You may be wondering why I post so many items about newspapers and the web. Simply put, this is one of the most fascinating business stories of this decade, about how an industry that even today generates a significant percentage of original online content continues to frustrate itself through a reflexive tendency to want to control the medium through which content is delivered to audience.
Shafer’s piece does an admirable job of covering the history up to the web and how newspapers tried and failed over and over to achieve a digital business that represented their existing business model and industry values. I suppose you could make the case that Hollywood has been fighting a similar losing battle and that should be informative to the newspaper industry.
But that’s not the case, and I think I know why: From the beginning, newspapers sought to invent the Web in their own image by repurposing the copy, values, and temperament found in their ink-and-paper editions. Despite being early arrivals, despite having spent millions on manpower and hardware, despite all the animations, links, videos, databases, and other software tricks found on their sites, every newspaper Web site is instantly identifiable as a newspaper Web site. By succeeding, they failed to invent the Web.
[From How the newspaper industry tried to invent the Web but failed. - By Jack Shafer - Slate Magazine]
In the final equation this is also about how a fragile an industry’s business model can be. What works for newspapers in print doesn’t work to the same contribution level online.
The Interactive Advertising Bureau (IAB) and Bain & Company today announced the release of a benchmark study which suggests that online publishers are increasingly turning to sales intermediaries known as ad networks to sell off excess inventories. The use of “ad networks” surged from 5% of total ad impressions sold in 2006 to 30% in 2007, according to the newly released “Digital Pricing Benchmarking Study” from Bain, the global business consulting firm, conducted in coordination with the Interactive Advertising Bureau.
[From Use of "Ad Networks" Surges Six-Fold as Media Companies Step Up Monetization of Unsold Online Advertising Inventory]
Keep in mind that the above study is being promoted by the IAB… for a more sanguine look at online ad networks you should read this piece in MediaWeek:
“While ad networks and their cousins, ad exchanges, offer an efficient way to unload inventory that would otherwise go unsold, common complaints are that networks amount to paltry ad rates, low-rent ads and, ultimately, the threat of undermining a brand’s value. “
Why is this a race to the bottom? For starters, the only real differentiator that the 300+ ad networks can control is price and even there the unit metric is entirely direct response based, as opposed to brand metrics that advertisers care about equally if not more so than how many people are clicking on the ad unit.
I’m still learning my way around the online advertising space but I do know enough to suggest with some certainty that simply commoditizing a fungible product leaves you with little maneuvering room in a very crowded and noisy marketplace.