“We lose money on each sale, but make it up on volume.” ~Dot-bomb era business strategy

 

In hindsight, we can now easily laugh at the absurdity of what passed as business strategy in 1999. Yet today publishers (who are not Time, US Weekly or Vanity Fair) are falling into an eerily similar trap.

 

Look at the “Hierachy of Ad Value,” where ad/sponsorship types are organized top to bottom, based on the value of what they can be sold for.

 

The Hierarchy of Advertising Value organizes types of advertising by the value they can be sold for.

 

At the top you have Magazine Ads, which often are sold in excess of $100.00 CPM. At the bottom you have Web Banner Ads, which typically yield <$1.00 CPM via programmatic. In between you have various other types of sponsorhips and ad vehicles.

 

What Do We Publishers Really Sell?

At the core, as publishers, we offer one primary thing for sale…the ability to access our audience.

Presumably then, higher valued offerings would provide better/stronger/faster access to a publisher’s audience than lower priced ones. Otherwise, it wouldn’t make much sense for an advertiser to choose a more expensive option.

 

“We have met the enemy, and he is us.”

For the last few years publishers have anxiously watched their sales decline (as wisely stated by the prescient BoSacks here), but many haven’t yet realized that their efforts to keep up with the “Joneses” has resulted in the canabalization of their own ad revenues. Consider the following:

 

MACRO TREND #1: Ad Dollars are Moving From Print to Digital

 

MACRO TREND #2: Readership is Migrating Online

 

Publishers, keenly aware of how important digital is, have dutifully invested in their websites. Beyond all the tech, it’s now common for publishers, even small B2B ones, to publish daily, web exclusive content.

 

Then, in an effort to have competitive audience numbers, they promote their website everywhere?—?via print, email, Facebook, LinkedIn, Twitter, eNewsletters…

 

The result?—?The publisher’s website grows, making it even more appealing to advertisers. Therein lies the problem.

 

The Website Catch-22

Advertisers prefer online ads. However, web banner ads yield the least (by far on a value basis) amount of revenue for the publisher.

 

Making a magazine’s website more robust has, counterintuitively, given a magazine’s advertisers a compelling reason to cut the amount they spend on premium priced print adverising, in favor of accessing the publisher’s audience far more cost effectively (often at least 1/10th the price) on their website.

 

The Banner Ad Model is Not Sustainable

Unless your website has massive, Buzzfeed-like traffic, a publishing enterprise is not going to be sustainable via banner ads. Check out this scenario from our Banner Ad Calculator to understand why:

 

Getting a $10 CPM with 30k visitors per month resulting in 150,000 page views results in only $54,000 in ANNUAL sales.

 

The long-term solution lies in creating premium priced online ad opportunities, which I’ll discuss in a separate post. (To get notified you can follow me here.)

 

Just don’t fall into the trap of thinking you can sell ads for a couple dollars per thousand and make it up on volume.

 

Larry Genkin is the founder and CEO at Of Eleven Media.