The power of audiences: Why innovative publishers are more valuable than ever
Guest column: Antoine Boulin, President, Media at the digital content company Purch, discusses why some new media companies are receiving eye-popping valuations
This past year was a major year for deals and financial activity in the digital publishing industry. From huge funding rounds for the likes of BuzzFeed and Medium, to M&A such as Axel Springer’s acquisition of Business Insider for $343M, it’s clear that there’s a great deal of investor interest in the space. Yet, at the same time, many publishers have spent the year dealing with well-chronicled obstacles to monetization such as declining referral traffic and ad revenues, not to mention ad blocking and fraud. Gigaom’s (temporary) shuttering highlighted that, as much as demand exists for innovative publishers, it’s still a difficult business to succeed in for the vast majority of players.
So, what’s led to some of the eye-popping valuations we’ve seen this year? The most obvious answer is that advertisers spent about $140B on digital advertising in 2014, and that number is expected to continue to rise for the foreseeable future. Investors are understandably looking to grab a piece of the pie by pouring capital into buzzworthy digital publishers. This, however, doesn’t explain why some publishers are thriving while many struggle. Shouldn’t we assume that a rising tide lifts all ships?
The problem is one that any Econ 101 student could easily recognize: as supply rises in the form of digital content, prices for the ads that publishers sell against that content predictably decline. At this point, it’s so cheap for marketers to reach vast audiences that even publications with millions of monthly unique visitors are seeing their ad revenue decline. There’s simply too much supply.
The publishers that have managed to thrive in this environment fall into two camps. The first camp is addressing the problem by creating audiences so large that they’re simply irresistible to marketers. The second is building a highly-engaged readership around a specific topic – these specialized publishers focus less on scale and more on creating higher levels of interest and engagement among their readerships, which translate into additional value for marketers. Avid consumers of Apple product fan-sites, for example, are more likely to be interested in Apple accessories, and marketers don’t have to reach as many to drive a sale. Let’s take a look at some examples of both these groups.
Business Insider is one publisher that has mastered the art of audience building. They’re digitally native, so they’re not forced to subsidize an unprofitable print publication – like Bloomberg, for example – and they use innovative distribution models. By relying heavily on syndication and publishing directly to Facebook, without worrying about links back to their site, they’ve built a large audience that advertisers value both for its size and engagement.
Another good example of building a superior audience is Buzzfeed. They’ve created a massive following by utilizing non-traditional content creation mechanisms such as user-generated content and their now-famous “listicles” (which are also perfect mediums for profitable native ads). These types of content are not only proven traffic-drivers, but are also cheaper to create than traditional journalism. This widens the publisher’s margins to ensure that a solid audience will create enough ad revenue to pay the bills. While this seems simple, many similar publishers flood their sites with tons of low-quality content in the race to scale, which ultimately backfires by turning off users.
As I mentioned above, another set of publishers is focused less on building huge audiences and more on improving the value their audience can bring to marketers. In other words, boosting the proportion of their audience that buys a product or service from a brand advertiser. TripAdvisor is a great example of a publisher who has cultivated an engaged and passionate audience around specific area of interest – in this case travel – and offers a suite of products and services to capitalize on this endemic environment. While the site offers content in the form of reviews and advice to support the research phase of travel booking, it also provides travelers with booking services and marketers with access to in-market consumers are ready to buy.
Under this more service-oriented model, publishers can point to a much stronger link between content consumption and a purchase outcome. This drives more revenue from a smaller user base, and decreases reliance on audience-based ad revenue.
What these examples all show is that engaged audiences are making innovative publishers more valuable than ever before. While the mini-crisis over ad blocking didn’t upend the publishing industry as we know it, it did serve to show that consumers are fed up with traditional, in-your-face ads – to the point where they won’t tolerate them even in exchange for 100% free content.
Unspecialized medium and even large-medium publishers are struggling to survive on an ad-based model, especially as digital ads are threatened by blockers and rampant fraud. Marketers understand this, which makes the ability to connect with an engaged audience more valuable to them than ever.
Those companies that have been able to break out of the mold to provide active audiences and connect them directly with products and services, either through massive scale or attracting a highly engaged segment, have reaped the rewards. We’ll continue to see those players attracting huge sums of cash in 2016, despite the concerns around advertising.
As President, Antoine Boulin manages Purch’s media business in the U.S. and Europe. He is responsible for ensuring the company’s portfolio of media properties produces content in line with the company’s mission – to help users make informed buying decisions.