The Digital Content Ecosystem Is Completely Broken

This week, I read a column about Ad Block being the new DVR. I read one about digital ad fraud, ad-supported piracy, and non-viewability. I read one about the dire outlook for the New York Times’ digital efforts, and one surmising that the end of the Times’ print edition is nigh.

The promise and the glory of digital is attribution: I know exactly where my views come from, where my clicks come from, where my sales come from. But that promise comes at a price: Maybe, just maybe, advertising was never worth what we paid for it.

So advertisers pull back. We’re not going to pour dollars down a black hole of non-viewability. The piece on ad fraud called for harsh measures and real penalties: “Advertisers and agencies should implement zero-tolerance policies and shut off services and networks completely for all future business opportunities when they have experienced fraud… Demand full refunds on campaigns, not just for the fraudulent portions. Recover fees from agencies. If you stop the flow of money, you might be surprised how fast real solutions show up.”

But even if we’re not talking about dishonestly and unethically charging advertisers for ads that are never seen, the cost of reach via digital channels is a fraction of its analog counterpart. A four-color 1/3 page ad in the New York Times Magazine -- circulation 1.2 million -- will run you more than $47 grand, or a CPM of around $40. Compare that to average CPMs for premium placements of general display ads ($10.40), premium mobile ads ($9.30), or even premium video ads ($32.80). Yeah, I know this isn’t an apples to apples comparison, but it sure is indicative of a value disparity: We may be able to be more precise with digital, but we still feel it’s worth less.

When advertisers spend less, publishers make less. The volume of content competition, especially free content competition, is exponentially higher online than off, and publishers earn less for the inventory they do have. It’s no surprise that what ensues is a race to pay content providers as little as possible. Look at HuffPo, which built a $315 million-dollar company on the backs of unpaid bloggers.

So content providers are left to fend for themselves, and exploit the system however possible -- the way indie band Vulfpeck did last month. Driven by the desire to give their fans free concerts, and frustrated at the meager $0.005 per stream they receive from Spotify, Vulfpeck formed an elegant solution: “They uploaded 10 tracks of silence to Spotify under the name Sleepify. Then, they put out this video, urging fans to stream the album on repeat while they slept. The band pledged to use the royalty revenue they racked up to fund a tour, where all shows would have free admission. Each song on Sleepify is completely silent and only runs about 31 or 32 seconds long, the bare minimum length for a song to register as a royalty-worthy play on Spotify. The band calculated that if one user listened to the album all night on repeat (800 plays) that would work out to a $4 payout. Multiply that by thousands of listeners... The band ended up netting around $20,000 in royalties from the album.”

Vulfpeck’s cheeky workaround is obviously not very gratifying for Spotify, and they’ve since had to take it down (although they did get to keep the money). But that doesn’t change the moral of these stories.

The digital ecosystem doesn’t work for advertisers, who have to fight rampant fraudulent activity for eyeballs that may not even pay off. It doesn’t work for publishers, who couldn’t afford to pay content providers even if they wanted to. And it doesn’t work for content providers, who can’t afford to eat unless they find a loophole to exploit.

The only people it may work for are the content consumers. For everyone else, the digital content ecosystem is completely broken.

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3 comments about "The Digital Content Ecosystem Is Completely Broken".
  1. Bob Gordon from The Auto Channel , May 16, 2014 at 2:11 p.m.
    We have been saying what you are saying from the start...until the cost to reach a viable prospect is equal to the cost of a direct mail response, content providers will be stuck in the unprofitable position we are now... but stay tuned.. we have a real answer to under monetized content in beta test... boy will publishers be happy.
  2. Paula Lynn from Who Else Unlimited , May 16, 2014 at 3:37 p.m.
    Justifiable reason de eyre for the profiteers. The Emperor has no clothes but nobody cares because one is dependent upon the vail.
  3. Christopher Sanders from Simulmedia , May 19, 2014 at 2:48 p.m.
    I think you have made the most cerebral argument for why there is still $80B+ being spent on TV (in the US). The comparable threats (like DVR: 10% of viewers time is shifted) are minor problems, easily worked-around when compared to those you cite above. And you don't have "bots" receiving Neilsen rating point credits or large industry disparities of what can be considered a "reach point" . . .