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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4 thoughts on “How Google and Facebook destroyed the value of digital advertising”
While I support 3 media via digital subscription, I feel guilty that I don’t support more (like TPM, Political Wire, the Guardian, etc.). And that goes to your point, how many media outlets can I support? One the one hand I felt I can only afford so much, about $75 a month but on the other hand I pay about $300 a month on cell phone and cable (and I assume that is on the low side of the curve) for my “pipelines”. Therefore I somehow feel I’m already paying for the “free” media content…which of course I’m not.
If TPM ad revenue fell from $2.5 million to $538,000, I see that as a little under a 5 to 1 drop, not 15 to 1. And a jump from $165,000 to $2.1 million is almost a 13x increase in membership revenue, not nearly quadrupling. Unless I’m missing something …
You are correct. Now fixed. Thank you.
With Google, the value of buying through the exchanges is that almost every reputable news site has these ads, so the advertisers “buy the audience.” It’s far more cost-effective for them.
Those ads are easy to get rid of, but cash-strapped publishers need the revenue.
An interesting thing could happen if a paper, or two or three got together and got grant funding to replace the network ad money for two/three years, giving them enough time to replace that revenue with their own ads. (Interestingly, removing that inventory from the networks would also drive up the price of the remaining audience inventory.)
With Facebook, the solution is even simpler: Block micro-targeting of ads. That’s the only thing keeping FB’s prices even remotely cost-effective.
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