Neil Thackray’s Business Media Blog

Just another WordPress.com weblog

Wringing our Hands about paid content and advertising

I didn’t manage to get to the AOP Conference last week, but no surprise that it appears the discussion there was mostly much wringing of hands about how to make the paid content model work.  The Guardian reported;

“Digital consultant Bill Murray warned publishers that if they put a barrier in front of their users, it is likely that they will disappear. Instead he suggested, they need to rethink the concept of content. The most important factor in the success of iTunes success wasn’t the content, he argued, but the service”.

This seems to me to be the crux of the issue and is accidentally a key insight in to the reasons that publishers find the paid model challenging.  The natural instinct for a publisher is to put the content at the centre of the thinking.  Magazine publishers start their working day by thinking about how to make a better magazine and then work out wards from there.  When they ask what their readers want, the answer can only be something that can be squeezed into a magazine delivery format.

“Not me!” I hear the progressive publishers cry.  The honest truth is, it is almost all of us.  The paid content model requires a fundamental rewiring of how our media brains work.  Instead of putting the content at the centre of our strategy we need to put the user at the centre.

If I ran a chain of coffee shops I might consider that if I make the best coffee I can my business will thrive.  I invest in better beans, more reaosting technology, training my staff how to make the best coffee, serving the coffees in the finest china mugs money can buy.  I will fail every time until I realise I am not in the coffee business at all.  Not sure? Well think about this;

A famous case study of the demise of the Parker Pen company exposes the same mistake.  When Bic began eating into the share of the Parker Pen business by selling cheap biros the managment at Parker determined to compete.  They reworked their manufacturing process to produce cheaper pens.  They judged that to match the price of the new upstart they needed to cut their own price.  The result was disasterous and share conitnued to fall.  After a while the rate of decline accelerated to a faster rate than the growth of Bic.  What had gone wrong?  The inisght to fixing the problem was to recognise that Parker was not really in the pen business at all.  When a customer selected a Parker Pen it was most usually as a gift.  The substitues were not the Bic, but a rather a cigarette lighter or a letter opener.  A reduction in the quality of the Parker Pen had sidelined them in the gift market and continued to leave them at a competitive disadvantage to Bic on price.

What is there to learn from this for business media? The content we used to offer (mostly news) is now avaialable for free.  We have competed by offering our own news for free but have discovered that our users, instead of rewarding us with loyalty and praise, now simply take us for granted and use us as one of many sources of news on the Internet.

Other articles in this blog have said this before, and I make no apology for repeating it again.  Our business is not content.  Our business is helping users to make better decisions and helping vendors to sell more.  When David Gilbertson says that we over estimate the importance of business journalism he makes a fair point and if you read this blog and others you will find lots of clues about what to do about it.  But now for a heresy.  What would happen if we put the question differently?

Instead of

“Giving content away in an advertising supported model does not create enough user engagement (page views/session) or repeat visiting to justify a high CPM.  As a result we conclude that the ad model doesn’t work and we say, how can we create a paid content model?”

Lets try, “What would we need to do to persuade users to engage with our content in such a way that advertisers woudl agrees to pay a CPM sufficent to pay for the content creation costs and give us a profit?”

Let’s think about the scale of that task.  In the old model a typical B2B magazine with a 20000 circulation might have expected to sell ads at around £1500 a page.  That equates to a cost/000 of about £75.  Our current free content model is a long way short of that.  Our typical B2B companion website might get 100,000 page views a month. With a 70% bounce rate only 30% of that traffic is likely to be effctive for advertisers to reach.  Let us imagine that we can service three ad impressions on each page.  So if we sellout our usable inventory our total ad impressions will be 90000.  If you are selling your inventory at £30/000 cpm you are probably doing well.  So if we sell out, our monthly revenue will be not more than £2700 – less than two pages of advertsing in the old model.  My hypothesis could be wrong by a factor of ten and we still don’t have a great business!

We need to find a way to take this model and achieve at least £50000 revenue/month. Driving the number of user visits up is unlikely to work.  The universe of relevant people is limited by the scale of the niche.  In any event the task is daunting.

Consider this:

Where maximum monthly revenue = M

Monthly page impressions= T

Bounce rate (expressed as a decimal) =B

Number of Ad impressions/page =A

Average achieved CPM =C

Then M= T*(1-B)*A*C

Max Rev = 100*(1-0.7))*3*30= £2700

So. all other things being equal, by how much would any one variable have to move to achieve our £50k goal? The terrifying answer is we would need either 1.9m page impressions/month or 55 ad impressions on each page or a CPM of £555!

This seems to me to be so far removed from anything that could be remotely achievable that the drive to paid content is impossible to resist

Does this mean that we should give up on the ad model. If we could improve CPM by 50%, increase available traffic by 50% and halve the bounce rate would that help?  The answer is not much.  Our maximum revenue would still be just £13000 a month.

As with content strategy, using offline thinking in the online world is always going to disappoint.  If you think about it, the magazine ad model, where we could charge £70/ooo to perhapsps fifty advertiisers in the same issue is the equivalent of having 50 ad positions on every web page.  No wonder the offline ad model doesn’t work in the online world.

Is it possible to consrtuct an advertsing model for the b2b web that pays the bills? While I think about that keep cracking on with those hybrid strategies.

Reblog this post [with Zemanta]
Advertisements

October 11, 2009 - Posted by | Advertising Sales, business media strategy, Paid content, Uncategorized | ,

2 Comments »

  1. […] Jonathan 11:31 am on October 15, 2009 Reply Tags: business media (66), Business models (2) A really insightful piece from Neil Thackray, ‘wringing our Hands about paid content and advertising.’ […]

    Pingback by Business models « BusinessMedia.co.uk | October 15, 2009

  2. […] Wringing our Hands about paid content and advertising « Neil Thackray’s Business Media Blog neilthackray.wordpress.com/2009/10/11/wringing-our-hands-about-paid-content-and-advertising – view page – cached I didn’t manage to get to the AOP Conference last week, but no surprise that it appears the discussion there was mostly much wringing of hands about how to make the paid content model work. The… (Read more)I didn’t manage to get to the AOP Conference last week, but no surprise that it appears the discussion there was mostly much wringing of hands about how to make the paid content model work. The Guardian reported; (Read less) — From the page […]

    Pingback by Twitter Trackbacks for Wringing our Hands about paid content and advertising « Neil Thackray’s Business Media Blog [neilthackray.wordpress.com] on Topsy.com | October 15, 2009


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: