Josh Gordon
This is a guest blog posting by Josh Gordon, president of Selling 2.0, who moderated the Digital Magazine Symposium in New York in March. It is reprinted with permission from his Ad Sales Blog.
Profit on the Web is about audience, not traffic
At the recent Digital Magazine Symposium, Gordon Borrell astonished the audience by blowing up the notion that building that largest base of online readers is the key to ad revenue.
After surveying the financial results from thousands of local media Web operations for the past eight years Borrell concludes there is no direct correlation between large amounts of traffic and large amounts of money.
For example, Borrell tracked a wedding Web site in one of the top media ten media markets making nearly as much money in Internet advertising (in millions of dollars) as the #1 ranked TV station website in that market. The TV site gets about 600,000 unique visitors per month, the wedding site gets about 60,000, or 1/10th of that traffic. How can this happen?
Borrell says that online, the best advertising is content. There was a time before the Internet (my kids are shocked at this statement) when the top way consumers learned about products was through advertising. But the Internet has become a far more efficient educator. Many of the most profitable websites make money because their content functions like advertising did years ago, as a customer educator for product sales. According to Borrell, visitors of these sites are “leaning forward” to read the content while probably ignoring the banner ads.
Some print publishers are still trying to win the print circulation/CPM battles online. But that battle is over. They lost. Online, search, which now accounts for over half of all online advertising dollars spent, has won. A media buyer can always buy more clicks per dollar buying search.
From Silicon Alley Insider
While the online CPM battle is lost, the war for publisher profit can be won. Borrell shows us how with an example: “Compare radio, a $15 billion media segment, with the yellow pages, a $9.8 billion segment. About twice as many people listen to radio compared with those who use the
printed yellow pages. So those ad dollars seem just a little out of whack, right? Now consider this: For radio, average weekly time spent listening is about 20 hours. For the yellow pages, it’s about a minute. An industry that reaches less than half the audience of radio and gets about 60
seconds of quality time with them every week – compared with radio’s 20 hours a week – can still attract about 65% of the ad dollars as radio? That’s because the yellow pages, like the Internet, are a lean-forward medium where people see the advertising because the advertising is the content.”
At the Digital Magazine Symposium, when Borrell laid this out, everyone in the audience was taking furious notes.
To further support Borrell’s points, the chart above illustrates the dollar value of a unique visitor at some of the best known websites. To estimate these numbers, Silicon Alley Insider took the full year revenue for 2009 for each of the companies below and divided them by the number of their average monthly worldwide unique visitors.
Craigslist, Google, Monster, Autotrader… for local media the list of outside competition is growing longer every minute. In old westerns, the scene would be akin to Indians popping up over the horizon, arrows ablaze, pouring down on the covered wagons of the cowboys.
In the scheme of things, it’s still a drop in the bucket. The total is less than 3% of all locally spent online advertising. If we estimated it for individual local markets (we usually don’t do that until an advertising segment reaches $1 billion), it would equate to a few hundred thousand dollars or less in most markets.
