Tag Archives: mathew ingram

Is launching an online advertising network a losing proposition?

blogads

Back in 2006, frequent visitors of Technorati, a popular blog search engine at the time, began seeing ads for a site called Performancing. Launched by a group of “professional bloggers,” presumably people who had figured out how to make a full-time living online, the site had the ambitious goal of serving as a resource to the blogosphere as it shed its pajamas and entered adulthood. In addition to how-to advice columns on making a living online, the company also planned to release a bevy of tools, from web analytics software to a blog advertising network. As someone who at the time dreamed of making a full-time living blogging (hell, I still do), I was addicted to sites like Performancing and Problogger, refreshing them multiple times a day so I could glean whatever information I could that would take me beyond the few bucks a day I was pulling in through Google AdSense.

The appeal of a blog advertising network is rather obvious. It allows content creators to focus on writing great posts and marketing their websites while the ad network takes on the responsibility of finding ways to monetize that content. As long as the network collects enough websites to its inventory, then it has at its fingertips millions of daily readers. This allows it to attract big name advertisers who wouldn’t otherwise bother with smaller blogs. The network runs the ads on the websites within the network, pays the bloggers 70 percent of earnings, and then takes a 30 percent commission for its troubles. And if you have enough websites within your network with enough inventory, that 30 percent can scale up to a lot of money.

Or so you’d think. Alas, many ad networks over the years have discovered that simply gaining access to million of readers doesn’t necessarily lead to advertisers beating down your door. Performancing suffered its own quick and ignominious fall, shutting down its ad network before it even got off the ground (I found an article claiming that it resurfaced the network in 2008, but if it’s still in existence I couldn’t find any evidence of it on its website). And it wasn’t alone. The last decade is rife with the carcasses of dead advertising networks, each more ambitious than the last. In 2009, Pajamas Media, which had inked deals with just about every major conservative blog on the internet, sent an out-of-the-blue email to its shocked bloggers that it was pulling its ads and focusing efforts on its video network. Common Sense Media, an ad network for liberal blogs, filed for bankruptcy in 2013. 

Even Federated Media, which was led by John Battelle, one of the most sought-after minds on online advertising, sold itself this year for $22 million to a Texas media company, far below the $200 million valuation it had received from investors. “We made money many years, and when we didn’t it’s because we decided to invest,” Battelle told Forbes’ Alex Konrad, trying to strike an optimistic tone. “… I think it’s true that it’s hard to make money in ad networks, but the specific story here could be different.” And then last week Say Media, which had purchased a number of high-profile blogs like ReadWriteWeb and XOJane, decided to sell off those properties after struggling to monetize them.

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Why are the networks having such a hard time monetizing when they have such massive scale? Well, as Mathew Ingram argues in a recent Gigaom column, most of these networks are built upon the framework of display advertising, which has always struggled to gain a foothold for even the most sought-after media properties. In a world where you’re lucky to get $5 for every thousand pageviews generated,  there’s just not that much money to go around, for the network or for the content creator. Let’s say a network has access to blogs with a combined 10 million daily pageviews and is managing to secure CPMs of $5. It’s then generating $50,000 a day in revenue, or $18.25 million annually. Once you subtract the 70 percent cut for bloggers, that leaves a paltry $5.5 million. Not bad for a small business, but that hardly makes you a media mogul worthy of Silicon Valley investment.

Ingram says that these networks exist in between the two real moneymakers in online advertising — programmatic (think Google Adwords and Facebook’s promoted posts) and custom native advertising (practiced by BuzzFeed and Vice):

In effect, the low end of the ad market has been colonized by Google and Facebook — it might as well no longer exist, because those massive operators are the only ones who can compete on the basis of scale and algorithmic ability. And the middle of the market is a dead zone, filled with rapidly-declining banner ads and other gimmicks. All that is left that’s worth focusing on is custom content, and that is a tough game that requires 100-percent focus.

That’s not to say that there haven’t been successful ad networks. Blogads, a North Carolina company founded in 2002, has continued to be the little engine that could, floating mostly under the radar. It was first to the scene with providing an advertising platform for major bloggers like Daily Kos and Perez Hilton, and you can still see its signature ad slots at places like Marginal Revolution and Wonkette. I’ve always liked the concept of Blogads because its tool has always, like Facebook or Google ads, been programmatic, allowing everyday people to place ads without needing to go through a salesperson.

And then there are Glam Media and BlogHer, both of which, at least from the outside, seem to be thriving. Glam has pulled in a reported $35 million in investment and BlogHer has received $20 million (I have no idea what the valuations were). In 2013, BlogHer CEO Lisa Stone told USA Today that it had generated $100 million in advertising revenue in the past four years and paid out $25 million to its bloggers.

It’s difficult to tell why Glam and BlogHer are succeeding where others failed (or if they’re even truly succeeding at all. These could be bubble valuations). It could be because they focused on niche consumer sites whereas political news content, the kind published by Pajamas Media and Common Sense Media bloggers, has never been very attractive to advertisers. BlogHer also heads an influential conference, which has likely enhanced its name recognition for brand marketers.

But aside from these few success stories, it seems apparent, for the most part, that display advertising — which is still inherently tied to pageviews — is not and perhaps never will be a major money maker for your average single-author, independent blog. And if you look at some of the most successful independent bloggers on the web, whether it’s Andrew Sullivan, John Gruber, or Ben Thompson, nearly every one of them has eschewed banner ads entirely. So if you’re a content creator looking to launch a blog that you hope to make a full-time living on, maybe you should focus less on generating massive web traffic and instead place all your effort in gaining your 1,000 true fans.  They may be your only hope.

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Simon Owens is a tech and media journalist living in Washington, DC. Follow him on TwitterFacebook, or LinkedIn. Email him at simonowens@gmail.com. For a full bio, go here.