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The real reason why newspapers are losing to Facebook

There’s a major problem facing communities everywhere — local news is losing the competition for advertisers to the duopoly (Facebook and Google). These two firms account for around 70 per cent of all digital ad spending globally, which has forced closures and cutbacks and severely threatened the future of journalism.

 

News deserts ()

The emerging “news deserts” across the USA. Source

 

Facebook made USD $39bn in ad revenue in 2017. They added over one million new advertisers in just six months and the majority of this growth came from…

 

 

...SMBs [small and medium businesses].

That’s right SMBs, not fortune 500 companies or big shiny brands like Nike or Coke. For the past 14 years, Facebook reeled in it’s organic reach for content published on its platform and introduced self service, easy-to-use digital marketing tools to encourage their users to create ads to reach their audiences and in the process transformed them all into paying marketers, genius!

 

A very cheesy Facebook promo video from 2018, “SMB’s are vital to our mission” 

 

Today there are reportedly 30–80 million SMBs registered with pages on Facebook. For a small local business managing advertising themselves on a strict budget, their preference for the local newspaper has all but been replaced by this more convenient digital medium.

Without a comparable alternative, this money will certainly continue to go to Facebook and Google.

 

But local media and local advertisers, makes sense right?

It has been proven that local media receives three times higher trust and 2.5 times higher positive sentiment to ads compared to Facebook. With Facebook ad prices rising for some verticals as much as 50 per cent year-on-year, increasing controversy over brand safety and user privacy and new EU law GDPR putting value back onto contextual targeting than creepy behavioural ad targeting, what’s keeping local publishers from winning back the local SMB advertiser?

 

Monopoly mentality

Let’s face it, news publishers had it good for nearly a century; they were basically printing money. Like with any empire it resists change until the point of no return. Unfortunately many publishers saw the signs but ignored it just long enough for their layers of management to continue taking fat salaries and retire.

 

Friction

Most publishers started as print, and they have been painfully slow, reluctant and in some cases pure bloody minded to retrain their staff, invest and embrace digital. Fast forward 14 years. If an SMB wants to buy digital ads on their local newspaper they likely still need to call up a sales rep to negotiate an order which requires graphic design services, countless emails and can take up to a week (!) to complete. And let’s not get started with performance reporting and campaign optimisation, sometime is the keyword here, forget realtime.

 

Legacy

A news publisher’s commercial infrastructure is simply not setup to offer self service. They employ sales reps, who have their own incentives; they’re not interested in commission on the $50 florist campaign, and add to that they’re often only just coming off print sales — in some cases they have even less knowledge of the digital space than their Facebook savvy prospects. And all the while Zuckerberg is whispering “you can turn your Facebook post into an ad campaign from just $10”.

 

Do not look into his eyes, we repeat do not… too late! 🧟‍♀️

 

Banners — suck

The style of advertising online has shifted from salesy “buy my product” banner advertising to a more content driven “join my brand” approach. This has been accelerated by social networks which have in turn birthed a new era of celebrity sponsors — otherwise known as #influencers. Spending on influencers reached over $1bn on Instagram alone in 2017 and is expected to more than double by the end of 2019.

 

join my brand ()

 

When it comes to the ad format, banners are most certainly out of fashion, and content is most certainly in, and you might think good news for publishers as they are all about creating original content. This has ushered in a new ad format in the industry known as native.

Unlike a banner ad which is usually isolated on the page, stuck at the top or side and stands out as an ad, native ads integrate into the environment being displayed. With publishers since their primary way of communicating is through articles, a native ad will often be displayed like an article and either contain a complete “sponsored” article accessible on the publisher site or click out to the advertiser’s chosen destination — blog, campaign page etc.

 

native ad ()

A native ad on a publisher site

 

Native ads generally perform up to 3x higher than banner ads and therefore fetch higher prices — appealing for publishers who have had their banner ad sales driven to the bottom through behavioural targeting which place little to no value on the contextual placement and premium environment. Native ads thrive best in context. However many media houses have struggled to scale in-house native offerings which often entail building out an agency like division of staff to create custom content that is ordered by large brands and agencies, add too that it can conflict with their independent editorial staff. In the local context, demand is not high enough to warrant such investments, therefore the majority of native ad growth is… on social again.

 

chart ()

Source: eMarketer indicating a major majority of native spend goes into social media advertising.

 

Insta ad ()

It’s no surprise that social is still the primary channel for native ads — here’s an ad from Instagram

 

Problematic programmatic

Automated ad buying technologies AKA programmatic have created a marketplace of ad space from millions of sites across the web and have grown to represent 28 per cent of the global digital advertising spend. In 2017 the US alone spending surpassed $10B and is predicted to nearly double by 2020. Indeed this is a kind of self service ad buying, albeit not owned by the publisher. However the cost and complexity of these data driven tools means that it is typically utilised by larger corporations and fortune 1000 brands that can afford to employ media agencies who bring the expertise needed to bid for ad inventory using the programmatic ecosystem. Ultimately the barrier to entry is currently too high for SMBs to adopt en masse.

 

app nexus ()

Ugggh! The Appnexus UI for programmatic ad buying — feel stupid? Welcome to hell! 

 

Facebook boost ()

Let’s compare how Facebook encourages the user to create an ad in just a few clicks. A very direct response ad creative shown here, still what’s key is the mechanisms for creating ads are lightning fast.

 

The publishers’ ad buying offerings suck!

- They’ve got a lot of traffic and trust (even more than Facebook), but they’ve still got terrible direct ad buying processes (calling and emailing)

- And even in the area where they’re actually allowing programmatic buyers the software platforms need trained professionals to handle, and make sense of their overly complex UI. It’s not accessible for a key advertiser segment — SMBs.

- If buying a local ad spot was as easy as boosting a Facebook post, newspapers wouldn’t be dying.

 

Coalitions for scale

There have been a few attempts from large media houses to form coalitions for an audience network large enough to compete with Facebook. In such a model to make the economics work, advertisers must be charged a premium for the one-stop shop approach, but not so much that they go direct to any one publisher. A delicate balance to strike considering many of these publishers considered each other competition.

Perhaps the most famous is Concert — which connects titles from Vox Media, Condé Nast and NSBCU and boasts to have the ability to reach 99 per cent of millennials in the US and 200+ million people. Formed in March 2017, it was all but a year before Condé dropped out due to supposed eroded profit margins.

 

concert ()

Concert ties together premium publishers for “High fidelity advertising” 

 

However once again, as you’ve probably guessed from the publication names, SMB is not the focus of these premium media house commercial teams. To quote Condé Nast’s SVP of enterprise sales Evan Adlman, “advertisers willing to spend a little more — $250,000, will get Condé Nast’s guarantee of business results in key performance metrics ranging from store visits to increased sales”.

 

Rethinking pricing

What isn’t often mentioned is the media pricing model. Purchasing ads on a CPM basis (cost per 1,000 ad requests — not a guarantee of actual “user views” as commonly misunderstood) has been the media standard since forever, but what social and search did was introduce alternatives such as CPC (cost per click) and CPA (cost per acquisition). These more engagement driven buying methods are uncommon with programmatic.

 

term icons ()

Ad buying models can be more than just CPM, look at CPC, CPA, CPL. Could a new metric be invented that is unique for the media? e.g. CPS — Cost per second spend?

 

But what if a coalition of publishers combined their proprietary user and content data with programmatic bidding technology to offer these pricing models at scale? Publishing giant Schibsted in the nordics already has tested a self service solution for their titles where a total number of clicks are guaranteed for the advertiser’s budget. Quality inventory, buying transparency, proprietary clean reader data, and CPC/CPA pricing models would be a powerful offer.

 

Closing remarks

There are undoubtably going to be many more closures before the media can readdress the spending balance. Due to the scale needed we believe this will likely be carried out by third parties specialised in ad technology and user experience while serving a vital political mitigation role to connect trusted local and regional news publications into a global audience network of 1B + people. Whatever the combination, unless the core is to meet the needs of SMBs Facebook will inevitably continue to win.

 

About Daniel Butler

Daniel Butler is the co-founder and CEO of Socius.co, a startup building next generation ad technologies. Follow him on Twitter if you’d like to stay in touch.

 

 

 
 

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