I was the editor in chief at Dr. Dobb's, which many of you know closed down in December. As I explained in my farewell editorial [1], our ad sales were squeezed by a comparatively recent phenomenon in media, which is a very steep drop in vendors' willingness to buy Web ads--a lifeline for most web sites.
The reason is that vendors have (finally!) discovered that effectively nobody ever buys anything by clicking on a web ad.
For certain consumer sites, that's a survivable problem. For example, Budweiser's ads aren't intended to make a sale, but rather to remind people of the brand. However, for many tech companies (those that aren't tier 1), they don't have the funds to do brand-oriented ads. Their ads need to result in clicks and purchases. And that's just not happening on pure websites. (FB and Twitter are a wholly different category.)
Personally, I expect that more web sites in the tech sector that have depended in the past on advertising will either fail or drastically cut back on their offerings.
So at $4.56 per thousand views, assuming one ad per page, even if an article does 20K views, that's only $91. This is why news organizations look for differentiators; it's what we did when I was at Wired and CNET, though I was on the editorial side, not advertising. Unfortunately not all news organizations succeed; Gigaom did events and had a paid research arm, but that wasn't enough. I'm also still mourning Dr. Dobb's, which I first read as a teenager. :(
I am managing a 7 digit banner ad budget which helps my client generate a profitable 8 digit income in education business. So no display advertising isn't dead for advertisers, because possibilities are more. The problem with Gigaom and DDJ is that they have low capacity with not much relevance advantage. One single programmer can run a web site with tenfold their capacity with a fraction of their cost.
In contrast one can claim banner (outdoor, indoor or web) never really worked except for some carefully chosen "success stories", and now advertisers can measure.
What does "low capacity with not much relevance advantage" mean? My understanding is that DDJ (at least) has great content that "one single programmer" couldn't hope to match.
Relevance advantage means that a site is so big and important in a broad category that it's worth it for advertisers to pay a premium to get frequent views from its readers( think of how TechCrunch is so central to the tech community)
You've hit on a key point: the ability to measure ROI with digital media has drastically changed the advertising landscape. Magazine advertising has always had notoriously low impact, as an example.
Considering that prior to the web, the most trackable advertising was direct mail.
Taking venture capital and starting at -$22M doesn't help.
There have been a lot of very successful and profitable media companies[0]. The industry isn't broken (far from it), just some of the models are.
This also isn't a new revelation: Arrington wrote a post on TechCrunch in 2008 warning other bloggers not to raise money[1]
Re: the effectiveness of advertising. This is a $120B+ annual industry with entire billion-dollar sub-industries involved in measuring its effectiveness and optimizing value. If it didn't work it would have slowed, shrunk and or shut down a long time ago - but rather it is growing insanely each year. Advertisers and the over-qualified engineers working in adtech are not idiots.
[0] TechCrunch (disclaimer: worked there, profitable - sold), ReadWriteWeb (profitable - sold), Huffington Post (profitable, sold for $350M+), ProBlogger (profitable), etc. etc. etc.
I'm not sure that all the examples you cite are evidence of very successful and profitable media companies. ReadWriteWeb was acquired by SAY Media for less than $5M and they cut it loose two years later. HuffPo wasn't turning a profit for AOL in 2013, and Tim Armstrong wouldn't say in Dec. 2014 if it was earning a profit, which basically means it's not. In any case, HuffPo's revenue is largely driven by rehashing the original reporting of other outlets, and that is definitely not sustainable journalism.
RWW operated for 8 years with no money raised and then cashed out when Richard retired. HuffPo makes more in revenue p.a than what AOL paid for it. They may have only technically not been profitable at acquisition because of their reinvestment in business. There are a ton of other profitable, bootstrapped media businesses - I just happen to know those I mentioned.
> The reason is that vendors have (finally!) discovered that effectively nobody ever buys anything by clicking on a web ad
There have been a few times I've seen an ad on a website that looked like it was for something I wanted, and wanted to click it.
The problem is that I pretty much ignore the ads while I'm reading the page content, and so I only noticed these ads when I'd finished the content and clicked a link to leave the page, and my eyes are wandering while I wait for the new page to start loading. I click back to try to get back to the ad, and something else has taken over its spot. I might refresh a few times to try to get the desired ad back, but that has never worked for me.
I've been saying exactly this for quite a while. It is so incredibly stupid to replace the ads when the back button is hit. The probability that I hit the back button to click one of the ads is quite high, and the probability that I'll want to click one of the new ads that replace the one I was trying to get to is virtually zero.
> There have been a few times I've seen an ad on a website that looked like it was for something I wanted, and wanted to click it.
Absolutely. IMO, Banner Blindness alone is the biggest reason why web publishers are facing difficulty in monetising web inventory.
Many a times, people don't notice ads even if they were relevant to them, just because of banner blindness. In fact, 3 out of 10 display ads are never seen [1]
Great comment. As part of the marketing team at a well funded but very money-conscious startup, I can confirm this awareness that most web ads have no visible effect on the bottom line, or the cost of customer acquisition is so high as to be prohibitive. On the web, people are overwhelmed with marketing messages. It's very hard to find the right demographic, and then to convince them to act. This has always been true, but it has become much more measurable since the Internet came along. Unless you are a large corporation with the belief that "branding" can be bought, and the budget to back it up, there's no reason to buy online ads in most venues.
Back before the internet was huge I used to subscribe to 3-5 computer magazines. PC Magazine, Wired, ... I don't even remember the other ones, probably mostly video game mags.
I used to look forward to the ads just as much as the articles because it was a way to find out about new products. Now though I need no such ads. I see the announcement on the various tech sites or from friends that read the tech sites. Almost zero need or interest in ads anymore and pretty much do my best to ignore them.
As a (very) small-time publisher, but with a fairly reasonable sample over the years, CPM ads pay about 1/5th what CPC ads do. I think that shows how much "brand awareness" versus "I'm trying to make a sale" advertising is worth.
Edit: CPM pays 1/3rd the rate, but CPC ads make up 90% of revenue, which makes sense if they generally pay more. I run a rather diverse set of sites, but I stay away from tech.
I concur. Back in 2006-2008, AdWords was incredibly effective for my company, then the leads gradually dried up, and after a while we realized it provided nothing useful anymore, unless you buy incredibly expensive keywords (up to several dollars per click).
It may still be effective for pure consumer-oriented services, but is IMO useless nowadays for B2B unless you're a large, deep-pocketed company.
We've had that trouble as well - anything related to offsite backup or cloud storage has outrageous pricing - perhaps $8 or $12 per click (!).
The frustrating thing is that if you do find keywords that have low prices, google will refuse to run them for you because too few people search for it. Citing "low quality", google will force you to artificially inflate your CPC just for the privilege of running a niche keyword.
There is this idea that every day there are X people on the web searching for exactly what you offer, and if you show them an ad during the search: success. I believe this to be true, but google makes it all but impossible to pursue low traffic, niche searches. They literally refuse to run them.
The curse of Dr. Dobbs was simply that the content was so good the ads were not able to compete for relevancy. This is a weird paradox: really good content attracts audiences but crappy content makes them click through on ads (and probably still not purchase anything but at least there is some effect for the ad buyer they can measure beyond 'impressions').
Lots of fond memories of the print edition, that's where I learned a whole bag full of useful tricks when information was a lot harder to come by than today.
Some do well with real content. Economist is well known on HN. But the Economist charges a fee.
In .de, SZ, Zeit and Spiegel appear to do tolerably. (I subscribe to the first of the three.) Two of them charge real money, though, and perhaps the third too, I wouldn't know.
The Germans have a proverb for this. Wer zahlt, schafft an. Liberally translated: Who pays, decides what's paid for.
That's not necessary, LWN.net (Linux Weekly News) is an excellent site with in-depth articles. It is funded by subscribers, and it seems to work relatively well for a long period already:
Don't confuse a lifestyle business that people do as a labor of love with a successful full media organization that can afford to pay people salaries and benefits. Not diminishing LWN, but it's not the same as a Dr. Dobb's or GigaOm.
Also, most successful smaller media publishers who are not purely ad-based have diversified into other areas.TidBITS is a smaller operation and can pay some salaries, but they supplement with their fantastic book business too. They diversify and have built what they can sustain
Jon Corbet's been pretty open that LWN's at best barely broken even, if that. Though last I recall his talking about this was a couple of years ago.
I've actually drifted off it in the past few years largely as I'm simply not tracking Linux-related stuff all that closely any more. Though for that, LWN is absolutely excellent. It's certainly seen numerous other contenders buried.
Personally I like news media / journalism to be operated as non-profits funded by governments, foundations, and individual donors. I am happy to pay for content.
I believe the issue is less that advertisers are unwilling to buy display web ads; it's more that they no longer place a premium value on buying them from branded publishers when they can reach the same users on many different websites with programmatic buying.
This hugely devalues quality publishers and increases the value of lower-investment publishers who successfully create a lot of pageviews. The latter inventory used to sell for bottom-of-the-barrel prices, but advertisers have decided it's pretty similar in value to reaching the same user on a high-quality site.
The best offensive weapon quality websites have against this trend is native advertising: create high-quality sponsorship offerings that commodity display ad impressions can't directly compete with.
> which is a very steep drop in vendors' willingness to buy Web ads
Any relative or absolute numbers you'd like to share?
> The reason is that vendors have (finally!) discovered that effectively nobody ever buys anything by clicking on a web ad.
My favourite experience with this was when I was selling a computer case and researched its specs on newegg.com. Then for a while all I saw were retargeted ads from newegg trying to sell me that case. Nonono, I didn't have one too few computer cases, I had one too many. I was the complete opposite of their target audience, heh.
You're example is obvious because Newegg can't tell the difference between market research because you're about to buy versus research because you're about to sell.
But it's always amused me (in a not very amusing way) that immediately after I purchase something I'm inundated with advertisements from the same vendor trying to sell it to me again. Big data is supposed to be about finding statistical relationships between events, right? In what world would the probability of someone buying something be highest when they're holding a brand new one in their hands?
What it really makes me think is the web advertising folks are pulling a con on their clients. They're not actually doing the critical analysis they promise but simply sorting by linear distance in n-dimensional space and hoping no one notices how useless the measurement is.
I have the same experience with Amazon whenever I buy a big-ticket item. When I interviewed with them, I asked them if they were working on that. "Yes, but it's hard."
A few years later my brother interviewed with them and they asked him how to solve that problem. I wonder if they were stumped, and if they were just looking for new ideas.
Isn't this a market opportunity, though? Make a website that provides product information for people who want to sell an item. Give tips on how to advertise and mail the item. Sell packaging supplies. Why isn't Ebay already doing this?
> My favourite experience with this was when I was selling a computer case and researched its specs on newegg.com. Then for a while all I saw were retargeted ads from newegg trying to sell me that case. Nonono, I didn't have one too few computer cases, I had one too many. I was the complete opposite of their target audience, heh.
Yeah, I've had similar experiences. Back when I used to play Eve Online, I'd see banner ads everywhere for the game. Big screaming banner ads imploring me to subscribe now.
At the time I already had two accounts. By definition I was the kind of person who could not be advertised to, but the ad network was still putting effort into targeting me with those ads.
I still get them and none of my 3 (4?) accounts are subbed anymore.
Oddly I almost never see WoW ads (excluding telly), but I do get the occasional email with free time/trials. Ofc they're all scams now, but once upon a time it really was a free upgrade...
What really annoys me is the online banking websites I use (or credit card ones) that implore me to go "paperless" and "try their app", whilst logged into their system as me. Funnily enough, I do use their app (so can't they set a flag to stop showing me the advert) and I am "paperless" as I'm logging on to grab the PDF statement. Again, why can't they set a flag: if (alreadyPaperless) { showAdverts = false; }
Its a customer retention scheme. If you're a customer of bank A and you're being flooded with ads from bank B, C, and D about greenwashing and being where the cool kids hang out, the simplest way for bank A to compete with B C and D is spam their own customers with greenwashing and aspirational stuff.
Put another way, I don't know who your banks competitors are, and you might not, but your bank thinks its competitors spam campaigns currently revolve around greenwashing and aspirational, so thats the kind of retention spam they send.
With publishers dropping off like this; when will the decreased business show up in Google's revenue? Google being the biggest advertisement broker thru AdSense and similar programmes.
More people are spending more time on the internet on more devices.
So far, this has protected Google from decline. Eventually Google will become a blue-chip stock because they can consistently match advertisements to users better than anyone else can.
If the publisher's revenue drops due to there being more publishers then Google and similar would be safe but andrewbinstock writes that it is vendors that have lower willingness to pay for online advertisement; they are simply spending less on online advertisement. That should effect Google all things being equal.
> With publishers dropping off like this; when will the decreased business show up in Google's revenue?
Never. Publishers aren't dropping off in sum, just the bad ones are cycling out and are being replaced with more nimble, relevant, cheaper, etc. content providers (ie. Grandparents thesis is not correct and is anecdotal)
There are is more and better inventory than ever and more audience than ever and both are growing at staggering rates.
Nothing is more amusing than a former employee of TechCrunch subtly swiping at the relevance of Dr. Dobb's Journal. Without a doubt, that's the funniest thing I've ever read in this line of work and says everything one would ever need to say about certain elements of the Silicon Valley culture.
Your analysis is just plain wrong, by the way. Dr. Dobb's was punished for delivering content. Turns out, advertising doesn't work as advertisers hope on people who actually enjoy content. When you deliver actual content at some point in your career, you will discover this to be true as well.
I'm actually a huge fan of Dr Dobbs, been reading it since I was 10 and would go to a lot of trouble to track down issues. My disagreement isn't with the magazine, it is with the thesis that online media advertising is dying.
There isn't a single cite in this entire thread to back that claim up outside of the anecdotal examples. The numbers for online ad sales and media revenue are all growing. The fact that the numbers haven't propagated through to Google's results is further proof of that.
Edit: some stats. The IAB report for last quarter shows 6% quarterly growth:
So where is this reported decline? It doesn't show up in numbers anywhere. There are profitable and well-run media businesses with both low and premium content in all sectors. I understand the tendency to want to blame this on some meta trend, but it just isn't there and can't be backed up outside of stories and feelings.
> So where is this reported decline? It doesn't show up in numbers anywhere.
"Network paid clicks, which include clicks related to ads served on non-Google properties participating in our AdSense for Search, AdSense for Content, and AdMob businesses, decreased approximately 11% over the fourth quarter of 2013 and decreased approximately 7% over the third quarter of 2014"[1]
"Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of our Network members, decreased approximately 3% over the fourth quarter of 2013 and decreased approximately 3% over the third quarter of 2014."[1]
"Google's Ad-Price Declines Continue for 12th Straight Quarter"[2]
> There isn't a single cite in this entire thread to back that claim up outside of the anecdotal examples.
ChuckMcM cited Google's earnings report in a top-level comment[3] nine hours before you claimed there isn't a single cite.
You're citing adsense which is CPC while most media is CPM and display advertising. They are two entirely different sectors.
AdSense struggles to distinguish between DrDobbs and a 12 year old writing about learning programming on Blogger. It performs when you have purchasing intent based sectors like gadgets, photogaphy, etc. (and a lot of blogs have built around that)
There is also a confusion here where CPM is used to refer to total CPC revenue divided by total pageviews. CPM is a specific display model where advertisers purchase Units of traffic volume and it scales out.
In any case neither DrDobbs nor GigaOM ran CPC ads in any significant volume (likely would only fill unsold display as backfill).
It is telling that somebody from DrDobbs - a display ad business would cite AdSense CPC performance or ad market performance as a reasoning for their failure. To me it just speaks to not understanding what went wrong.
Nobody should expect to take a premium magazine like DrDobbs, split it into online articles and then slap AdSense onto it and then sit back and count the money. That is totally unrealistic. It also doesn't work with just CPM markets either.
Premium brands require humans to sell them and not algorithms. If you don't have the scale to hire a sales team then you need to join a network.
You are exactly right. There were issues at UBM that had nothing to do with the industry at large. And GigaOm just had too much debt to overcome (IMHO). Many, many other tech pubs are thriving online, in site growth, revenue and profit.
I'm sure that is true, but aren't we overlooking the fact that the tech sector has an extreme amount of content to offer compared to any other sector? Plus there's a large amount of content that can be had straight from the source.
> Plus there's a large amount of content that can be had straight from the source?
Exactly. How many articles have been written in the past day on the new MacBook that are actually just worse than reading the Apple.com page itself. Filtering can be done by link-sharing sites like HN and Reddit.
I had assumed GigaOM's web property was there to lend brand to GigaOM Research, versus the advertising angle. The ability of journalists to make ad revenue is very disappointing and unfortunate across the board, though it can also be said there's a lot of really poorly researched tech journalism out there too.
If the goal wasn't a self-sufficient web business, this seems to imply (maybe?) that the "research/analyst bits were also unsuccessful.
Which I can also believe, because Tolkein's "Go not to the Elves for counsel" was somewhat written about analysts - "for they shall say both no and yes".
It's not advertising that's the problem as many in the comments seem to think; it's the shitty type of ads these 90s websites were all built around.
The recent Marissa Mayer piece in Medium [1] made much of the fact that her big accomplishment so far was transitioning from the old dying Banner ads model to a mobile/video/social/fake content friendly model.
Also consider this bit from buzzfeed [2] which I first saw from stratechery's great article [3] on them.
The banner ad, whose decline Farhad Manjoo recently celebrated, was also born during this era and created a business model in which clicks are tied directly to dollars — something many people assume is still how all online publishers make their money. But BuzzFeed has never sold a banner, and I couldn't even tell you how many monthly page views we get. And so our business model at least moderates that incentive to drag every last click out of our audience.
I had no idea their headcount was 70. It would be hard to maintain such a large staff unless research + events + advertising + other were doing really, really well.
There is a trend towards awareness advertising - I think this is because the Super Bowl is barely more measurable than a bunch of display ads. The amount of $ spent on web and mobile advertising is tiny compared to the time spent there. If branded ads can make it on TV, perhaps that's the future rather than click through.
But awareness advertising doesn't pay as well (yet?). The real money is getting people at the edge of making a purchase to make that purchase, whatever it may be. And the ability for the web (or any advertising, for that matter), is increasingly being called into question (or people are getting better at questioning such purchases).
This is true. If I got a "$100 better than your best competitive offer" ad when I was car shopping, I would have clicked through. There was enough data on my phone to suggest this was the case.
> effectively nobody ever buys anything by clicking on a web ad
I know I never did - at least for banner ads and other CPM advertising, but I'm not so sure it applies to the CPA sector. My impression (no pun intended!) is that sector is in a growth phase.
On the plus side, if this means the return of advertising revenue to print media, that's an interesting development. If it doesn't, then ... where is the advertising spend going to go? Mobile? I think mobile advertising is even more universally reviled than CPM web advertising! Should the penny be dropping (pun intended) there, as well?
As a 100% layman, I spent 20 mins thinking about the ad issue. The easiest way out I can find is to have some kind of location-based ad system to increase the degree of connection between a user and the ad content. Is it feasible technically and commercially? I would like to learn more. Thanks.
That's already being done; in mobile based on your GPS/cell location and otherwise based on your IP (not very specific, but a general location work pretty well).
Yes, I know. But most of the time we see ads on bigger screens. The location-based ads have way less location awareness in my experience. I guess, besides the ads from your neighbours (location aware ads), there should be some kind of quicker balance feedback between ad bidding system and what user really pays attention to. Just think about the ads we see in the paper-media-only age, different ads occupied different places. Online ads have not reached that point yet. I wish we could get to that point earlier to make more quality content makers' life easier sooner.
Working for a UK-based division where our corporate Internet gateway ingress/egress is in San Jose, things do get confusing - for example, when I browse ebay.co.uk, (in my lunch hour, of course!) without logging in, the postage charges are astronomical as ebay assumes the UK sellers have to ship to California.
I was the editor in chief at Dr. Dobb's, which many of you know closed down in December. As I explained in my farewell editorial [1], our ad sales were squeezed by a comparatively recent phenomenon in media, which is a very steep drop in vendors' willingness to buy Web ads--a lifeline for most web sites.
The reason is that vendors have (finally!) discovered that effectively nobody ever buys anything by clicking on a web ad.
For certain consumer sites, that's a survivable problem. For example, Budweiser's ads aren't intended to make a sale, but rather to remind people of the brand. However, for many tech companies (those that aren't tier 1), they don't have the funds to do brand-oriented ads. Their ads need to result in clicks and purchases. And that's just not happening on pure websites. (FB and Twitter are a wholly different category.)
Personally, I expect that more web sites in the tech sector that have depended in the past on advertising will either fail or drastically cut back on their offerings.
[1] http://www.drdobbs.com/240169421