Commentary

What If Internet Wasn't Ad-Funded?

by Tom Goodwin , Op-Ed Contributor, October 7, 2014

We’ve always assumed the Internet would be ad-funded, we had the era of dial up and ISPs, but the dawn of broadband subscriptions and free Wi-Fi was an entry to a world of the Internet that was free at the point of delivery. We do pay, but invisibly so and with our attention and data.

But, as great newspaper and magazine visibility suffer, it seems that as things stand, it isn’t worth that much. The data collected is patchy, it’s collected by different people, in different ways, it’s not connected on mobiles and when people have it, they’re not allowed to or reluctant to actually use it.

Our attention is also, as I’ve talked about before, not worth that much. The combination of lower ad yield and vanishing subscriber bases is what is killing media owners. It’s not only them that suffer, our mobile apps see ever larger, more intrusive ads and our social media feeds become blocked with “you’ll never guess what,” remember when headlines used to tell us things, not ask us questions or make statements about ourselves?

I liken our news diet to food. In the past, we had long-term relationships with quality content providers in the forms of newspapers and magazines. We paid for cover issues and subscriptions, and we entered an almost maternal like relationship where they would provide us with a balanced diet of healthy food —sometimes expensive to make and always from a wide variety of sources. We’d keep coming back because it made us feel good, we knew roughage, variety, things that were hard to digest and made us feel uncomfortable would be good for us, after all it was in their interest to keep us happy, wise and curious.

Modern media has become like fast food, it’s a quick hit of news when we crave it most, it’s without substance, there is little variety, its super cheap, unchallenging and unvaried. We know it’s not good for us, but it satisfies our craving, it always feels better that it is. It’s a sugary rush of a quizzicle, the quick carbs of a cat video, the fatty saltiness of “ 15 reasons you love New York” — and it’s taking over the world.

The problem for news sources is it’s impossible for quality content to keep up with the thrusting challenge of cheap fast food, it’s expensive, doesn’t spread virally, of limited appeal, both in audience and occasion. We don’t crave it and even though we say we want it, we rarely consume it unless forced or part of a concerted effort.

Quality content providers from The New York Times to Conde Naste are failing, while the new incumbents of cheap, quick, easy, viral hits, the Buzzfeed, Business Insider and Viral Nova thrive despite their empty calories.

We all know the death of great media is a shame, we all know we should be paying for it, but we don’t do much about it. It’s the current paywall and advertising system that is to blame. As much as I love The New York Times, or a good Chicken Caesar Salad, I don’t want to only eat that. I want variety to my diet, and paywalls don’t offer that. We often think in the modern age that people don’t read newspapers any more, it’s true, they read the articles and the new front page of the news in Twitter, friends emails and Facebook.

I think the solution comes in three forms, all based on destroying some of the assumptions we’ve made.

Pay With Data

One the one hand, we hate our privacy being stolen, on the other hand, our data is incredibly value and the only thing worse than relevant ads are irrelevant ads. I could imagine a future where in order to access valuable online content, we earn credits by completing online forms about our habits and intentions. It could be as easy as embedding a cookie, or as manual as monthly questionnaires, but I’d love to see better ads, for 5 minutes of my time each month and free quality news

Pay Via Better Ads

Online ads are currently cheap because they don’t work and they are ignored. Video ads look set to spread like wildfire on the Internet, which will soon make browsing even worse than it is now. Why do we expect 30 second ads online? What if 3 second video ads became the default ad of the Web? We’d see fast free browsing, we could see advertising served as sequential micro-ads that build over time. An ad that is both in video form, and actually noticed could be worth far more.

Pay with Micropayments

If your data is too much then why not pay with real currency? Perhaps we could create a credit system where we buy a universal digital microcredit through our phone bill or credit card to purchase tens of thousands of credits per month. Then access to paid sites would be charged for based on the unit time we spend on that site.

The death of quality content and the rise of poor content is every bit as problematic as the rise of obesity. It’s encouraging lazy thinking, entrenched viewpoints, and it’s killing one of the most vital arts in the world: journalism. This is a big problem, and I’d love to see the next billion dollar VC company as the one that nails how we can spread wisdom through the Internet.

advertising, internet, media, pay wall

8 comments about "What If Internet Wasn't Ad-Funded?".

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Ed Papazian from Media Dynamics, October 7, 2014 at 8:32 a.m.
Tom, without getting into our recent argument about how cheap online ads are, I think you raise some interesting points. The problem is how do you define "quality" content and who gets to fund and direct its development, then put it on the Internet so people can see it? The TV networks have been going the "quality" program route since they began. While they have had many notable successes, the number of failures far exceeds these. Upwards of 75% of the shows they launch in primetime each season are flops-----not only in the Nielsens, but also----with a few exceptions------on a qualitative basis as well. I recall, a decade or so ago, one of the senior guys at a major Internet company stating that all he had to do if he wanted top notch programming was to go to Hollywood and demand that "punch through" shows be developed. Unfortunately, it's not that simple as has been demonstrated many times before and since. Even more problematical is the possibility that online users might pay for access to program content on a massive enough basis to radically alter the current ad-based business model that is now so commonplace. I think that as online ad sellers discover that advertisers want engaging program content to serve as platforms for their ads, and begin to invest seriously in the program development function, they will learn, by trial and error, what works and what doesn't-----just as the TV networks and cable channels have. It may well be that a certain amount of online programming will be of the "super premium" variety and be user funded----like Pay cable----but most of it will probably have to rely on advertising to fund the initial "airings", followed by "syndicated" rerun fees as the programs are recycled to other online ad sellers for further exploitation. Indeed, I can envision an emerging TV "aftermarket" for online-developed program content----if it is good enough----mostly on cable, which, in effect, is funded partly by ad dollars and partly by cable subscriber fees. To sum up, I agree with your goal but I think that online, in this regard, is just beginning a rethinking process that may take a decade or longer to bear fruit. I also believe that there is much to be learned from the TV experience----from both a program development and a business model point of view.
Reply

Douglas Ferguson from College of Charleston, October 7, 2014 at 8:58 a.m.

"Online ads are currently cheap because they don’t work and they are ignored." Sometimes, they are simply blocked. I use AdBlock Plus on my browser and filter out 99 percent of advertising.

Ari Rosenberg from Performance Pricing Holdings, LLC, October 7, 2014 at 9:13 a.m.

Tom, this is an excellent column -- it is provocative and yet filled with simple solutions. Thanks for sharing this -- things have to change.

Ari

Ed Papazian from Media Dynamics, October 7, 2014 at 9:19 a.m.

Douglas, the incidence of ad blocking is certainly on the rise, but one of the ways that online ad sellers can deal with this problem is by offering much more engaging content, particularly in video form. Obviously, if a user really wants to see something of interest and it happens to carry a reasonable amount of ad messages, the ads should "work". In defense of online advertising in its current state, while there is much to criticize and visibility certainly is a huge issue, it's hard to believe that all of the ads, many of them not nearly as cheap as some think, don't work. If that were true, the advertisers who keep investing in online ad campaigns must be the biggest bunch of idiots one can imagine. Frankly, I don't buy that.

Craig Mcdaniel from Sweepstakes Today LLC, October 7, 2014 at 11:14 a.m.

Over the eleven years I have been a publisher, online ads are "ignored" because they are simply not interesting not in the correct format. When we publish a sweepstakes, what we really do is to take it and turn the sweep ad into entertainment. The same way the TV game shows present products and product placements. We have no problem with most quality sweepstakes selling out the sponsor's inventory. The other reason online ads don't do well is because the belief that you must have a banner. Not true. Text lines are far superior in performance than banners in the right combination on the correct website. So the problem? The industry is set in it's ways and simply will not change or even open your minds to new ways.

Martin Focazio from EPAM Systems, October 7, 2014 at 12:28 p.m.

"[T]he death of great media is a shame"

I think that the fundamental problem is that the definition of "great media" is often presented in a nostalgic fashion. Content often simply keeps the ads apart & nothing has changed online in that respect. Some of great media's deepest assumptions about information and access to it have been made irrelevant. But that does not mean we can't have great media worth paying for anymore.

I think that you touch on the most interesting and important thing in a slightly oblique way:

"...destroying some of the assumptions we’ve made."

How about this new assumption:

What if Advertising were no longer welcome at the media table?

The real junk food addicts are the media companies who are wholly dependent on advertiser funding and can't develop an ad-free product at a price people will pay.

Companies like Netflix & HBO have known it all along: Many consumers feel that If you're paying for media, it damn well better be an uninterrupted ad-free experience, and if I don't like the ad-full experience, I can and will opt-out at will.

When you say, "Online ads are currently cheap because they don’t work and they are ignored" I think that
a) You're partially right and
b) What you're touching on is the advertising industry's trigger word, "attribution."

As long as Neilsen and the Audit Bureau of Circulation told the advertisers there was a huge audience, the advertiser paid. Online is, fundamentally, a direct response medium and publishers are resorting to metrics like "time spent per page" rather than CPM or CPC as a result. Online carries with it something that offline didn't - real time evidence of the effectiveness of the ad.

I'm not suggesting that there is no need for advertising - indeed, one could argue that Amazon.com is nothing but product advertising that a good number of people pay $100 a year to access. QVC, the Home Shopping Network, any catalog - all are advertising that is expected, even welcome. In those categories, online advertising works very well.

Ultimately, it's not a matter of HOW people pay for media - there are so many mechanisms out there it makes my head spin.

The question is more basic than that - what does media "worth paying for" look like? I am more interested in what companies like Lessin Media and Ello and Andrew Sullivan come up with in the next 3 or 4 years than some baroque micropayments scheme.

To close, I'm not trying to be combative here, or to disagree for the sake of being a another bloviating internet commenter. I really think that you've pointed at a serious issue, but my take on it is that the offering itself is what needs a fundamental change. Maybe it's time for media to be a self-funding enterprise - without the sugar high of advertising.

Ed Papazian from Media Dynamics Inc, October 7, 2014 at 4 p.m.

An interesting take, Martin. But, suppose that the media, somehow, could fund themselves, plus make a nice profit, only on what consumers are willing to pay to access their content, wouldn't that pose a problem for advertisers and. ultimately, the economy?I realize that there are some who regard advertising as a sham or as totally ineffective, but I'm not one of them. Even though it's often poorly targeted and executed advertising does get consumers interested in buying products----the evidence on that score is overwhelming. So, if advertisers were deprived of the media----namely TV and other types of electronic media-----they would suddenly have a very difficult time letting people what they've got to offer and building brand equity. This, in turn, would be catastrophic for the economy----in my opinion, of course. You might say that advertisers could always use print media----magazines, newspapers, OOH billboards, etc. but that's not an effective substitute for what they've got now. As I said in my earlier post, online ad sellers must deal with many issues before their medium becomes truly ad-friendly----not only for advertisers but also for their users. Aside from the question of better content leading, perhaps, to better ads, there are serious questions about ad viewability, ad and other clutter on many pages, the best way to target users, etc. To be fair, the past few years have been the only time when such questions have arisen----mainly due to the growing influx of TV-style branding advertisers. I think it will take time to sort all of this out; there are no magic solutions like getting rid of advertising. You can't fund the kind of improvements that are needed without dollars to invest in research, content development, new formats, etc. Finally, regarding the online advertising is cheap, business, yes, you get bargain basement CPMs for standard banner ads, buttons, etc. because that's all they are worth, But the record shows that many advertisers are and do pay substantial CPMs for "premium banner ads" and many video ads. That's a positive sign. It shows that if the right choices are made, that the money is there and will come. Then, Tom may get the better online ads he clamors for.

Neil Smith from Boob, October 8, 2014 at 5:06 a.m.

I wish that the internet was free of adverts. I would much rather pay for access if I could stop all the pop up adverts. The internet is clogged up with low interest and meaningless videos and patronising rubbish. I went online to look for a Short Term Loans from BFWG GRANTS and it took me a while to get past the rubbish and get to the site.