We are having a smackdown over an unlikely topic — programmatic ads, those low-quality ads fed to websites by a third party, nearly always Google.
At one time they were fairly lucrative and supported news organizations like The Huffington Post. But their value diminished over time. Indeed, it seemed anachronistic when The Messenger launched last year with a pretty substantial newsroom, offering free access in the hopes that it would attract a mass audience and thrive on programmatic. Its quick demise was as predictable as it was depressing.
Anyway, last week Josh Marshall, the founder and editor of the political news site Talking Points Memo, wrote a post explaining what had happened to programmatic ads over the years. He included a chart (above) showing that revenue from such ads had collapsed at TPM, from nearly $1.7 million in 2016 to just $75,000 in 2023. “As I think is pretty clear, if this is your business, you’re dead,” he wrote. “You don’t have a business.” He added that TPM had successfully pivoted to reader revenue, which was how his project had survived the programmatic meltdown.
Enter Ben Smith, the co-founder of Semafor. Smith called Marshall’s numbers “a dramatic oversimplification,” arguing that the reason TPM’s programmatic ad revenues had fallen so much was that Marshall had put much of his content behind a paywall — and even charged a higher rate for an ad-free experience, meaning that of course ad revenues were going to drop significantly. “The drop in ad revenue is a feature, not a bug, of that strategy,” Smith wrote. “Meanwhile programmatic ad rates, for instance, have actually increased — modestly — over the period that Marshall’s chart covers.”
Smith also quoted Foster Kamer, the editor-in-chief of Futurism, as calling Marshall’s post “sensationalist bs.”
Well, now! I’ve been waiting to write until Marshall responded, and on Tuesday he did. Essentially his counter-argument is that his programmatic revenues didn’t drop because of TPM’s paywall; rather, he implemented a paywall because programming revenues were dropping. He writes:
[W]e didn’t just decide this was money we didn’t need anymore. The changes we made that played a direct role in the decline were entirely in reaction to reductions in potential revenue which we knew we couldn’t sustain. While we were making those changes we still fought for every dollar we could get out of the rapidly diminishing programmatic advertising pie. The results are what you see in that chart, which not surprisingly got a lot of people’s attention.
Now, there’s no way of knowing exactly how much programmatic revenue TPM would be earning if Marshall had left the site wide open and had tried to get as much money as possible from such ads. But he guesstimated that it might be about a third of what TPM was getting in 2016 — in other words, maybe around $570,000, a significant decline from $1.7 million. “Needless to say,” Marshall adds, “no company can withstand a 2/3rds drop in a primary revenue stream.”
Noting that Kamer and Futurism really are making a go of it with programmatic, Marshall points out that certain categories such as tech and science are still able to generate decent revenues from Google ads. “There are no industry sectors for cultural polarization and societal decay, where we operate,” Marshall writes. “They also don’t face the negative premium that news publishers — in the sense of news about daily events and politics — face in a polarized age.”
My own take on all this is that Marshall’s initial post was only a little bit deceptive, and only for readers who weren’t paying attention. He laid out his paywall strategy quite clearly. It’s obvious that if your response to the cratering of programmatic is to start charging for your journalism, then your programmatic revenue is going to drop even more quickly than it otherwise would.
This is relevant, too, to local news. There’s a reason that some 2,900 newspapers have closed since 2005, and that reason is the ad revenues publishers were hoping for to support what were initially free websites never materialized. For-profit local news has become extraordinarily difficult. A few large regional newspapers, like The Boston Globe and the Star Tribune of Minneapolis, have achieved profitability through digital subscriptions, but that strategy has proven to be a pretty much a non-starter at smaller outlets. That’s why we’re seeing a major shift to nonprofit for local news.
As Marshall puts it, “who are we trying to kid here? Does anyone think that advertising — direct or programmatic — still sustains digital news organizations, especially independent ones? Really? I think the almost weekly lists of bankrupt and shuttered news outlets tells the story pretty clearly.”
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