Most industry experts agree that legacy media companies, especially those that deliver news to consumers, are finding it difficult to transition ad revenue streams from traditional to digital platforms. Researchers point to 2 key problems news organizations are wrestling with as disintermediation in the marketplace continues – a loss of advertisers that used to promote their products and services in old media and a failure to effectively use new technology.
In a study on digital advertising, The Pew Research Center Project for Excellence in Journalism finds that news companies are limited by the following factors as they move online:
- Relying on in-house ads – promoting their own products. In some cases, between 21–56% of ad inventory is filled this way.
- Relying on the financial industry – for many companies, reliance on this sector for their digital platform far outweighs the financial sector’s presence on the traditional platform.
- Little or no use of targeted advertising based on consumers’ online behavior.
- Too much reliance on static banner ads – demand for these ads is growing more slowly than for the rich media or video formats.
Regarding the significant difference between the types of clients advertising on traditional versus digital media, researchers believe that the heavier workload on media sales reps may lead these businesses to rely on ad networks to fill the online space. Media companies will need to train their reps to sell to a broader client group and work with the ad networks to reach beyond the financial industry and find others willing to advertise online.
Researchers also discovered that few media companies are effectively targeting consumers online. Technology in this sector is rapidly evolving and if news organizations can participate in strategies such as real-time bidding, when a consumer loads a website page, they’ll tap into what some analysts are calling “the holy grail of targeting.” Another type of targeting, discount sites and coupons, was initially expected to generate promising ad revenue for media companies. But relatively few media sites in the study reported discount ads making up more than 10% of ad revenue. However, when a media property established its own discount program, the revenue from that source tended to be higher.
For now, nearly 46% of ad revenue comes from static banners and 38% from sponsored links for news sites. Researchers say that if news media sites begin to sell video ad capability to marketers they can improve their prospects. They can reach out to marketers that have not yet begun to advertise online. And, the revenue from video advertising can be far higher than what is generated by static advertising.
To compete for ad revenue going forward, news sites will be aggressively courting a broader range of clients by touting their ability to manage new technology such as video advertising and new strategies such as targeting.[Source: Matsa, Katerina Eva, et al. Digital Advertising and News. Journalism.org. 13 Feb. 2012. Web. 20 Feb. 2012]