This is a continuation of Part I – where we discussed malware, the phony “moral” arguments of adblockers and the rising problem of walled-gardens.
“Find a better business model”: The myth of the alternative revenue model
As revenues collapse and publishers are forced to downsize, one piece of often-repeated ‘advice’ from the ad-blocking camp goes like this: “Ads are dead. Find a better business model”.
The ‘new model’ most often recommended is a donation model, but there are many others which include the often suggested (and often failed) subscription-model, membership models and some others I’ll get to below.
Historically speaking, advertising has always fueled publishing. Relatively few publications exist on purely subscription-based revenues. But that’s not to say they haven’t tried. Most print newspapers and magazines have always used a combination of advertising and subscription revenues. Large pay-walled websites like the Wall Street Journal still serve ads to subscribers. Remove advertising revenues from the equation and the cost-per-reader typically skyrockets, resulting in plunging demand.
In order to keep per-reader costs low (or free), advertising has always necessarily filled the gap.
So when Adblock users insist that publishers try “subscription models”, they seemingly forget that subscription models have been around for as long as there has been media. With relatively few exceptions, subscriptions are an adjunct to advertising — not a replacement. Subscription revenue is for the vast majority of websites insufficient to generate required content. Which is not to say there aren’t exceptions. There are. But subscriptions don’t work for everyone.
The side-door problem
One of the reasons subscriptions are often difficult to implement is the so-called “side door” problem. Today, very few readers access websites via the homepage. We Google. We read one page. We click away, never to return.
This dynamic describes how twenty-first century web users surf. We no longer “drill down” as people used to say in the web’s early days. For millions of websites, “readership” in the traditional sense is dead. It has been replaced by what I call the random-access reader. We come in through the side-door. We take. We leave.
As Harvard University’s Nieman Journalism Lab reports:
A remarkable 88 percent of traffic to The Atlantic comes in sideways, meaning just 12 percent of site visits begin on the homepage.
In aggregate, this system of one-off pageviews still works only because of advertising: Along the way, some small percentage of those one-time visitors will click on an ad. But to think that a one-time visitor will subscribe to that site is wishful thinking at best. (I’ve written more on this topic here)
“Donation” systems like Flattr are similarly insufficient, and reduce publishers to begging — hoping for the goodwill of a few readers. Publishers that have added donation models to their publications describe the results as “anemic”. As a tertiary revenue stream, donations may have their uses — but they don’t come anywhere close to replacing advertising. There are exceptions of course, but they are far from being the rule.
A recent study by mobile data company, Tune showed that vast majority of mobile users are reluctant to pay even $1 per year to avoid mobile ads:
It would certainly seem that subscriptions and donation systems are not the answer.
Are there others?
In previous posts I have discussed newer revenue models like Brave browser which promises to pay users for reading free content with ads. Brave not only guarantees publisher losses, but hopes that by bribing users with Bitcoin amounts measuring fractions of a single cent they will actually persuade users to view ads. The coming failure of this model to create viable publisher revenues is nearly a mathematical certitude and it is extremely unlikely that Brave’s insignificant payments will be enough to persuade meaningful numbers of users to view ads in prime geographic / demographic markets. How many Adblock users are going to look at ads for an hour to make south of 5 cents? I have no idea. But not many.
The biggest problem with these alternative models is that users already have the best possible model: Free, ad-free content. As long as the choice to not view any ads exists, alternative revenue-generating models are doomed to generate little interest.
This realization has led some pundits to claim that the solution lies in “better advertising creative”.
“I would turn Adblock off if ads were better”
I love this argument. As a founder of an agency that produced brand and advertising creative for multiple Fortune 500 clients, and as the winner of multiple creative awards including some of the biggest in the world — this argument strikes me as deeply over-entitled. Not all advertisers are Coca Cola. The landscape of creative agencies today can’t be much more competitive. The digital revolution has enabled agencies to develop compelling creative at a speed and quality level that were impossible a generation ago. The amount of sheer talent out there — and the ability to produce compelling creative for small campaigns — has never been higher.
This isn’t a question of talent or creativity. Calling for better creative in online advertising as a requirement for ad viewing misunderstands the scale of the ad market.
The pie-chart of online ad-spending as a whole isn’t dominated by the world’s biggest brands. It’s dominated by the long tail. If you look at the pie-chart of Google’s ad revenue (Google being the largest seller of online advertising in the world), it’s loaded with small players in geographically diverse, local markets. These players typically don’t have large advertising budgets. The Internet isn’t actually fueled by brands like Nike. It’s fueled by ads for nail salons, pool cleaners, local lunch specials and chiropractors. It’s fueled by millions of campaigns that we never think about.
As Google’s Eric Schmidt said, “The surprising thing about the Long Tail is just how long the long tail is” (emphasis mine below)
Eric Schmidt, Google’s CEO, explained how these millions of small-to-midsized customers represent a huge new Long Tail ad market. “The surprising thing about The Long Tail is just how long the tail is, and how many businesses haven’t been served by traditional advertising sales,” he said. Google now has revenues of more than $1 billion a quarter, at least half of which is made up of Long Tail advertisers by this definition. This is, needless to say, just a glimpse of what’s still to come.
Two important points about the long-tail in advertising:
First, most of these smaller advertisers will not be producing cutting-edge creative anytime soon. They’re not car companies. They’re small businesses — often sole proprietorships.
Second, without this long-tail advertising, online publishers would drop like flies. Their contribution to the marketplace represents an absolutely gigantic piece of the pie.
So to those who ask for better creative as a requirement for ad viewing — that is a mathematically unrealistic requirement given the broad spectrum and relative scale of advertisers.
“But ads eat my data”
This is the adblocking argument that speaks loudest to mobile users. Data is expensive. Ad viewing represents a quantifiable cost to mobile readers.
Low kilobyte ad creative is extraordinarily important, and initiatives like the iAB’s LEAN ads program are important steps towards reaching a middle ground with users.
Unfortunately such initiatives are likely futile as the middle ground will never be reached as long as users have the option of the cheaper and more enjoyable experience of no ads at all via ad blocking.
So what can be done?
The larger issue from a mobile technology perspective is that we surf the web ‘blind’ to the memory requirements of web pages. While some VPN’s reduce and minify web content on the fly, most mobile users consume data exactly as it is served.
What if just by reading this page you just consumed the equivalent amount of data as watching 15 YouTube videos?
Well, you didn’t. But you might have if this page were designed differently.
And as disturbing as it sounds, data consumption is not something most readers have much control over — even with Adblock installed.
A website designer could have embedded 15 different web-fonts on this page. Likewise, they could have used gigantic, uncompressed images and used CSS to scale them down. This page could have been be flagrantly irresponsible in the use of external libraries. Or could even pre-fetch 10 additional web pages in the background in an effort to guess where you’re going to click next.
This web page didn’t do any of those things. But it could have. And since now you’re already reading this page, it would likely be too late for you from the perspective of data consumption.
Creating new technology to better empower users with regards to data usage is an area ripe for development, and more platform and browser developers need to create better tools which indicate the expected download requirements for any given page. But again — these are fundamental web and platform infrastructure issues that are well beyond the domain of small publishers.
By shifting this need for better technology onto publishers, we accomplish nothing but “revenue denial” to the parties whose work we care about the most.
This won’t starve publishers one day. It’s starving publishers right now.