Giving advertisers direct access to an audience without previously approving the message is a big departure for media companies. The American Society of Magazine Editors’ standards, revised in January 2011, are strict about separating ad content visually from editorial content, but they are silent on the access issue.
Eric Hippeau, who has gone back to being a venture capitalist, calls this approach “turning your customers into publishers.” Advertisers, he says, will not only create content that will increase traffic, but this will represent “a great diversification of revenues” away from advertising sold by the page view. Before Hippeau left the HuffPost, the company had just launched a program that charged flat fees and gave advertisers the opportunity to “have a conversation” with the site’s audience through posts and responses. He believes that once companies start interacting with the audience in this environment, they will be hooked. “Once a brand starts that process, they are not going to stop. This is a great benefit to the media companies.”
Managing digital journalism properties often means stepping away from roles and job descriptions that were found in traditional operations. At AOL, executives have decided that content areas such as business or technology should become their own business units, or “towns” in the AOL patois. And editors are increasingly responsible for determining the revenue potential of stories.
An explicit rendition of AOL’s strategy can be found in a fifty-seven-page internal PowerPoint called “The AOL Way,” which was leaked to Business Insider in February 2011. The handbook outlines AOL’s plans to lower the cost of creating content while increasing revenue, with explicit targets; it was written a few weeks before AOL announced its deal to buy The Huffington Post.
The company’s rule of thumb is that the cost of acquiring a story should be no more than half the amount of ad revenue expected to come from that story. An editor who wants to pay for a premium freelancer must also estimate the size of the audience for the assignment—in other words, the editor must cost-justify every story. In the chart below, the company shows average costs and revenue by story type. The first column lists the department or source of the story, and the next column states the average cost of these stories. These figures are then matched with the “eCPM”—or effective cost (to advertisers) per thousand page views—and from that, AOL estimates the number of page views needed to break even on that story.
One method of building traffic is to hop onto hot topics, the document advises. “Use editorial insight and judgment to determine production,” the document says, offering as an example that if “Macaulay Culkin and Mila Kunis are trending because they broke up,” someone should “write a story about Macaulay Culkin and Mila Kunis.” And editors are told to always keep expenses in mind. The cost of content can run from $25 for a freelance article that needs 7,000 page views to break even, to a $5,000 video that will require a half-million streams to recover its costs. Catchy headlines, such as “Lady Gaga Goes Pantless in Paris” (from AOL site StyleList.com) are important to entice readers from search. Similarly, an article headlined “Benadryl for Dogs” should cost $15, because its revenue potential is around $26. “We are heavily invested in analytics as this is the way to empower our editors and journalists,” Neel Chopdekar, vice president at AOL Media, said in an interview shortly before “The AOL Way” was made public. He calls this “bionic journalism—the best of man and machine.”
Paying freelancers by performance is not as unusual a practice as paying editorial staff that way. About.com, the general information website founded in 1995 and now owned by The New York Times, pays its expert writers, or “guides,” by performance. USA Today announced in early April that it is considering paying bonuses to writers based on page views.
Digital companies, which lean heavily on part-time contributors or unpaid commenters, are constantly on the lookout for cheap labor. And mainstream news companies have long offered psychic, rather than financial, rewards to its reporters and editors.
Forbes’s DVorkin is experimenting with pay schemes for blogging “contributors,” whom Forbes compensates with a flat monthly fee. On top of that, Forbes pays a bonus if a writer reaches a certain target of unique visitors. (DVorkin declined to give details about pay at Forbes, but he did say that at True/Slant—the web company he owned before coming to Forbes—contributors would typically earn about $200 per month, and some would get twice that much, counting their bonuses. A “few” earned several thousand dollars a month.) DVorkin said he’d like to add more metrics to the calculations—for example, Twitter followers or repeat visitors.