Since about the 1830s when Benjamin Day of the New York Sun decided he was going to sell newspapers for a penny, advertising has been a primary method of funding journalism and news. Throughout the digital age of news, advertising hasn’t just been a primary method, it’s often been the only method.
I want to explain why that is bad. The gist of the problem is you can publish a fairly successful piece of content, but because of a variety of factors, make nowhere near the cost of production. An article read by hundreds of thousands of people might only yield a few hundred dollars. That’s often not even what you paid the writer to report that article, and certainly not enough to pay the editor or any other expenses. This is the primary reason that we launched a membership program, which I hope you’ll consider joining.
I should be clear about something before I get to far into this: I’m very well versed in journalism and publishing in the United States. I’m far less familiar with these subjects in other countries. So please keep that in mind as you proceed.
The concepts behind distributing news for free on the internet, and for a penny in a newspaper, were basically the same: News and information should be distributed at the lowest cost to consumer possible because an informed citizenry is essential to a working democracy.
The key there is lowest cost possible. Newspapers had geographic monopolies and for years were the only place advertisers could consistently reach potential customers. Radio ate away at that monopoly, and then television continued to erode the advantage. The internet completely fucking destroyed it. News companies — whether TV stations, newspapers, or digital media sites — are no longer the primary, secondary or even tertiary way for advertisers to reach potential customers. There are social media platforms like Facebook, Twitter and Snapchat. Cable TAV is still bulwark for advertisers — but there’s nothing special about most news programming.
The gist is this: Advertisers pay to reach customers. They don’t need news sites to do that. But people still need the news, and they need content.
You might be thinking, “But lots of sites are funded exclusively through advertising, right?”
Well, not really. The New York Times, for example, still makes most of its revenue from its print newspapers, even though most readers access through the internet. A behemoth like ESPN makes a ton of money from advertising on sporting events – but it also gets paid a shitload by cable companies, as much as $7 per subscriber.
Magazines like The Atlantic have huge events businesses (and subscribers). Many sites derive revenue from syndication deals (i.e. they get paid to put their content on other sites). Some companies, like Gizmodo Media (formerly Gawker) make millions of dollars from e-commerce, i.e. product reviews, etc.
Now, to be clear, it’s possible to fund a site entirely through ads. It’s just extremely difficult. Advertisers want to work with companies who can reach a large number of people. It’s not worth their time to work with 100 little sites. They’d rather work with a few giants. That is why Facebook and Snapchat are appealing: They can reach BILLIONS of people.
Now for a little inside baseball. There are basically two ways of buying or selling ads. The first is called “guaranteed” or “direct” advertising. The second is called “unguaranteed” or “programmatic” advertising. In reality, there’s some overlap between them, but I want to keep this as simple as possible.
With guaranteed or direct advertising, you work DIRECTLY with a brand or company. They buy ads on the site, and the publisher guarantees to serve the ads the buyer paid for. This is how all advertising worked for decades before technology made the automated buying and selling of ads possible.
With programmatic advertising, a publisher does not work directly with the advertiser. Instead, they work with an intermediary called an ad network. An ad network is like an exchange with advertisers on one side and websites on the other. The ad network might work with thousands of brands and thousands of websites. What happens is, when a page loads, the ad network analyzes the page and serves ads from brands it thinks make sense.
Suffice to say, direct advertising is where the big money is. Programmatic advertising is extremely inexpensive.
Direct ad rates for banner ads (such as the various picture boxes you see on sites) can be in the double digits. With programmatic advertising, you’re doing well if you can get to $1.50.
Oh and by the way, advertising is sold by the thousand. So when I say you get $1.50, I’m saying you serve 1000 ads and you get $1.50. So if you had a story that was read by 100,000 people, and that story had exactly one ad on it, you would make $150. And that assumes zero people used an ad blocker. That is a key point.
You can do the math yourself from here. Even with a million page views, you’re talking only $1,500. If you have two ads on the page, $3,000. And that is assuming a rate of $1.50. That is very high. Realistically, it’s probably more in the 50- to 75-cent range.
Most sites have programmatic advertising. Very few have direct advertisers these days because advertisers can reach who they want to reach through ad networks. (If you’re wondering who the biggest ad network is, it’s Google.) This is why you see websites with dozens of ads all over it. They have to do that to stay alive.
But the natural progression from sites with an abundance of ads is the use of ad blockers. In the esports industry, ad blocking can be as high as 75 percent of readers. So of that $1,500 earned from story with 1 million page views, knock off 75 percent: you’re left with $375. At that monetization rate, you will be out of business in no time. Even if you had five ads on the site, you’re still talking about only $1,875.
And here’s the thing: Most sites are not getting to a million page views in MONTH, let alone on one story. That is why sites begin to publish clickbait bullshit and lists of every goddamn thing under the sun. They need mega traffic to afford to pay people.
Ok so let’s pivot to video. Everyone loves video, right? It’s easy to enjoy, makes everyone a shitload of cash — what’s not to love?
Well the reality is only a certain KIND of video makes a shit ton of money. In the business, we call them branded videos. You probably call them commercials because your soul has not been corrupted by marketing jargon.
If you have a video about League of Legends and you slap an add in the middle of it or at the beginning of it — and you sold the ads yourself — you might be looking at $25-30 per thousand views.
If the video is on YouTube, good luck. You get nowhere fucking near that. Also, if the video autoplays (i.e. the user doesn’t click on it), then we’re back to single digit dollar figures. Video is also way more expensive to produce than a written article. You need a skilled video editor, equipment, maybe a studio. And you’ll never be able to produce as many videos as you can articles. Most advertisers also don’t want to pay you unless you can prove the viewer watched the ad. If they start a video and don’t finish, you’re shit out of luck, my friends.
Ok, so advertising models suck. Are we fucked?
No, we are not, because even a small contribution from readers is extremely valuable. A dollar per month is worth hundreds of visits to the site. In fact, if everyone who read Slingshot each month contributed just $1, we’d never need any advertising at all.
Smart news companies diversify away from solely ad revenue because the news business has NEVER relied only on that model.
And, most importantly, when journalism and news is funded by readers, it’s BETTER. When you don’t need to chase size, then you can focus on quality. That’s all we want to do at Slingshot. We simply believe memberships are the best way forward for both us as a company and you as a reader.