Digital advertising isn’t just simple display ads – publishers must be so much more

With the rise of digital comes the inevitable scrutiny of revenues. Publishers are increasingly talking about alternative revenue streams – amping up the interactivity of advertising, running new homepage ‘takeovers’, and in general working on how their ads are targeting people with specific needs (see the rise of advertising networks in digital). 

There are two running themes from this model: firstly, they are all themed around the traditional publishing model of ‘display’ advertising (which is an exceptionally print based model, particularly as customisation is virtually impossible to scale), and secondly, they are based on flawed metrics. 

Looking at the first point – advertising is still based around the concept of buying ‘space’ for a brand to market against an audience. And increasingly, developments in ad tech are basing themselves around this concept – how do we better develop and monetize the engagement of display ads? 

Take, for example, the rise of Hearst UK’s content arm, working on how best to leverage homepage takeovers. Or the rise of Conde Nast’s push to interactive display advertising. Alternatively, even News’ programmatic approach to creating ad buying networks for their display ads. 

And then there is the measurement of ads. Internally, and with clients, these publishers and media companies all base their targets (generally speaking) on a few key metrics: views, click through rates, or an interactive engagement. 

All of this points to an outdated model – one driven by traditional print thinking, and sold to advertisers in a slightly different way. After all, the display ad is only a way of advertisers buying space, rather than buying results. Even Click Through Rates are an often inaccurate measure. 

As if to reinforce this, there are a number of statistics on the effectiveness of display advertising. 0.6% click through rates are about industry standard. Around 50% of clicks on mobile are accidental, not intentional. And you are more likely to have a prospect go through Navy Marine training, than click on your banner ad. 

Those are some scary statistics. 

Why then, are display ads failing where print and TV ‘display’ ads succeeded? In advertisers minds, there are two factors likely at play. Firstly, print and TV are not disrupted environments. A disrupted environment is where the methods of switching are quick, and will immediately satiate another demand. Think smartphones, PCs, tablets – content on demand devices. 

The second factor at play is likely to do with the mode people are in when they are consuming content in the digital age. Most consumers are in ‘search’ mode when they are on the internet – hunting down content they like, want to see, want to hear from. As if to reinforce that, Search Engine Marketing often sees Click Through Rates of 3-8% – markedly higher than that of any display advertising. 

Even on social, consumers are more likely to engage with advertising they see. Often this is because it is based on a contextual interest – e.g Facebook, for example, has the data on what you look at, and so is better placed to serve display advertising on a one to one basis than the traditional publishing company. 

What does all this mean for publishers going forward? 

Increasingly, it means that display advertising is not going to be the model where publishers can replace print revenues in digital. And the best publishers are recognizing this: the rise of native ads, for example, or microsite partnerships are a good start. 

At the end of the day, though, publishers have a distinct advantage over the Facebook’s and the Google’s – they are producing content at high editorial quality and integrity, that people trust, and know they want. More importantly, they do this again, and again, and again. 

This means that publishers are more than capable at understanding at what their audience want rather than what they say they want

That’s an important distinction to make. Agencies, for example, often rely on client briefs and a deep understanding of the audience to produce content for brands that aligns with their client’s values. Affiliate marketing companies offer compelling offers. Social media companies align with what offers people say they want. Search engines align with what people want once they know they are looking for it. 

In a sense, this makes publishers unique – they are the only ones who make it their business to anticipate audience wants and needs, first and foremost (agency planners, like myself, do this as well – but we are always compromised by market positioning for the brand, rather than a singular objective). 

What does this mean for advertising solutions? It means that to create the advertising engagement that publishers need to monetize digital, they have to think more laterally – primarily, about how they can use their audiences and bridge them to quality brands. 

Native ads are an example of this in it’s infancy. BuzzFeed is now working with it’s advertisers to create socially viable content. Shortlist now runs partnership emails where it helps partners write compelling content to it’s audience. 

But there is so much more to do in this space. Looking at how publishers can deliver results, outside of the traditional ‘display’ paradigm, is the way they will succeed in digital. The question now becomes: will publishers take up the challenge? 

 

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Is email the next comeback kid?

Four years ago, email newsletters would be all the rage. Every brand had one: each was designed to push short, offer based messages to consumers. Email was considered one of the best ways to communicate consistently with audiences.

 

Out of this came serious attempts at cracking the digital media market. Thrillist, launched by Adam Rich and Ben Lerer in 2004, was the first major guide to city life in New York City for young males. It positioned itself as a media brand, publishing the biggest and best guides for a young, male demographic in an urban environment.

 

The company had strong growth, seeing profits in year four with around $5 million in revenue. Not bad for a small, email based business.

 

In 2010, more spam filters were introduced. Gmail, with one of the best spam filters in the world, began to seriously take form. Other email services, like Yahoo! and Hotmail, played catch up.

 

In short: Gmail had recognized a key consumer demand (among a myriad of other things they did exceptionally well): consumers were getting tired of email newsletters. Open rates declined a full 5% year on year until 2012. And click through rates, as a trend, also declined – a full 20% from their previous figures.

 

For something so prevalent, this became quite significant. Throw into the mix a slowing rate of receiving emails, and it became clear that the platform was looking at a subtle reinvention of itself from 2011 onward.

 

And companies like Thrillist responded. In 2010, Inc Magazine named Thrillist as number 93 on the fastest growing privately owned companies. In May 2010, Thrillist recognised that it’s reach could drive e-commerce sales, acquiring online retailer JackThreads, tying it to the Thrillist subscription service.

 

This all happened to coincide with the growth of another medium: social media. Social media began to rapidly replace email as the daily social communication tool, and this accelerated in 2010 – with more people visiting Facebook than Google in March of that year. This became indicative of the dominance of social media.

 

Email became, then, the medium of choice for one to one, longform communication – important information that a user would want to be aware of on a day to day basis. More consumers place value on an email over a Facebook message – a fact which should not be ignored by advertisers fixated on social media.

 

2011 saw Thrillist go to new heights, with the company seeing at least $40 million in revenue that year with projections skyrocketing. E-commerce through the JackThreads brand had suddenly become a huge growth area, with the buying impulse created by Thrillist linked to the transaction provided by JackThreads.

 

Credit to Colin Morrison here – who aptly put it as ‘media is retail and retail is media’.

 

Emails were generally used to promote articles by the major media brands – IGN, for example, sent out regular daily updates with articles that were segmented by audience. They had not yet followed the example of Thrillist in providing a targeted offering for their audiences, linked to daily consumption habits.

 

That isn’t to say email publishing was all rosy in this period – in fact, one of the declining stories has been the DailyCandy brand, another New York e-newsletter. Launched in 2000 and picked up by ComCast in 2008 for a cool $125 million, it quickly became one of the biggest stories.

 

In late 2009, however, it was forced to shut down much of the overseas operation, including the flash sales arm of the site “Swirl”. Why? Likely because it didn’t gel with the operation – the direct buy was too forced. That isn’t to say this is a venture without growth, just at this stage, it needs to reinvent.

 

Thrillist saw the opportunity to create a club, or a members lifestyle, around e-commerce – allowing members to feel as if they were buying into a brand. Swirl (DailyCandy), with their flash sales, didn’t allow the level of trendsetter exclusivity that their brand offered.

 

In short, flash sales were incongruent with the ‘trendsetter’ view that DailyCandy had of itself – hence, the launch never kicked off properly. For an audience that placed a high value on being socially aware, flash sales did very little to prove that they were in a ‘trend-setter’ environment.

 

Contrast this to Thrillist, and you can see the difference. Thrillist created a brand, DailyCandy looked for alternative revenue models.

 

With email increasingly becoming more valuable, more of these trendsetter type emails are beginning to appear. Email is remaking itself into a form of premium communication – with social media handling the day to day, email suddenly becomes the source of all your ‘need to know’ information.

 

And as spam filters have become increasingly stricter, consumers have begun to trust the medium as providing what they genuinely would like to see.

 

Urban Walkabout launched Urban Talkabout in 2011, an email only page of ‘editorial’ which placed emphasis on places to go out, to see and things to do. It was email only, and designed to reach into the inbox of people every day – part of a growing strategy to surround audiences in digital for their products.

 

Using their already paid for distribution, they promoted this heavily, using it to gain a daily, unique traction for their audience. As a concept it had two major strengths: one, it had a greater value to advertisers (daily reach, digital metrics), and two, the audience would appreciate the communication more.

 

In 2011, Shortlist Media saw a similar opportunity, recognizing the power of a daily reach without the traditional print production costs media dailies used to rely upon. Shortlist already published two targeted (and free) weekly magazines, Shortlist and Stylist, but in digital it did not have the same day to day presence.

 

The concept was simple: create a page of day to day editorial that would be appreciated as a guide by consumers. And it recognized a big flaw in digital strategies thus far: they relied upon users to come to them, rather than going out to users instead.

 

Emerald Street became the first launch: a daily email for working women in the ABC1 target market. It played off as a splinter brand to Stylist, launching off the strength of the group to promote it.

 

Giving a page of consistent editorial that was kept to a high quality meant that users had a reason to be familiar with the brand and look at it, being in their inbox every morning meant they didn’t have to actively search for it. With a time poor audience who had so many options in digital, this was critical to ensuring they revolved around the Emerald Street (and therefore the Stylist) brand.

 

Strategy director Tim Ewington summarized the opportunity as such “Email is a medium with which young women spend more time than even television than the working week.” What he neglected to say, but what he likely knows, is it is also a medium which is has seen an increasing value with the contrast against social media.

 

And with over 80,000+ subscribers, combined with open rates between 42% and 48%, the medium clearly works.

 

With the increased value of email, it is clear that the medium is being reinvented into a premium form of communication. With the right content, editorial and strategy, email promises to be the best way to reach on audience on a daily basis.

 

Building it into a channel in it’s own right is critical to engaging time poor audiences who have little to no need to navigate toward a central website. Getting it right is about making the email the go to source of information – whether that be hear it first gossip, best places to go out, or any number of other topics – email has to be about being ahead of the trend.

 

In 2013, look for the growth of well targeted email dailies that exist in their own right. It is one growth area that for media companies, cannot be ignored. It’s value as a first in, cheap and effective way of reaching an audience cannot be understated, and the premium  nature of the medium is increasingly important in a fragmented landscape.

 

A quick summary: email is back. It isn’t the offer driven medium it was, but rather the trendsetting medium it should have been. And it’s something that brands, and publishers, must consider to revitalize their digital strategies. 

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Has distribution fundamentally shifted towards audiences?

Once upon a time, in the age of print, you had the newsstand. Magazines were put on shelves through unique distribution deals – in Australia, for example, distribution deals have existed between the likes of Bauer, Pacific and News with groups such as the Australian Newsagents Federation.

They built strong, locked up distribution networks that saw dominant publishing monopolies and large scale distributions become the necessity for the media industry. And it meant that consumers, who by and large only saw publications through major newsagents, had all their demand funneled through the newsagent model.

It meant that the process of ‘discovery’ – or finding a media product that you did not previously know about, was largely limited to what you saw inside of a newsstand, and it meant that this process of discovery was tightly controlled by dominant publishers.

This meant that things like covers, mastheads and subscriptions became crucial to making a magazine profitable, and ensuring it hit a mainstream, newsstand dependent demographic. It also meant, psychologically, it was hard to sell subjects that were not socially conventional – to discover a magazine, or media product, you generally either did it at the Television (monopoly) or newsstand (monopoly).

Flash forward to today.

Today, discovery has been fundamentally shifted. You’ve got social media, the digital app store (which uses micro targeting/advertising to make recommendations to audiences), email, search engines to compete with.

This isn’t to mention the increasingly diminished costs of print and the targeting it generates: leading to the rise of the freemium brand of magazine (think titles like mx in Australia, Shortlist and the Evening Standard in the UK).

All of these have shifted the discovery process away from the traditional, and tightly controlled, newsstand model – in the process democratising the media landscape further. So what does this mean for media publishing?

Well, for one, it means that there is going to be more of a multi-channel purpose. Your product, in itself, now takes on far greater importance than before against your newsstand deal. Working out how to disseminate your product in the most efficient way suddenly becomes the new aim of the game.

Take one of my often used examples: Shortlist. They knew that their product was a free men’s weekly – and that social would be an important way to showcase this interest. They host covers and post articles in digital, distribute free weekly and create a product built around an audience.

In other words, rather than relying on an audience that is coming to them, they go to their audience. It’s a remarkably efficient way of publishing that means the audience is engaged, you understand their aggregate points and match your media alongside that journey.

Another great example of this is a less insurgent brand: Esquire. In recent years, Esquire have worked out that their product is not just a ‘media’ specific brand, but instead meets a lifestyle need. They’ve pushed out apps, iPad stores, strong social and a product line.

Now, Esquire creates ties, furniture and consumer goods based off its brand. It saw an audience need and it met it.

The key lesson is that publishing has changed – and for magazines, focusing on the newsstand no longer can be the priority. When digital gives you so many ways to circumvent traditional distribution, and so many ways to get closer to your audience, it means that you can more aggressively target them.

What does this mean for the future? Well, expect an element of media creation and products to be built around creating and generating distribution. This means thinking about social content, talkability, daily reach and mapping out the content journey of a media product – thinking about how it touches your audience throughout their media consumption habits.

Getting this right will be the foundation for the future of media – rather than the traditional newsstand tactics of the past. It will mean having a focus on building multi-channel touchpoints to ensure interest in your brand, rather than trying to hook audiences at a single aggregation point.

In essence, distribution of the future is simple: build it around your audiences. And that is exactly what the best companies in the world are now doing.  

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