There are longstanding examples of moves to sell inventory beyond a company’s sites, including careerbuilder.com, an employment-classified site that McClatchy jointly operates with Gannett and Tribune companies. But there can be difficulties. It isn’t easy to persuade traditional ad departments to sell inventory that is not their own. “The gravitational pull of print is very strong. As soon as you get away from distribution and content adjacency, the harder it gets,” Hendricks says. And ad sales on other sites represent only a small revenue stream so far. Hendricks says McClatchy sold about $15 million of Yahoo ads in 2010 and expects to increase that to as much as $19 million in 2011. To put that into perspective, as dismal as 2010 was for McClatchy, the company still sold a billion dollars of advertising that year.
One of the issues in selling others’ ad space is that a publisher must adjust to a variety of pricing schemes. For example, the Houston Chronicle tells advertisers that it can help them reach, say, local men between the ages of twenty-five to sixty-four on Facebook. But Facebook users would need to see an ad 2,500 times before the advertiser could be assured it would generate a single click, according to the Chronicle. That’s a key reason that the price of ads on Facebook is low: $1,500 for 1.875 million impressions on Houston’s rate card, or a CPM of just eighty cents, less than a tenth of what most news sites get. Others have calculated Facebook’s effective CPMs as even lower, below twenty cents. By comparison, for targeted ads on Yahoo Sports or Finance, the Chronicle expects to charge up to $4,400 per 200,000 impressions, for a CPM of $22.
Actual ad costs often vary from what appears on a rate card as a result of bargaining between buyer and seller. Nevertheless, it’s noteworthy that the Chronicle charges nearly twenty-eight times as much for ads on Yahoo as on Facebook. The price difference is a result of several factors, including the more prominent display space on Yahoo and the problems that social-media sites like Facebook have getting users to see or click on ads. In November 2010, The Wall Street Journal reported that 24 percent of all online display ads in the U.S. now appear on Facebook, but that they are responsible for less than 10 percent of total display-ad revenue.
Why do Facebook ads get such low rates? And what does that mean for the rest of the market? It could be that the standard ways of valuing advertising—that is, by whether it will impel a consumer to buy a product, visit a store, or feel better about a brand—simply don’t work very well in a world where people using social media aren’t looking to be sold something.
In a prescient 2008 AdAge column, Matthew Creamer summed up an issue that runs throughout this discussion: “The Internet is too often viewed as inventory, as a place where brands pay for the privilege of being adjacent to content…. The presumed power of that adjacency has provided the groundwork for the media industry for decades.” Companies today have faster and cheaper access to consumers. “The marketer, once at the mercy of a locked-up media landscape, can now be a player in it,” he adds.
Inevitably, as Creamer notes, the discussion becomes one of how marketing is shifting to “earned” media rather than paid. One analyst defines the distinction this way: “‘Earned media’ is an old PR term that essentially meant getting your brand into free media rather than having to pay for it through advertising,” writes Sean Corcoran of Forrester Research. “The term has evolved into the word-of-mouth that is being created through social media.”
If marketers believe they can reduce their advertising costs by engaging consumers directly, that almost certainly cuts revenue for news organizations. Although some firms are trying to capitalize on the trend by assisting advertisers with their social-media strategies, that is a labor-intensive business that is outside the expertise of many media companies.
And there are journalistic problems that go beyond the economic loss represented by the decline of old-fashioned advertising relationships. A Florida company, Izea, explicitly sets up arrangements so people who blog or tweet favorably about a company can get compensated in cash, travel, or in other ways. The company insists that its writers adhere to Federal Trade Commission guidelines, enacted in 2009, requiring disclosure of “‘material connections’ (sometimes payments or free products) between advertisers and endorsers.”