Kent’s Official Blog

Jump to Comments

Matthew Yglesias wrote:

The problem newspapers are having with online isn’t that the readers won’t pay, it’s that the advertisers won’t pay. The reduced costs per reader make up for the reduced revenue involved in giving the product away, but a physical newspaper generates far more in terms of ad revenue per reader than does a newspaper website. Probably once physical newspapers all disappear, ad rates for news websites will go up somewhat merely because ad buyers won’t have as many options.

That’s the real crux of the problem.  Advertisers don’t know how to value online eyeballs.  The myths of old media have accrued until now they are just pure common sense or conventional wisdom.

My favorite example is what’s known as the pass along rate in magazines.  The pass along rate is some imaginary number that publishers say that original subscribers pass along the magazine to friends and other non-subscribers.  And that certainly happens in the real world, but it’s also very hard to quantify.  It’s squishy and human and imprecise.

Right now most of online advertising is anything but squishy and human.  Google adwords are the king (44% of revenue), with display brand dollars getting a distant second (21% of revenue), according to the most recent IAB study.  Adwords and the other search ads are addictive and very measurable in their effect on consumers because they are there the second someone is looking for that good or service.

Awesome.

But how does one create a desire and a need for a new product or service?  That’s very squishy and unquantifiable.  Ads that build awareness are always going to be inherently low action ads (few clicks on the ads themselves), but they are going to build a want and need for a future action.

That’s why you’re seeing newspapers in the bad way that they are right now.  Because they can’t extract as high a value for the same eyeballs that they can for the dead tree edition.

And they can’t because they don’t have the same mythology in place.  It’s a huge PR event when someone like MoveOn buys a full page ad in the NYTimes.  But if they spent the same amount of money to roadblock (i.e., buy every ad impression on NYTimes.com for a certain amount of time), they most certainly wouldn’t get the same amount of coverage and controversy that the infamous “General Betray Us” ad did for them.

Why?

It’s the same amount of money, and probably the online ad would be seen by more people and run for more days.

First and foremost, it’s tradition.  We all know, or think we know, or imagine that full page advertisements in big papers like that are expensive.  That they have value.  So the notion of some non-traditional advertiser spending moeny like that is itself a topic for debate.

Part of that tradition is that the New York Times has a great brand.  And that anything printed in it has inherent added value.  I remember in the early days of AskANinja, someone once said to us when we were being interviewed for the online version of Business Week, “You really should try and get into the print version of Business Week.”  Sure… but, we weren’t making that decision.  And as a result of a print piece, we’ve never seen a spike in our numbers.  Only online things have helped concretely, and mostly online pieces from blogs not papers or magazines.  Print editions have only driven up the awareness of our brand (which is good too).

Moving forward, we are going to need to see an increased value for eyeballs online.  When a show like Ask A Ninja can deliver similar or better demographics as Adult Swim, then Ask A Ninja needs to be able to command similar ad rates.

Same with newspaper’s online divisions and everything else.

But that’s not to say that we online folks don’t need to change and figure things out.  We have to be flexible, we have to work to create the new mythology of value and make a system that works for users, publishers, and advertisers.

We all need each other and we can’t cut a corner out of the triangle.