terms of click-through rates, the difference between display ads and native ads in terms of CTR is not huge. Gawker’s VP of Business Development Ryan Brown pointed out that when people click through, they engage more with the brand through the story being told for the client.
The panel identified native advertising as the only publishing equivalent to the venerated 30-second spot, and as one of the few options for advertising that currently can’t be blocked by ad-blocking technology.
People usually associate remarketing, also known as retargeting, as the experience of examining shoes on a website, only to have those sneakers follow them around the internet for days afterward, regardless of intent or, indeed of the fact you may have already purchased them.
But remarketing was one of a few digital advertising options that the panel identified as options that could become more exciting with some thought and effort. Joe Purzycki, Medium’s head of partnerships, said that by engaging in better remarketing, media organizations can offer value while monetizing journalism. The trick, he emphasized, will be to focus on user experience first and foremost.
— Stephen Lepitak (@StephenLepitak) August 25, 2015
“The problem with monetizing websites is that readers hate to be marketed to.” – Elise Layton, Director of Operations, Apartment Therapy
In one sentence Layton managed to sum up what is easily one of the biggest hurdles for digital media companies trying to find new revenue streams. Fortunately, she also provided a solution.
Affiliate marketing is a more seamless way to monetize an audience. Apartment Therapy uses Skimlinks, a third-party service, that works by modifying links to add affiliate tracking codes. If a reader clicks through a link on Apartment Therapy’s website and makes a purchase, affiliate revenue finds its way to Apartment Therapy, through Skimlinks. It’s an unobtrusive way to play the advertising game.
Gawker also has a large affiliate marketing program, using the same technology. In January, it was reported that the company grossed $100 million in e-commerce revenue, and netted $10 million. Brown, however, said his role was unaffiliated with the affiliate team at Gawker.
“No matter your revenue stream, the economics of digital media hinges on community building and engagement.” – Josh Stearns, Director of Journalism and Sustainability at the Geraldine R. Dodge Foundation
For the hyperlocal startups that Stearns works with, advertising has been the go-to revenue model to date. But Stearns sees an opportunity for memberships, joint sales operations and other alternatives for monetizing to replace the status-quo, especially if they bring value to the community they serve.
Events is one of these alternatives. Outlets like The New Yorker, The New York Times, Refinery29 and Politico are all have revenue and audience strategies that include live events. Stearns pointed out that local media organizations may have more connection with communities and could rely on these events not just for revenue, but to support other digital strategies.
The takeaway? Clearly, no single revenue model wins “best in show.” The variables involved, including type of media organization, audience and budget, make the hunt for the best revenue stream impossible to duplicate across all companies. But that’s not a bad thing – in fact, the panelists agreed that’s what makes their jobs exciting. There are plentiful opportunities for success, thanks to the many different avenues that exist for media companies to make money. A little creativity and foresight can shift a media company’s monetization method, for the better.
Have any thoughts you want to add? Check out the event’s hashtag, #mediaecon, and join the conversation on Twitter!