Advertising has long been the main source of revenue for mainstream journalism — but have advertisers ever really gotten their money’s worth? On Jan. 16, Ethan Zuckerman of Harvard’s Berkman Institute on Internet and Society examined the economics of print vs. online advertising and posed a very basic — but crucial — question that everyone in the news business probably should consider carefully: Is ad-supported journalism viable in a pay-for-performance age?
Here’s his line of reasoning. I think he makes a very going point….
“When I worked in advertising the ineffectiveness of advertising was hardly a secret. But customers couldn’t measure the effectiveness of ads. So they paid and continue to pay ridiculous prices for them. Online ads, on the other hand, are measurable. They work just as well, if not better, than print, television, etc., the difference is that for the first time ad customers know exactly how ineffective they are.”
From that, Zuckerman observed: “Basically, there are two ways to explain the disparity in online and offline ad cost. One is to argue that paper ads are, for some combination of reasons, ten to a hundred times more effective than online ads. The other is to argue that advertisers are better at pricing online ads than offline ads.”
Zuckerman continued: “Let’s posit for a moment that the price of newspaper ads may have more to do with how much money a newspaper needs to earn to keep the presses running, rather than how effective they are at producing new business for advertisers. …Why are advertisers willing to pay these prices without strong evidence that they give an effective yield? They may not have much choice — other options in a community where many customers are offline are also pay per impression and may be similarly expensive. …Without good methods to track the effectiveness of the print ads, [a paper’s] ability to sell ads may have more to do with comparable ad rates in other local newspapers or radio stations.
“So what happens if the market rationalizes, if pay per performance advertising becomes a viable way to reach the majority of consumers who consume a particular publication? …If print advertising costs are fundamentally irrational, then it’s possible that the way we’ve built media in the U.S. can’t survive a transition to a more rational market.”
What do you think of Zuckerman’s line of reasoning? If he’s right, what — if anything — can ad-supported news organizations do to update their strategy and work with advertisers on a more rational basis? And if it’s too late for most legacy news organizations to make this shift, could their prospective successors find a more rational, fair way to make money from ads? Please comment below.
(Note: I originally posted this article in Poynter’s E-Media Tidbits.)