But a 2010 study by Izea found that many people engaged in this “social media sponsorship” weren’t aware of the FTC guidelines or had been offered compensation without a requirement to disclose it. The survey respondents also priced a “sponsored tweet” from a personal Twitter account at an average of $124 and a “sponsored blog post” at $179—around the same amount a small news organization will pay for a story and far more than an average blog post would ever get from display ads.
None of these ventures comes close in potential payoff to the online coupon craze, pioneered most successfully by Groupon. The company was launched in Chicago in November 2008, offering its customers daily discount deals on services ranging from nail salons to restaurant meals. For the deals to kick in, a minimum number of users must sign up; the system encourages users to spread the word and to take advantage of social media.
In a little over two years, the company expanded to more than 500 markets in
44 countries and turned down a $6 billion takeover offer from Google. Forbes called it “the fastest-growing company in Web history.”
The company’s model is a repudiation of much of what has driven online revenue for media companies. “Banner ads seem such a relic of the 19th century,” Groupon founder Andrew Mason told wired.com. “If God created man and the Internet on the same day, we would see more stuff like Groupon.”
The company has drawn complaints, particularly from retailers like some Chicago restaurant owners who said many Groupon customers either came only for the discount and didn’t return, or gamed the system by copying coupons and using them repeatedly. Groupon has also spawned a host of competitors. And media companies have wavered between joining with Groupon or competing with it.
The Minneapolis Star Tribune launched a coupon service, called STeals. Cox Media has started DealSwarm. McClatchy is trying to have it both ways: it announced a deal with Groupon in July 2010. Less than a year later, McClatchy said it would launch its own deal service, while continuing to work with Groupon. As AdAge noted, “McClatchy gets 15% of revenue from Groupon deals … on its own, McClatchy could collect as much as 50% from deals it sells and distributes.”
But it may be too late for news organizations to get substantial revenue from this business. Groupon is reported to be considering an initial public offering that could raise as much as $15 billion. With so much capital, Groupon could compete on price and breadth in ways that would overwhelm ordinary competitors. And Groupon has its own challenges. It is possible that so many competitors’ coupons will flood the market that consumers and businesses will begin to tune them out, which would diminish the value of the idea.
Many media companies are trying to raise revenue through more untraditional means. Wired opened a physical “Wired Pop Up Store” in New York City during the winter holidays, where it holds events like a “Geek Dad Family Party.” The store sells gadgets and paraphernalia. New York sponsors a wedding showcase event every year, selling tickets to the public, and sponsorships to national fashion brands; it also caters to local disc jockeys, dress stores, bakeries, and other enterprises in the wedding business.
Such events may be good for branding, but tend not to bring in a great deal of new revenue. The Atlantic is different. It is involved in running about
seventy-five events a year, the most ambitious of which is the Aspen Ideas Festival. “Most magazines do events for advertisers,” says Justin Smith, president of the Atlantic Media Group. “We use the Atlantic brand and editorial prowess for attracting people.” The business, called Atlantic LIVE, also runs events with such names as the Green Intelligence Forum and the Food Summit. They usually include partnerships with organizations tied to the topic. Coverage of the event may appear on The Atlantic’s site or in the pages of the magazine.
Atlantic LIVE is run separately from the magazine and website and has its own sales group and editors who run the events. It has become a significant source of income for the company. Of the $32 million reported as revenue by the company in recent publicity, as much as $6 million comes from these events.
If the old formula of “adjacency”—selling ads and commercials alongside content—is fading, what will replace it? There are many possibilities, but few are likely, on their own, to provide the stream of dollars that advertising and circulation once did.