Creating a Leakproof Life Preserver to Save Journalism
It was Jeff Zucker - then head of NBCUniversal, now running Donald Trump’s favorite, CNN – who coined the famous cautionary phrase, trading “analog dollars for digital pennies” nearly 10 years ago. He warned of an economic Armageddon as digital advertising drained high-priced, high-margin volume away from traditional TV broadcasters.
He was right. In fact, a decade has meant the continued crushing of the revenue streams of more than just the broadcast networks, but journalism at large. Newspapers are increasingly shutting down their print editions; many magazines have it even harder. Relentless innovation in programmatic advertising gives marketers the ability to navigate autonomously to the highest value/lowest CPM impression.
The Math at the End of the Tunnel
But all is not gloom and doom; 2017 digital results have been encouraging for some publishers. Gannett digital revenue was up 2.3 percent in Q1, which is usually considered a harder quarter, and Meredith was up 15 percent. But growth still has to confront the reality of the “Zucker Equation”, the value of digital eyeballs is still not where it needs to be. At least when those retinas are looking at publishers sites, versus a social feed or a search box.
As Om Malik pointed out in his analysis last year, the growth in digital did not offset the decline in print revenue, not even when we look at NYTimes subscription growth (which has obviously been boosted by the Trump phenomenon).
So yes, some of the bleeding has stopped as publishers are mastering the digital ecosystem, re-engineering their online/offline models, and getting more creative at generating revenue through branded content and custom partnerships.
An Olive Branch Gets Extended
At the same time, publishers face the complex and continuing challenge of a multi-dimensional relationship with social media - and search - enormously powerful platforms that they rely on for distribution and engagement – and now potentially subscriptions. Facebook has said they plan to sell subscriptions and not take a cut, sending non-subscribers back to the publishers’ sites after the cap on free content has been reached – in order to help support quality journalism. Seems like a positive step, particularly after facing industry pushback with their Instant Articles.
Google is also taking steps at “not doing evil” as relates to publishers, announcing a similar initiative, and said it is testing changes to its “first click free” policy, to help warm the chill that exists, given that publishers have long believed that Google is essentially giving away their content for free.
While social and search companies make 90% of their money within their ecosystems - the open web is where three billion people spend time browsing publisher sites - and that behavior has not been as monetized as the "S&S" companies have done."
You Can’t Suffocate the Hand that Feeds You
Without content, there would be nothing to share, nothing to search for, and nothing to browse. Browsers, along with social and search platforms, need publishers to thrive, not just because they make meaningful revenue on their sites in the form of banners, or video-ads -- but because it’s an essential part of their core service. Publishers bring people again and again into their feeds, browsers and search boxes. Companies like Facebook, Google, Apple - and others - in truth really need the open web to not only “not die” but to actually grow. While publishers and journalism in general are not “utilities” in the Federal Communications Commission (FCC) sense of the word, they basically function in that role and as such have a certain social responsibility.
Ok, so let’s assume I’ve convinced you that publishers must survive not only for people like you and me who need unbiased sources of information locally and nationally, but also so that platforms we find useful (social, search, etc) stay strong. The question is what can truly move the needle for that important open web industry, what can DOUBLE publishers’ revenue - moving to CPMs that are 2x what they are currently getting - versus growing it 20% by modest pixelated improvements.
Video is the Ultimate Game-Changer
It’s actually simple. When I look at what can truly drive good user experiences as well as massive revenue growth, and I’m looking at Facebook, Instagram and Snap in the past year - I believe the answer is video. Just imagine news sites or entertainment websites and destinations serving a huge amount of quality video, solving the scarcity issue we have today with the lack of premium video inventory.
We know that digital video will become a $20B+ industry by 2020, and we’ve seen from Facebook and Instagram that if you create a good video user experience - you can create the one of the largest video businesses in the world (after YouTube).
But how can we apply this to the open web? How can a massive, legacy news, or magazine network transform itself into an organization that serves a billion video views a month, yes - a billion. Earning CPMs that are sometimes 10x higher than display. How can publishing entities become resources that brands can’t get enough of? Safe places to expose your video messages to tens of millions of people.
Case in point: Today if a brand wants to spend $10M (or more) on a publisher's site to buy video inventory - the answer is 9 out of 10 times, publishers simply can’t take the money. How bitterly ironic - there is an economic way out of the Zucker dilemma, but there isn’t enough supply to satisfy what the best brands want.
As Behavior Changes In Scale, Revenue Always Follows
That promised land requires more than pixel optimization - we need to change user behavior, we need people to experience the web differently. To integrate video so fluidly and organically that it would be consumed in big, satisfying, profitable gulps. Online Video Dollars are More Plentiful than Digital Pennies, so this will bring a massive new revenue stream - it’s something that sales teams can sell directly; that programmatic companies can leverage for even more revenue; and brands would cherish - because they can get a video ad played in a safe environment, adjacent to quality editorial content they feel proud to be associated with.
There are a few ways video is going to change the open web as we know it:
Video is the Consumption Medium of the Future. Less Clutter, Richer Experience.
I believe we are in a new – and exciting – era of video storytelling. It’s the way that Millennials are consuming content, and even the boomer generation is raising its hand and asking for information to be communicated in ways that transcend the written form. From long-form to now 6-second moments, marketers and other content creators are building their brands and developing narratives through video. I anticipate that we will be seeing an explosion of creativity that pushes the boundaries and finds new ways of message expression.
Because of this superior monetization, publishers will not have to be on a pixel hunt. This will lead to a cleaner, fresher and more attractive visual presentation while still driving significant revenue. The average user spends 50 minutes scrolling every day on Facebook according to the NYTimes, which is a fast and consistent user experience, and helped drive massive video growth - to Instagram - as people saw multiple videos in their beautiful feed.
Imagine - The Open Web Supersedes YouTube
There’s nothing more powerful than the integration of text and video. That’s the full and rich experience of the future. Currently, YouTube viewers watch 1 billion hours of video a day. But people are spending an increased amount of time online - over 10 hours a day according to Nielsen. And YouTube only owns a part of that. So imagine a fluid, supple publisher experience where users are inspired, nudged and encouraged to watch a few videos per article. This powerful (and monetizable) new behavior will have them spending minutes versus seconds on a publisher’s site - delaying the costly “back to social” behavior we see now.
I believe it won’t be long before users will have an option to consume great video content, organic and branded on their favorite sites, and we’re doing our part to make that possible. This is a new and seductive environment where they would enjoy spending time, be entertained and become informed.
In fact, I can easily imagine a time when earnings reports – like the ones quoted earlier – start to break out “digital video revenue” because it’s such an important component of overall publisher revenue. A decade after the analog dollar hemorrhage began, video will be the life preserver that will bring us all - safe, sound and happy - to profitable shores.