Note: This guide was originally titled, “If You Can’t Join ‘Em, Beat ‘Em,” but we decided to change it to a more pithy title, ironically, for the purpose of search-engine optimization.
Despite the Fed’s attempts to inflate the market, a global pandemic is absolutely a potential trigger for the unwinding of the bull market “bubble." With COVID-19, either the hysteria is worse than the reality OR the reality is worse than the hysteria, but after the stampede, it won’t matter whether what started it justified it. Governments, investors, businesses, events, and citizens of the world are making statements and shaping policies on how they will be handling COVID-19’s effect on their governance, business, and personal lives. Despite flooding our inboxes (as I continue to do herewith), Twitter feeds, and capturing the world’s attention overall, the reaction to COVID-19 is certainly showing its effect in the economy.
On a macro level, most of the developed world has been so hyped up on credit since 2008 because the strategic problems remain, so much so that anything could have been the straw to break the camel’s back.
Of course, the advertising market was already on shaky ground.
As local and state officials continue their work to determine the best strategy for slowing the spread of COVID-19, some states are looking for ways to reopen certain businesses closed as a result of government orders. However, the combination of uncertainty and lack of marketing dollars making their way to publishers in the form of ad revenue has had a major impact on advertising writ large. While larger publishers may be able to take the hit for a few quarters and focus on building their brand for the long-run (although many have experienced downsizing in the interim), other smaller publishers have determined the only way to remain open and serve customers is to transition operations to online commerce and affiliate sales, which is something several businesses will do for the first time.
In this guide, we contextualize the shift for publishers from ad-focus to affiliate commerce-focus and provide some useful information for publishers to get started in e-commerce without much (if any) overhead.
Ad Platform Revenue in a Pandemic
Google's recent slide in ad revenue shows how a pandemic-related pullback in media spending is affecting companies in different ways. Twitter last week also reported a drop in Q2 ad revenue, contrasting with the gains reported this week by Facebook, Amazon and Snap. However, Google's digital ad business is bigger and more mature than those of its rivals, making its prior growth rates harder to achieve even when economic conditions are better.
Facebook's revenue growth rose 11% to $18.7 billion in Q2 from a year earlier as the social media giant saw increased engagement from homebound consumers during the coronavirus pandemic, per its quarterly earning report. However, the growth marked a slowdown from the 17% gain it had seen in the prior quarter as the health crisis curbed demand for advertising
Alphabet (Google’s parent company) reported results a day after CEO Sundar Pichai was among technology executives who testified in a congressional hearing about their possibly anticompetitive business practices. He faced questions about a litany of issues including Google's dominance in digital advertising exchanges, prioritization of its services in search results, content-scraping practices and possible political bias. Prosecutors in the Justice Department expect to file in the coming months an antitrust suit that will allege the company monopolizes the advertising technology market, among other accusations, Politico reported.
In early 2019, Mary Meeker’s report on internet trends presented the case - perhaps to the dismay of the International Advertising Bureau (IAB) - that among the leading USA-based on ad platforms, global internet ad has decelerated roughly 20% vs. 39% (Q1 ’19 vs Q1 ’18).
In his article “COVID and Cascading Collapses,” Benedict Evans gives us a broader range of this history:
“Print ad budgets were doing just fine all the way though the first decade or more of the consumer internet. There was even a little spike upward for the Dotcom bubble. Then the financial crisis and recession of 2008/9 caused a step change down, but when the crisis was over the budgets didn’t come back. Instead, the market had been reset, and budgets have been falling steadily ever since.
We are having a similar kind of external shock to the one that reset the print ad market in 2008/9, and a lot of new services and infrastructure have built up penetration and capability that is not perhaps captured by gravity. And now we’re all forced to try to use all of them. A bunch of industries look like candidates to get a decade of inevitability in a week. The really obvious one is retail. Everything that the internet did to print media is happening to retail - a lot of retailers, like newspapers or magazines, are fixed-cost bundles that are now being unbundled, and are defended by barriers to entry that are now meaningless. Hence we’ve been talking about the ‘retail apocalypse’ for a year or two now, as the internet reached a level of penetration that made those fixed costs unsustainable and consumer behavior peeled off more and more of the bundle.
Advertising share of GDP started sliding immediately after the Dotcom bubble, had a major step down in the financial crisis and has been suspiciously flat ever since. That decline was very obviously concentrated in print but actually affected TV and radio as well. We think of TV advertising as being pretty much unaffected by the internet so far, but on this data it’s down by 40% as a share of GDP. The economy grew and advertising didn’t get its historic share of that growth.
Facebook in particular has been massively deflationary to online advertising: it offers vast quantities of relevant advertising inventory at much lower prices and much lower entry costs than you’d have needed in print, let alone TV.
Meanwhile, ‘advertising’ is only a subset of all the money being spent to ‘get people to buy things’, and the data captured in traditional metrics is only another subset, and money moves between those categories. Some parts of this are called ‘advertising’ and others ‘marketing’, but that’s not always the best way to look at them.
A Better Solution for Publishers
Publishers have never succeeded by selling content or news.
In “News By The Ton”, Evans claims, “Newspapers are, yes, a content business, but they were also a light manufacturing business, and it was the replacement of light manufacturing and trucking with bits that removed the barrier to entry and unbundled their attention. So, here’s what that business looks like. In 2018, the US newspaper industry shipped ~2.5m tons of newspaper, down from 12.5m tons at its peak.”
By owning printing presses and delivery trucks (and thanks to the low marginal cost of printing extra pages), publishers were the primary outlet for advertising that didn’t work on (or couldn’t afford) TV or radio — and there was a lot of it. Maximizing advertising, though, meant maximizing the potential audience, which meant offering all kinds of different types of content in volume - all focused on quantity over quality. And then, having achieved the most readership and the ability to expand to fit it all, the biggest publisher could squeeze out its competitors.
Too many publisher advocates utterly and completely fail to understand this; the truth is that publishers made money in the past not by providing societal value, but by having quasi-monopolistic control of advertising in their geographic area; the societal value was a bonus. Thus, when trade associations like News Media Alliance complain that “today’s internet distribution systems distort the flow of economic value derived from good reporting,” they are in fact conflating societal value with economic value; the latter does not exist and has never existed.
This failure to understand the past leads to a misdiagnosis of the present: Google and Facebook are not profitable because they took publishers’ reporting, they are profitable because they took their advertising. Moreover, the utility of both platforms is so great that even if all publisher content were magically removed — which has been tried in Europe — the only thing that would change is that said publishers would lose even more revenue as they lost traffic. As Ben Thompson notes:
“It’s not that Google and Facebook [and Amazon, Baidu and Tencent] are setting a higher price to maximize their profits; rather, they are sharing less of their revenue; the outcome, though, is the same — maximized profits. Keep in mind this approach isn’t possible in competitive markets: if there were truly competitors for these companies when it came to placing content or website domains, they would have to share more revenue to ensure said content was on its platform. In truth, though, they are so dominant when it comes to attention that they don’t have to do anything for publishers or domains at all (and, if said publishers or domain owners leave, well, they will still place links, and the users aren’t going anywhere regardless). There may be similar evidence — that Facebook and Google is able to reduce supply in a way that increases price and thus profits — emerging in advertising.”
This is why this solution is so misplaced: publishers no longer have a monopoly on advertising, can never compete with the Internet when it comes to bundling content, and news remains both valuable to society and, for the same reasons, worthless economically (reaching lots of people is inversely correlated to extracting value, and facts — both real and fake ones — spread for free).
We just said that “good reporting” has never had economic value; this wasn’t quite right. Rather, the articles that result from “good reporting” don’t have economic value: once published on the Internet they have zero marginal cost in a world of perfect competition. This is why publishers have to shift their mindset about their product and their market.
First and foremost, publishers should be selling “good reporting”, that is, the commitment to the regular production of content that the buyer would like to see. This is a slight distinction but a critical one: successful subscription products do not sell content but rather the production of the content, and that production, unlike the articles themselves, can be differentiated and sold as a scarce product. That, though, means knowing who the buyer is: it’s not advertisers, but rather readers.
Moreover, this approach addresses the Facebook and Google problem: the issue with Aggregation Theory from a supplier perspective is that the aggregator owns the consumer relationship; however, because Facebook and Google are advertising companies, they are not even competing in the subscription market. They, like advertisers, only care about content that has already been produced, not how it came to be.
In fact, this is the single most ridiculous part of this proposal: one of the issues News Media Alliance wishes to collectively bargain with Facebook and Google about is “better support for subscription models”. In other words, News Media Alliance wishes to bring in Facebook and Google as an aggregator in the one market — subscriptions — where newspapers actually have a viable business model.
It’s easy to envision how this could play out: Google and Facebook set up subscription offerings for publishers, eventually create the bundle of the future, and, by virtue of owning the consumer, skim off most of the profits, leaving publishers desperately pursuing page views to get their minuscule share of revenue. Sound familiar?
The fundamental issue is this: there is a business model that works for publishers, but it requires a dramatic shift in mindset and the long hard slog of building a business. That means understanding what customers want, building a product that appeals to them, reaching them, moving them down a sales funnel, and retaining them. What it does not mean is the suffocating sense of entitlement and delusion that underlies not just this proposal but the majority of commentary from newspapers themselves that expects someone — anyone! — to give journalists and by proxy publishers money simply because they are important.
That’s the thing: journalism is important. It is so important that the sooner publishers let go of a long-gone world where publications earned advertising simply by existing, and actually build publications that can not just survive but thrive on the Internet, the better off society will be. And, in that fight, this move by the News Media Alliance is actively hurting the cause.
This is, of course, a reason why centralized digital advertising monopolies have gotten away with the deceptive and inflated auction format to price attention-based advertising in the first place. We’ve outlined 9 problems of the ad-funded Internet.
So, where do we go from here?
If you can’t join ‘em, beat ‘em.
A Guide for Publishers
1. Set up an online marketplace
The first step for any publisher considering e-commerce as a new revenue stream is to research the platforms available to determine which best fits the needs of your business and your budget. There are a number of cost-efficient e-commerce providers that allow small businesses to get up and running in a matter of minutes.
When evaluating e-commerce platforms as a publisher however, there are a number of factors to consider, including multi-platform operations, shipping and fulfillment features, security measures, compliance capabilities, and its ability to fit your brand aesthetic.
If your publishing business is transitioning to e-commerce, simplicity in functionality both on the back end and customer-facing features will likely be top of mind. Most e-commerce platform providers have several different plans designed to best fit your business. A good rule of thumb when deciding which plan is best for you is to keep in mind the following:
- How many products do you plan on selling? If you’re not planning to sell a lot of products, a simpler plan with lower rates may be suitable. There is no product limit for many providers’ main plans.
- What features do you need? If you’re looking to have a site that enables customers to view your products and make purchases, a simpler plan is likely the best fit. However, many businesses find it’s beneficial to include additional features that contribute to positive customer experiences, like customer loyalty plans, abandoned cart recovery, and more.
- Does the platform offering fit our brand aesthetic? Will it help protect, maintain, and build our brand equity? How much customization does it allow?
Note that during this time, your business may not have the luxury of conducting extensive research on multiple platforms, and instead may need to rely on something that works now. Fortunately, Mav Farm offers out-of-the-box functionality that will enable you embed any product or series of products anywhere on your site and facilitate a seamless checkout experience.
Even better, as a marketplace provider Mav Farm enables the brands in your marketplace to fulfill those orders, relieving your business the burden of fulfillment, logistics and customer service operations, while providing you the added value of a new revenue stream.
Once you’re in, it’s time to start customizing the features of your website, which begins in step #2.
2. Determine which products you’ll sell online
Given the necessary timeliness of your efforts to transition store functions to e-commerce which can be done in a matter of minutes on Mav Farm, it’s important to prioritize which products you’ll be selling online, so your most profitable and in-demand products are available for purchase. It can feel like you need to have every product in your store available immediately, but by prioritizing the most popular products first, you can get your online operations up and running. Publishers using Mav Farm tend to pick products that work well with the editorial, advertorial or video content they publish. You can quickly leverage your current brand customers to sell their products in your marketplace at a commission.
3. Plan your online marketing strategy
Perhaps one of the most important steps in this transition is communicating how your business will now be selling. Most publishers are already using social media to market to their audiences. However, it’s critical that businesses over-communicate the change in operations to ensure regular customers are aware of the new channel, and to capitalize on the expanded audience you can now reach.
Social media can be used to promote your new initiatives and as a platform to advocate for your business’s distinguishing factors and unique value-add. Use this opportunity to tell your story and highlight the characteristics that make your small business stand out to consumers. Not only are consumers turning to social media to learn where they can continue making regular purchases during this time, but they’re especially inclined to support small businesses.
Another option, when using social media, is to go beyond your marketing efforts and consider using social selling platforms as a complement to your newly formed online store. With Mav Farm’s video app .show, most of these social selling features are baked in. In today’s social network-driven society, social media platforms are no longer just an avenue to increase brand awareness, but an opportunity to connect with customers and make sales in the social threads customers are already sifting through.
Shoppable media platforms are blending media and commerce to convert social media into sales. .show provides video-focused publishers an excellent way to capitalize on this new trend. By leveraging this method of “headless commerce,” or separating the front end and back end of an e-commerce application, businesses can easily combine their social media marketing and online selling for quick sales conversions and limited friction throughout the browsing and shopping experience. Through social selling capabilities, businesses can save customers time they would otherwise have to spend sifting through websites to find the items that best fit their wants and needs.
4. Preview, test, and publish your store
The final step to bringing your store online is to ensure every function of your site is operational. Double-check each function by asking yourself these questions:
- Does my checkout work? Make sure orders work across all payment methods; your shipping options and charges are correct and visible; the items and price in your cart are correct; discounts/promotions apply correctly; and tax is calculated once shoppers enter their location. While often overlooked, ensuring sales tax is calculated correctly in real time is critical to maintaining a positive shopping experience, and also helps prevent your business from being at risk of tax audits down the road.
- Is content presented in a professional manner? Proofread all copy and double-check that spelling and grammar are correct across the website. It’s also important to check images, videos, and other forms of multimedia across platforms to make sure they don’t interfere with the customer experience.
- Does my store work on various channels and internet browsers? Consumers want to access products online whenever they choose from whatever device they are on. Testing your online site for functionality across channels is important to ensure that you’re not turning away potential customers who are unable to access your site.
While you can certainly ensure each is functioning properly in-house, using a platform like Mav Farm relieves your business those potential hardships as Mav Farm’s technology is automated to make sure your solutions are up and running.
Apply now to get started growing your content publication on Mav Farm.