“The digital world has changed the revenue dynamics for publishers,” he adds in another post. “In the print world, a publisher’s shipment of physical media was the basis for generating revenue. In the digital world, consumption of media is the basis for revenue…. In other words, engagement is the unit of monetization.”
Shanahan says the benefit of more engagement isn’t just in higher ad rates, but in relationships that publishers need to build with their most loyal readers—something that has been lost in the drive to attract mass audiences. By chasing after large audiences rather than deeply engaged ones, he says, news organizations are sacrificing advertising revenue. Publishers who have a “direct relationship with fans can push better contextual advertising”—that is, ads that relate directly to a user’s habits and interests. “A publisher can know which fans saw which advertisements in which context on their site.” Sites can use that information to provide readers with targeted ads or offers.
And news organizations that hope to charge for online access need to locate—and cater to—fans, since engaged users are more likely to subscribe. That way of thinking is at the heart of The New York Times’s decision to charge for access to its digital editions. The Times built its pay scheme so light users of the site won’t have to pay for access, while heavier users—defined as those clicking on at least twenty stories a month—will be charged. But the Times also sees a connection between engagement and advertising. Michael Golden, vice chairman and president of The New York Times Co., discussed the different kinds of online audiences during a speech at a March 2011 advertising conference, shortly before the pay strategy went into effect. Speaking of less committed users, Golden said, “Their engagement is limited, but their numbers are impressive. We have to balance engagement and reach. The higher the engagement, the higher the CPM.”
Two media outlets with very different editorial missions—Gawker Media and PBS—have tackled this issue of trying to differentiate more and less engaged segments of their audience when pricing advertising.
Gawker’s network of sites, started by British journalist Nick Denton in 2003, includes Gizmodo (for gadget lovers), Deadspin (for sports fans), and Jalopnik (for car buffs). In March 2010, Gawker began touting a metric it calls “branded traffic.” This was defined as people who have bookmarked the company’s sites or arrived at them by searching specifically for the site by name—by, say, typing “Deadspin” into a search engine.
Gawker found that roughly 40 percent of visits come via branded routes, as contrasted to links from search engines. And such visitors are more devoted and engaged, spending ninety-one seconds more per visit than others. That is a meaningful difference with financial impact, says Erin Pettigrew, Gawker Media’s marketing director.
First, the more engaged users are more likely to see highly profitable “road-block” advertisements—ads that take over the home page of the site for several seconds and then fade away to reveal the editorial content of the page. That revenue helps compensate when advertising rates fall at Gawker and other sites. As Reuters’s Felix Salmon has noted, the number of online ads has been growing so fast that advertisers can demand lower rates. As a result, wrote Salmon, “Denton says that since 2008 he has been getting only half the revenue per page that he used to get in 2004.”
One way to counteract that is to try to sell more “branding” advertising on the web—that is, ads designed to draw positive attention to a company’s name and image, rather than to trigger a direct response to an offer for a product or service. Brand advertising has long been profitable for traditional media, especially television and magazines. But because publishers have struggled to convince advertisers that the web is a good platform for branded ads, they’ve often missed out on this lucrative revenue stream. “We had been told ad frequency of more than two or three exposures is a bad thing,” said Pettigrew. “But for brand advertising, it’s different. Six to twelve exposures [of an ad] increased the persuasiveness. And this is the most useful segment to our advertisers.”
Because Gawker Media has an array of sites on different topics, it can sell engagement across its network. Thus, the same readers who click on gadget stories at Gizmodo can be served with branded ads at Lifehacker or Gawker. And if Gawker Media can demonstrate to advertisers that its readers are loyal, it can charge higher ad rates, Pettigrew said.
At the other end of cultural spectrum, Public Broadcasting System’s web strategists are also using engagement metrics to increase revenue.