The digital ad model that most digital publishers are currently banking on is in “chaos” due to the rise of social behemoths such as Facebook - that are providing scale and targeting at an unprecedented price for advertisers.
This was just one of the findings from a special edition of Media Watch last night, which investigated how publishers and digital players are going to survive in the face of the rise of Facebook's Instant Articles, adblocking and shrinking CPMs, just to name a few challenges.
Speaking to Media Watch, former Sydney Morning Herald editor Eric Beecher, who’s now the publisher of Private Media, said for the first time in history advertisers aren’t dealing with scarcity, rather they're dealing with ubiquity.
“Therefore the price they pay for advertising, the ability to target audiences in a way they never could before at low prices, is just creating chaos to the revenue model,” he said.
“They [digital sites] are heading towards the cliff and it's not their fault but they are heading towards the cliff really fast ... I think that cliff, for everybody, is within a year or two or less,” he added.
One reason that digital publishers are struggling, especially in the Australian market, is because bigger players have come in creating more competition for every online dollar.
“Five to 10 years ago if you wanted to buy digital advertising in Australia you went to one of five places ... Nine, Fairfax, News Ltd, Yahoo7 or Telstra ... took up 80% of the display ad market.
"What we’ve seen over the past five years is the emergence of Facebook ... and other global players,” Alex Parsons, chief digital and marketing officer for Nine Entertainment Co said to Media Watch.
Facebook's use of data also poses a challenge for other digital players with editor in chief of Business Spectator Alan Kohler telling the program: “Facebook are just the champions of data because they have got everybody not only using Facebook, but they reveal everything about themselves.
"We all put our entire lives on Facebook, so Facebook knows everything about everybody. You can target your advertising through Facebook to the individual - nobody's been able to do that before. It's incredible.”
Media Watch also looked at paywalls as a way to generate much needed revenue for these businesses, however host of the program Paul Barry pointed out that while Fairfax's digital numbers were strong for sometime, they are now falling.
When it comes to what could be the answer for media companies facing this brave new world, research associate at the Reuters Institute, Nic Newman, explained to Media Watch that there's probably no one single answer to all these issues.
“Essentially most media companies are thinking about a range of business models. They can no longer afford to rely purely on digital advertising, that’s clear.
“I think traditional media is definitely in the midst of this ‘perfect storm’ because of the combination of adblocking, falling print sales and just the difficulties of funding news in a more atomised world. In the short term the prospects look pretty serious, but I suppose the positive side is that people are still really interested in news, they’re interested in all kinds of news, so it’s not the demand, it’s the business models that’s the problem,” he added.
You can watch Media Watch's special publishing report here.
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