Almost all of us read some form of news on the Internet. It may be something like a well-written analytical piece or a story narrating a particular incident. Before the Internet came around, newspapers had the geographical monopoly by virtue of controlling the printing press, delivery trucks and other infrastructure that made a newspaper company successful. However, with the advent of the Internet, the geographical monopoly of newspaper businesses ended. As of now, anyone with access to a word editor and Internet can run a blog or a website.
Yet another difference that the Internet has made is the advent of aggregators. These aggregators are the only way through which a large number of people find content online. In their heyday, newspapers had a direct relationship with their readers, but in the Internet era, most people find their news via aggregators like Google, Facebook, Twitter, and others. This has turned the economics of the news industry upside down, and if recent signs are anything to go by, most legacy news companies are finding it difficult to adjust to the new reality.
The aggregators that drive traffic to the websites of news companies have tried their best to help the news companies since even the businesses of aggregation rely on people sharing content like news on their platform. But despite their attempts, little has changed in the news industry. Revenues at most legacy news companies have been plunging, followed by layoffs.
Google: When Ads go Bad
Google indexed the entire Web and made various websites/articles accessible to anyone at one click or touch. For a lot of publishers, Google Search is the major source of traffic. Google’s entire business model depends upon serving ads on its own properties such as Gmail, Google Maps and on the properties of third party websites via tools like Google AdSense. Google’s business model was pretty simple for third party websites. They allocate a certain portion of their websites for various types of ads and depending upon the quantity and quality of traffic that reaches the website; the website owner gets paid.
This model worked well during the early days of the Internet when most people accessed content from their desktops, and the number of sites on the Internet was low, thereby limiting the potential ad inventory. However, as newer websites kept coming online, the ad inventory kept expanding, thus diluting ad rates. In addition to this, there has been a marked shift of online activities from desktop to mobile where ad rates are lower.
The only way publishers knew to combat the falling ad rates was by increasing the number and types of ads. This, in turn, made the experience of reading content online worse which gave rise to the cottage industry of ad blockers. Google, for its part, rolled out the AMP initiative.
AMP stands for Accelerated Mobile Pages, and the initiative used a variety of techniques in order to make reading articles online a pleasing experience.
When AMP was launched, a host of publishers came on board. However, the cracks in the program became visible as time passed. For a lot of publishers, the earnings from AMP were lower than normal pages because of ad restrictions placed by Google, and there was not much uptake in terms of traffic to compensate for the lower earnings of AMP pages.
It was, therefore, no surprise when publishers began abandoning AMP. To add to Google’s woes, the ad blocking phenomena is still on the rise. Having failed in AMP, Google’s new tactic is to become a pseudo ad-blocker itself. Currently, the most popular ad blocker on earth is Ad Block Plus. Ad Block Plus has an acceptable ads policy whereby ads that meet certain standards are allowed to pass through. However, it is known that even for that, the companies that supply those ads such as Google need to pay a certain sum to Ad Block Plus. As the number of Ad Block Plus users keeps increasing, the negotiating power of Ad Block Plus keeps growing.
To prevent Ad Block Plus from gaining more users and thereby more negotiating power, from 2018 onwards, Google will be blocking ads that do not meet the acceptable ads policy. This is just Google’s way to make sure that its business model is not held hostage to services like Ad Block Plus and to adopt an alternative route now that AMP’s failure is clear. Whether or not this works is something that remains to be seen. Chrome is the most used Web browser, which while being a good thing in general, can also end up being a headache for Google. A lot of ad exchanges serve video ads or other full page interstitial ads. If these ads are all of a sudden blocked by Google on Chrome, then these ad exchanges are bound to go out of business overnight. And with the stakes being so high, some of these ad exchanges might end up suing Google. Considering the high profile EU and Russian investigations that have happened on Google’s various businesses, this might not end up well for them.
Remember Instant Articles, Facebook?
With close to 2 billion users, Facebook is now one of the largest sources of traffic for many websites. In fact, quite a number of websites these days receive more traffic from Facebook than they do from Google. In the past, every time someone clicked on a link on their Facebook feed, they were taken to a different website where Facebook could not monetize the user as effectively as they could in the feed. To make sure that the user remains within the Facebook walled garden, Facebook launched Instant Articles.
Instant Articles promised speedier load times just like AMP and Facebook labeled it an initiative that would help publishers reach their audience better. However, just like AMP, even Instant Articles failed to take off for various reasons. There was initial enthusiasm, but it quickly faded away. To add to Facebook’s woes, the company has had to deal with a media that’s been extremely critical of the fake news phenomenon. Ever since Donald Trump got elected in the US, many websites have indicated that a significant reason behind Trump winning was fake news. Most of the blame was laid squarely on Facebook as that is where most people get their news from, and where sharing is at its peak.
Stung by the fake news debacle, Facebook has paid little to no attention to its Instant Article initiative. Instead, most of the company’s resources are dedicated to battling fake news while making sure that there’s no bias in their editorial decisions, a fine line to maintain. Whether or when Facebook decides to concentrate on Instant Articles is something that remains to be seen since as of now the company is more busy battling fake news and seems busy in other initiatives like VR/AR.
Medium is going rare
Medium was heralded by several people as something that would save online journalism. Medium’s founder Ev Williams was the same person who founded Blogger that made it possible for anyone to write and publish articles on the Internet, even if they were not particularly tech savvy.
Medium did well at its inception by attracting a lot of top quality writers. In its bid to save online journalism, Williams swore that traditional banner ads would not be the source of monetization on Medium. Instead, sponsored articles that looked like original content were Medium’s way of monetization. Medium managed to have an ad sales team in place and even convinced quite a number of publications like The Monday Note and The Ringer to come on board.
However, in January this year, Medium shocked the entire industry when it announced that it was closing its New York Office, would lay off employees and would search for a new business model. The new business model turned out to be USD 5/month subscription that would unlock certain exclusive articles on Medium and give access to audio stories. Many people feel that the subscription business model that Medium has suggested is way too broad to become a success. Most people have different interests and would prefer paying only for articles on topics that they are interested in, instead of a USD 5 subscription to Medium which they could rather spend on something like New York Times or Wall Street Journal.
Patreon plays on niches
While Facebook, Google, and Medium that made tall claims of helping publishers succeed, one unlikely candidate that has been doing some solid work in helping publishers has been Patreon.
Patreon did not start as a website intended to help publishers. It, in fact, was designed to help people who did creative work making a living off of the Internet. It helped people who were musicians, dancers, and in similar “creative” professions create a constant revenue stream by selling subscriptions to their fan base. With the advent of the Internet, many people became bloggers covering niche topics. These topics were not popular enough to draw a huge audience for ad monetization to work but whatever audience these topics drew, was extremely devoted, and would not mind paying a few dollars every month to support their favorite writer and this is where Patreon has managed to succeed.
Wait But Why which creates high-quality blog posts by going to the bottom of some of the simplest things we see every day or hear about has managed to gain close to four thousand patrons on Patreon. Several other niche bloggers could use Patreon in order to create a sustainable living. However, despite Patreon’s potential in helping niche bloggers, there is little chance it would be able to support a full-fledged media company.
We have news – news needs a solution
News companies play a crucial role in any democracy. The declining fortunes of a lot of media companies are, therefore, not good news. A solution needs to be found. Ad based monetization seems to be hitting its upper limit and does not seem a viable long term solution. Ultimately there needs to be a solution where people could just pay and consume the news that they want to. There are companies like Blendle that are trying to achieve the same but how successful they will be is something that remains to be seen.