Advertising is Seriously Broken

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Publishing online is a huge business. But it doesn’t work quite the way a lot of people seem to think it does. Whether you’re publishing software, content or something else entirely, you can’t just slap a bunch of ads in and expect to make your fortune.

It’s true that audience and attention are incredibly valuable online. But ad revenues have been on a downward trend for years (both online and off) — see this report from the Guardian. Online advertising revenues aren’t hurting nearly as badly, because there are still plenty of businesses still slowly moving into promoting themselves online. However, every company using advertising in any way is looking to cut costs and get as much bang for their buck as possible. It’s a tough business to get into.

The proposition is even worse when you consider that the grand majority of publishers online are small. The guy developing iOS apps and using ads so that he can release them for free isn’t able to spend a lot of time on optimizing his apps to earn money through advertising; it isn’t his skill set either. The same holds true for the girl publishing a niche blog. Building ad revenues is a very specialized talent and not everyone should expect to be able to do so.

Advertising Isn’t Good Money

There is no doubt that advertising has its place. There are people who do still make fortunes from slapping a whole bunch of Google AdSense spots on to their sites. But such people do a lot of research before hand, targeting specific high paying keywords and ensuring that they have enough traffic hitting their site and clicking on ads to be worthwhile. It’s not nearly impossible, but it does take plenty of work — perhaps more than most of the alternative ways you can make money from publishing.

Furthermore, there will always be companies interested in paying for advertising, provided you can connect them with a big enough audience to make it worthwhile. That’s particularly true because of how online advertising has revolutionized marketing. Fifty years ago, a business couldn’t really tell how effective a particular ad in a particular newspaper actually was. They could ask new customers if an ad had sparked a purchase, but customers forget or even occasionally lie. But with the advent of the web, a company could suddenly tell how many people had clicked on an ad and track their behaviour after doing so. Metrics have suddenly become a crucial part of marketing.

I have a personal love affair with metrics, but even I have some concerns about what they mean for the long term value of advertising. I look at things from the publisher’s side of things mostly, even though I have paid for advertising on occasion.

The rise of metrics have dropped the prices that publishers can demand for advertising. When advertisers can see exactly how many people see each ad and how many of those viewers convert into buyers, they can ask for better prices. That’s not necessarily a bad thing, but it does mean that anyone who has pushed up the prices they demand for advertising over the past century (hey, newspapers!) have to be able to justify those prices — and if they can’t, they need to find a different business model. Prices overall have dropped for ads and they will continue to do so as big companies invest resources in tweaking ads for the maximum possible return on each ad spend. There’s no use crying about it or trying to demand more money; it’s a fact of life for publishers.

At this point, the options on the table are to find a way to either play the advertising game, which starts with building huge audiences and ends with playing the metrics game yourself, or to find a different way to make money. Building your own products, charging for premium publication and pursuing other opportunities mean that any truly committed publisher will never starve. There are even options related to advertising, like affiliate marketing and sponsorship, that provide some opportunities if you think that your audience is the most valuable asset you have.

Advertising’s Cousins Have More Legs

While I wouldn’t want to depend on any one option related to advertising, such as sponsorship, to fully cover the expenses of any project I’m working on, there are some strategies that are related to advertising that are a little more stable — although the still require a great deal of work to reach anything resembling profitability.

Chief among these is sponsorship. You can draw a line between advertising and sponsorship because the relationship between the sponsor and your audience is usually very different. In both cases, someone wants to reach your audience. In the case of advertising, the strategy is usually to slap an ad up on the site somewhere that readers have to see it. The advertiser then hopes really hard that viewers will click on the ad. However, in the case of sponsorship, there’s a little more thought. If you’re doing it right, the publisher and the sponsor have a serious discussion about what content, activities or other connection will benefit and motivate the audience to take action.

A great sponsor may enable a publisher to make premium content available for free or to create some content she wouldn’t have been able to otherwise. Or a sponsor may come up with an entirely different approach to reaching an audience. But there has to be a benefit present for the audience. Consider this series of posts about Lanai on Plum Deluxe: it’s obviously noted as sponsored content (paid for by the Lanai Visitors Bureau), but the articles give real glimpses in to a visit taken to Lanai by the author. It’s personal and connects with the reader, showing what a vacation to Lanai is like without being a flat-out sales pitch the way that an ad would be.

There are plenty of other types of partnerships between publishers and organizations who want to reach the audiences those publishers have already connected with. They all are more expensive, both in time and money, for the company buying access, but they tend to have much better payoffs as well. Such approaches require skill on the part of the publisher, but it’s not such a specialized question as building ad revenues is.

To give credit where credit is due, thanks to Andy Hayes, the publisher of Plum Deluxe not only for providing me with a great example of sponsorship but also for helping me talk through my thoughts on the relationship between advertising and sponsorship. You can see our conversation on Storify.

Is Advertising Fixable?

I don’t see an easy solution for making advertising a more viable way to make money for publishers. There’s not really a need to invest in doing so, either: there are plenty of ways to make money as a publisher that don’t have as many potential pitfalls as advertising.

Consider exactly what you’re selling when you sell advertising on your website or app or whatever else you might be publishing. You’re selling access to your audience. It’s true that access is incredibly valuable, but you’re putting it in the hands of someone who may not know the people in your audience the way you do. They could alienate your audience in the time it takes to post a new ad if you aren’t closely engaged in the process.

Even if you do your best to make sure that you find advertisers and ads that fit closely with your audience’s beliefs and needs, you can damage your own connection to your audience by accepting advertising. It’s not out of the question that an audience member could come to the conclusion that you’re trying to sell them out, just based on your acceptance of advertising. Publishers have struggled with balancing the needs of their audiences and those of their advertisers for years. It’s never been easy, but audiences demand more and more transparency every day, making it harder to justify making money through advertising over alternatives like flat out selling whatever you’re publishing.

Image by Flickr user Annaliese Moyer