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The media industry’s original sin

I get annoyed when people treat the “media” as a monolith. The reason I love writing this newsletter is that the industry is fascinatingly complex, with a diverse range of niches, mediums, content strategies, and revenue models. You don’t need to cast your net very far to find a bevy of successful outlets that are thriving in entirely unique ways.

That being said, I don’t think I’m going too far out on a limb in observing that a huge portion of the media industry has experienced serious distress over the past 15 years or so. It’s not just legacy newspapers and magazines; a whole generation of “digitally native” publications ranging from BuzzFeed to Vice have experienced their fair share of turmoil. The history of 21st century media is pockmarked with news of mass layoffs, fire sales, and outlet closures. It’s clear that the sector as a whole faces serious challenges.

But what’s the root cause of those challenges? Many media veterans like to debate over what they consider the industry’s “original sin” — some kind of early ethos that, when embraced, doomed the sector to financial hardship. For some, that original sin was the decision made in the early 2000s to not paywall most internet content. By embracing the information-must-be-free mentality, these people argue, media executives permanently devalued news. Others point to publishers’ failure to view tech platforms like Craigslist, Facebook, and Google as serious threats to their business models.

While there’s certainly some truth to these observations, I think most still-existing outlets have adjusted their strategies to account for those mistakes. Media companies have become much more circumspect in dealing with large tech platforms, and most have pulled a large portion of their content behind a paywall.

And yet the industry still struggles. I think it’s because executives have failed to identify the true “original sin,” the one that still burdens the sector to this day: the embrace of open programmatic advertising.

The promise of programmatic was that it would allow publishers to monetize all their inventory in a way that simultaneously reduced their overhead on sales staff. It was also supposed to reward publishers that attracted high-valued consumers — the kind that purportedly command higher CPMs. 

Instead, this adtech sort of delivered on the first promise and failed disastrously to deliver on the second. Rather than allowing publishers to more effectively monetize their inventory, it drove down the value of that inventory. This not only harmed premium publishers, but it also incentivized the growth of low quality content mills that pumped out everything from clickbait to fake news.

Let’s explore all the harm that programmatic adtech has wrought on this industry:

It fueled ad fraud

Because programmatic adtech is optimized around publisher scale, it’s nearly impossible for most exchanges to adequately vet and audit the thousands of outlets that are included in auctions. This provided a huge opportunity for bad actors to enter these exchanges and then generate fraudulent ad impressions, often by using increasingly sophisticated techniques designed to mask that fraud.

As a result, an estimated $68 billion a year is lost through ad fraud. That’s $68 billion that would have otherwise gone to legitimate publishers, but instead was siphoned off by companies that produce literally no value. Aside from the lost revenue, this also causes brands to devalue media as a marketing channel since it produces lower-than-average ROI. 

It funneled ad budgets to low-quality publishers

Programmatic decoupled the reader from the publication they’re reading, which meant that many marketers could care less whether their ads were appearing on a high quality website as long as their target demographics were being reached.

Once that decoupling occurred, then brands had less of a reason to pay the high CPMs of premium publishers when they could aggregate those publishers’ audiences elsewhere. Hence the market was flooded with low-quality outlets that served as little more than vehicles for ad arbitrage. 

This also triggered an explosion of hyper partisan outlets that leveraged manufactured outrage and fake news to drive traffic to their websites. While some adtech companies stepped in to establish brand safety standards and steer brands away from these outlets, the folks at Check My Ads have done an excellent job of exposing how easily partisan outlets have evaded these filters.

This race to the bottom pressured many publishers that once adhered to high content standards to lower those standards in order to compete for low-CPM ad dollars. It wasn’t really all that long ago when outlets like Forbes and Newsweek were widely-respected institutions, but they’ve long since succumbed to the programmatic ad game that rewards content volume over quality.

It devalued news

Remember when I said that programmatic decoupled the consumer from the outlet itself? This trend eventually led to brand safety best practices that included the creation of “block lists” — automated filters that steered ad dollars away from hard news. It wasn’t that these brands didn’t trust premium publishers, but rather it was a reflection of the fact that they were buying ads across literally thousands of websites at once — a level of scale that made it impossible to guarantee that their brand logos wouldn’t appear next to controversial content. So to account for this reality, they simply blocked any keyword that had even a remote chance of appearing in controversial content.

This trend has been catastrophic for outlets that specialize in reporting on important news. Publishers love to blame Facebook and Google for their supposed defunding of journalism, and yet they still embrace the platforms that built tools designed specifically to defund journalism. That’s insane!

It prioritized display advertising

This one’s a little more abstract, so bear with me. If you look at the most successful ad businesses of the 21st century — Google, Meta, and Amazon — there’s one thing they all have in common: the embrace of self-service native advertising. While all of them have some version of traditional display ads, those comprise a relatively small portion of their business.

That’s because display ads provide very little value to marketers. News consumers don’t look at or click on display ads, and a sizable portion of the population installs ad blockers to avoid them. In my 23+ years of use of the open web, I can probably count on one hand the number of times that I’ve intentionally clicked on a display ad.

And yet, for reasons I can’t fathom, most of the programmatic adtech industry has oriented itself around display advertising. Back in November, I expressed bewilderment that the media hasn’t embraced self-service native advertising. While many outlets built out native advertising units, they’re still largely centered around the in-house creation of bespoke content, which is incredibly expensive to produce and doesn’t scale very well. 

Imagine an alternate universe where, instead of embracing programmatic display advertising, publishers had invested in the same kind of native advertising tools that fueled the growth of companies like Meta, Google, and Amazon? I think we’d see a much healthier media ecosystem today.

***

If there’s any silver lining to this story, it’s that there seems to be a meaningful shift away from open programmatic advertising. Recent data shows that this type of marketing is taking up a smaller and smaller portion of ad market spending, both because brands are waking up to its lack of ROI and publishers are reprioritizing direct-sold ads.

So how does a publisher turn away the “free money” offered up by programmatic adtech for its unsold inventory? One such company that’s leading the way on this endeavor is Bloomberg Media. Marketing Brew published a good piece about the financial news outlet’s decision to do away with open programmatic advertising entirely. While the entire article is worth checking out, I was particularly drawn to this passage about how Bloomberg is utilizing its unsold inventory:

Over the past few months, Bloomberg has effectively replaced those advertisers buying on the open market with in-house promos—inventory worth $7.4 million over the last few months, Beizer estimated. These are ads for the media company’s podcasts, events, reporting, and new shows like Getting Warmer With Kal Penn. Bloomberg’s own internal data has shown that subscribers are more likely to retain their subscription—or subscribe in the first place—if they consume four or more different verticals.

If you’re a well-diversified media company, then you’re already offering up a range of products that include paid subscriptions, events, merchandise, and ecommerce content. Rather than devaluing your site with programmatic advertising, start using that freed-up real estate to push these other products. Not only will it improve your business, but it’ll also steer revenue away from the bad actors who have contributed so much to the destruction of the media industry. Stop funding the very people who caused your business woes in the first place.

What do you think?

Do you think I’m being too harsh on programmatic adtech? Am I unrealistic in my suggestion that publishers can wean themselves off it? 

I actually want to read your thoughts. I’ll round up your answers in this Friday’s newsletter. Click this button to sound off in the comments:

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Let's talk to Stephen Hayes and Taegan Goddard about monetizing political news

When it comes to building a politics media brand, there are probably no greater authorities than Stephen Hayes and Taegan Goddard.

Stephen is the former editor of The Weekly Standard. In 2019, he and several other prominent journalists launched The Dispatch, a center-right magazine that caters to never-Trump Republicans. Despite very little outside investment, they managed to grow it to over 40,000 paid subscriptions in just a few years.

Taegan is the founder of Political Wire, one of the OG political blogs that built up a monthly audience in the millions. After over a decade spent monetizing the site almost solely through advertising, he launched a paid membership model that was quickly embraced by his most loyal readers.

I’m hosting a live Zoom conversation with Taegan and Stephen on Thursday. We’re going to talk about how they optimized their subscription models, their approach to attracting advertisers, and how they’ve navigated the hyper polarization of political media.

You can find the login details over here.

How The Reload newsletter became a leading authority on gun policy

It’s not very easy to find online coverage of the gun industry that isn’t hyper polarized. The issue is dominated by a mix of NRA members and gun control activists, and even the traditional media does little more than play referee between these two sides.

When Stephen Gutowski launched The Reload in 2021, his aim was to cut through this noise. Stephen had spent several years covering the issue for The Washington Free Beacon, and despite his background in conservative media, his work has been widely praised by both centrist and left-of-center journalists. In 2022, CNN hired him to serve as an on-air analyst around gun policy issues.

In my conversation with Stephen, we talked about why he struck off on his own, how he monetized his newsletter, and what role his cable news career plays in building his audience.

Check out the interview in the video embedded below:

If embeds don’t work in your inbox, then find the video over here.

Quick hits

Some of the top creators on YouTube are building bona fide media empires that extend far beyond their main channels. [Passionfruit]

YouTubers are getting increasingly sophisticated at repackaging their already-existing content and monetizing it on other platforms. [Hollywood Reporter]

"[BuzzFeed founder Jonah] Peretti understood the power of traffic to reshape the structure of culture but ultimately misjudged the direction of its effect on society ... The company’s decline offers a signal lesson in the perils of pursuing traffic for its own sake." [The New Republic]

Publishers are embracing a type of vertical video that can be embedded in articles. They use it to make product recommendations with affiliate links, so at least this pivot to video is actually monetizable. [AdExchanger]

How do I quantify the impact of Substack Notes on my newsletter? [Simon Owens]

Let me end this newsletter with a parting question

Let’s say there was a media conference that had this lineup of speakers:

Chris Ferrell, CEO of Endeavor Business Media, one of the largest B2B media publishers in the world

Sean Griffey, founder of Industry Dive, which sold for over $500 million

Mignon Fogarty, a New York Times bestselling author who hosts one of the world’s most popular podcasts

Steve Hayes, former editor of The Weekly Standard and co-founder of The Dispatch, one of the most influential center-right publications

Taegan Goddard, founder of Political Wire, one of the most popular political blogs

John Gannon, founder of a media company that’s sold over $1 million in online courses

Dan Oshinsky, former newsletter editor for both BuzzFeed and The New Yorker

Judd Legum, founder of Popular Information, one of the most popular newsletters on Substack

Patrick Trousdale, creator of The Daily Upside, a finance newsletter with over 800,000 subscribers

Joe Pulizzi, founder of multiple media companies, including the Content Marketing Institute

Brian McCullough, founder of the Techmeme Ride Home podcast

Brad Wolverton, director of content at HubSpot

I’ve been to plenty of media conferences that have far less impressive speaker lineups than this, and yet they’ve charged upwards of $1,000 or more to attend.

This is just a small sampling of the featured guests that I’ve had on my biweekly Office Hours Zoom calls. There’s such a wealth of knowledge shared on these calls, and yet I only charge $100 a year, a fraction of what you’ll pay to attend a conference. For the live sessions, you’re actively encouraged to participate and provide input. For the sessions you can’t attend, I send you the recorded video afterward.

If you’re at all serious about growing your content business, this subscription will pay for itself after just one or two sessions. Use the link below and get 10% off your first year:

Get 10% off for 1 year