To what extent have Google and Facebook destroyed the digital ad model for news organizations? I came across a telling data point the other day from Josh Marshall, the editor and founder of Talking Points Memo, a liberal political site that’s one of the oldest outposts on the web. In an email to subscribers explaining why he’s raising rates, Marshall wrote:
The high watermark of advertising revenue for TPM was in 2014. That year we had a little over $2.5 million in ad revenue and $165,000 in membership revenue. In 2020, we’re on pace for $538,000 in ad revenue and $2.1 million in membership revenue.
What Marshall describes is a successful business venture that has boosted reader revenue by a factor of 13 over the past six years — but that at the same time has seen its ad income plummet to about a fifth of what it was.
Google’s auction system has destroyed the value of digital ads. Meanwhile, more than 90% of all new spending on digital advertising goes to Google and Facebook, which works out nicely for them because of sheer volume and the fact that most of their operations are automated.
It’s great for TPM that it’s been able to induce so many readers to pay. But with more and more publishers asking for subscription money (including all those individual journalists who’ve decamped for Substack), the ceiling is going to be hit fairly soon.
We need a way to bring digital advertising back for news publishers.
Correction: Post updated to fix several math errors.
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