The past few years have been challenging in the world of advertising. First came the decline of print, with “digital dimes” replacing lost print dollars.
Then programmatic buying turned inventory into a cheap commodity. The “viewability” debate stole another chunk, and ad blocking is an emerging challenge. The rise of social, mobile, video and native atomized audiences and changed the rules of the game again and again. And then there’s whatever happens next. And all this is happening in a market where just two companies—Google and Facebook—now grab more than $60 billion in annual U.S. advertising revenue, which by some accounts is more than the magazine and newspaper industries combined. So what’s going on here—and what’s the long-term outlook? We see at least five powerful trends in play:
• Traditional magazine advertising worked because of supply and demand. Advertisers needed prospects, and magazine companies owned audience. The emergence of digital media changed all that. Now media brands have proliferated, audiences have fractured and advertisers have many alternate ways to reach people.
• Programmatic technologized a sales process that had been built on face-to-face calls, driving down prices and diminishing the power of individual brands.
• Advertisers now buy targeted slices of audience across thousands of websites, including many non-media sites, leaving media companies with less leverage.
• Content marketing made it possible for brands to find and communicate with prospects directly, sometimes without the media at all.
• Most threatening, the entire industry is increasingly driven by technology, and magazine companies have often been a step behind their digital competitors in mastering change. That’s one reason Google, Facebook, and eight other Internet companies plus a host of ad-tech middlemen claim over 75 cents of each dollar spent on digital advertising.
To dig deeper into these trends, Folio: interviewed 18 key players in magazine-media advertising today. On the publisher side, they included 11 senior executives at nine publishing companies: Atlantic Media, ESPN, Forbes, IBT, IDG, New York, Rodale, TEN and Time Inc. We also spoke to people from three ad agencies (SMG Global, Carat, GroupM), two digital scorekeepers (com- Score & eMarketer), plus a leading consultant who has one of the industry’s best-known sales rep firms.
Our research turned up something important: Even with the decline in print, magazine media—that is, brands with multiple channels—are holding their own or even growing advertising despite the tough climate. They are getting out in front of each new digital challenge. And by doing so, they have turned what might have been an “ad-pocalypse” into a new sales opportunity for ad-driven brands.
“The ground shifts under our feet every few months, but we’ll be up more than 20 percent in overall ad revenue this year,” says Bob Cohn, co-president and COO at The Atlantic. “It’s a challenging market,” agrees SVP/Group Publisher Chris Lambiase of Rodale, home to Men’s Health, Prevention and others. But Rodale is seeing gains in both print and digital this year, he says, “so we’ve been able to defy gravity.”
If those guys make it sound easy, don’t be fooled. But understanding their strategies may offer a clue to solving your own ad challenges. So here are eight of the biggest obstacles they encountered— and how they are solving them.
THE RISE OF PROGRAMMATIC
Like the illegitimate son Jon Snow in Game of Thrones, programmatic advertising has been unfairly tainted by the circumstances of its birth.
The system—basically a software platform to enable ad delivery according to precise demographics, geography, buying or shopping patterns, and more—was originally devised to sell low-value inventory, using real-time bidding to fill ad slots that would otherwise go empty. CPMs were dreadful. But so was the quality of the inventory that unscrupulous Web sites dumped into the system, which is turning out to be a good thing for quality publishers like magazine media.
“You can still buy cheap, obviously,” says Mac Delaney, SVP for Programmatic at SMG Global, “but cheap inventory is a dangerous, poorly-lit place right now.” Quality advertisers got tired of seeing their ads on trashy or inappropriate sites, and paying for fraudulent robotic “impressions.”
As a result, programmatic is starting to evolve mechanisms for buying premium inventory, which commands a better price. “CMOs want a quality audience, and we are the ultra-premium network.
Programmatic is just an efficient way to buy inventory,” says Mark Ford, EVP of global advertising for Time Inc., where digital audience has grown over 30 percent in the past year to 120 million monthly uniques, nearly one-third of whom are millennials. “That’s why programmatic has increased our ad rates, not decreased them,” adds SVP Andy Blau, who oversees Time Inc.’s digital ad strategy.
Like most companies, Time Inc. still sells many of the highest priced slots on People, Time, Money and other titles directly, using a feet-on-the-street sales force. But reps are trained to use the company’s programmatic system, where rate card CPMs range from $6 to $35, so they can teach it to agencies or advertisers. And they are rewarded no matter which way a customer buys. “Currently, programmatic represents around 20 percent of digital revenues,” says Blau, “but it’s expected to exceed 50 percent in the next two years.”
At Forbes, even direct-sold inventory is exposed to programmatic bidders. “If you buy directly, we make sure you get everything you contracted for,” explains chief marketing officer Tom Davis. “But for any given pageview, if a programmatic buyer bids a higher price, they win. That keeps our programmatic CPMs in the double digits, not dollars or pennies.” Davis says Forbes now derives about 70 percent of ad revenue from digital, versus 30 percent from print, and that about one-third of the digital buys are through programmatic. Programmatic has grown so fast—it will account for an estimated 53 percent of all digital ad buys this year, and could hit 65
percent by 2020—that skilled developers, managers and operators are in high demand.
The technology, too, is expensive, which is why Time Inc., Forbes and most brands use partners to power their systems—although at least one company, IDG, built much of its ad platform from the ground up. The IDG Tech Media Exchange enables programmatic trading and targeting across the company’s worldwide network of sites plus some 500 non-IDG partners. “We are now the only global exchange serving high-tech media,” says Michael Friedenberg, CEO of IDG Communications, which publishes titles like Computerworld, Network World and PC World. “It’s all a matter of being ahead of the marketplace.” Digital now accounts for about 75 percent of the company’s ad revenue, compared to 18 percent for events and just 7 percent from print.
To keep digital CPMs high, publishers follow some or all of these strategies:
• Set up a private marketplace, so you have greater control over the range of bidders and auction rules.
• Include your best inventory, not just junk, but set a minimum price.
• Use discounts to reward repeat buyers and long-term orders.
• Incent your salespeople too, so they will proselytize for the system. Personal relationships remain the cornerstone of successful ad sales, even in the programmatic world.
• If you must dump unsold inventory on the open markets, make sure the sales are “blind”—so the buyers never know they got your site so cheaply.
Not that programmatic is perfect. The platforms are still improving, and the move towards premium has only begun—so direct sold inventory is still more profitable and probably will remain so.
But the trend is positive, with effective CPMs climbing 31 percent for programmatic-sold display ads this year and 141 percent for social ads, according to platform provider Turn. “Advertisers like the control and flexibility of programmatic, but they also want quality,” observes Eric Johnson, EVP of global multimedia sales at ESPN, which now offers not only digital inventory but also spots on its popular SportsCenter newscast to programmatic buyers. “So we bring the best of both worlds together.”
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