The Evolution of Display: Change Is Here, For Good

Earlier this year I wrote a long post about the “death of display,” since then, I’ve consistently been asked about it, and in particular, to expand on my thoughts around display advertising economics, and the prospects for what might broadly be termed “independent creators of content,” or what I call “the independent web.”

Now, I love this topic, as many of you know. So in this post I’ll reprise the core points from On Thneeds and the “Death of Display”, and then riff a bit about where I see things now, and where they might be heading. Spoiler: It’s not all bad. Double spoiler: This post will be written in two parts. This is just the first.

Here’s that previous post, boiled down to bulleted form:

* The model of “boxes and rectangles” – the display banner – is failing to fully support traditional “content” sites beyond a handful of exceptions. For 15 years, independent websites have “direct sold” these units on their sites, or hired someone (like Federated Media Publishing) to do it for them. But marketers increasingly are turning away from direct-sold display units. Why? Read on….

* A new generation of “native” ad units are on the rise, which live primarily on large social sites that curate and aggregate content. Examples include Twitter, Facebook, Tumblr and of course the grandaddy of them all, Google’s AdWords. Big sites like HuffPo and fast social comers like BuzzFeed are also employing native units. Pinterest is expected to roll out something similar soon.

* With the notable exception of Google’s AdSense (which is essentially a programmatic machine, see below), none of the other large “native” platforms  help independent content creators make money, other than a “quid pro quo” deal that if those content creators engage with the platform, they’ll earn traffic back to their sites.

* These publishers hope that by accepting this quid pro quo, they will drive traffic to their site that they can then monetize with display advertising. However, as I stated before, this model is breaking down. Why?

* Because even as all those “Boxes and Rectangles” morph into far larger units, they are increasingly bought and sold in real time by machines (“programmatic buying” or “Demand Side Platforms,” also known as “DSPs” – the largest include Google’s AdX, AppNexus, and Turn).

* So far, the rise of programmatic buying  has not made it possible for most independent publishers to make enough money to create content full time. Hundreds of thousands are making money using these platforms, but if you want to run an independent content brand that employs people full time, boxes and rectangles are usually not going to be enough. Some are opting out of playing in the programmatic market, but it’s quite hard to direct-sell small sites that are not at scale. Marketers and their agencies are finding they can far more efficiently find the audiences they want using machines, at a fraction of the cost of working directly with traditional web publishers.

* If we don’t figure out better models for how to get the “content creator” paid, we risk losing the oxygen that feeds the web ecosystem. After all, what would Google, Twitter, Facebook, or Pinterest be without harvesting the hundreds of thousands of pieces of great content created every day on the web? Ditto for the DSPs, which depend on inventory created by these same independent content creators.

* At the moment, the lion’s share of digital marketing dollars and equity value is flowing to either those large content-harvesting platforms, or to programmatic platforms.

* At the end of the post, I suggest a new model that attaches value to an individual piece of content, such that the piece of content is monetized as it travels around the web, getting reposted, tweeted, shared on Facebook, pinned on Pinterest, and so forth. Such a model is incredibly difficult to create, but not impossible. I promised a follow up post.

Well, this is it (at least, it’s part one).

That took a lot to summarize, but readers know I’m passionate about getting independent content creators paid. In the past five or so months since that post was written, the direct-sold display marketplace has continued to deteriorate. Yahoo, a bellweather for display advertising, has had two more quarters of flat-to-declining display revenues that have missed Wall Street targets. In its latest earnings report, the New York Times Company noted that display revenues actually declined year over year.  We’re seeing it at Federated Media Publishing, as it has both direct-sold and programmatic businesses, and I’m hearing it from folks I speak with privately – models that depend on direct-sold “quality display” are under increasing pressure.

Meanwhile, business is great for the two platforms I outlined above. Programmatic buying platforms are seeing double and triple digit increases in revenue year over year (again, we see this at Federated, because we acquired such a business more than a year ago). As more data and insights are applied to programmatic, and better inventory secured, I  see a very bright future for this part of the market. Business is way ahead of plan at Twitter, executives there have said, and Facebook’s recent earnings highlighted the growing success of that company’s “native” advertising products – promoted posts and sponsored stories.

Unfortunately, neither of these two high-performing sectors of the marketplace help most full time independent web publishers make enough money – at least not yet.

Given all this, what is a publishing business to do? Well, as much as I’d like to say my idea of “monetized content traveling around the web” is imminent, I think that’s going to take a few years.  And while programmatic is getting better each quarter, it’s also going to take time and improvements over years before that ecosystem is fully expressed. If independent web publishers are to thrive in the near term, we’ve got to change our approach to the market. Change is scary, change is hard, but change is needed – and change is good.

How do we do it? In short, we’ve got to be far smarter about how we “feed” those platforms – making sure the value we get is equal to or more than the value we’re giving. We’ve got to be smart about how we interact with both social and programmatic platforms, and align ourselves with companies that put publishers first. And lastly, we’ve got to rethink how we bring high-touch marketing onto our sites – we need to more rapidly adopt new advertising products, new architectures for our sites, and a deeper understanding of how to partner. We can no longer relegate marketing to second-class real estate. If high quality sites on the independent web are going to thrive, we will have to embrace change. That’ll be the subject of my next post.