Article

Darren Ryan
Darren Ryan 11 September 2019

Publishers Squabbling over Advertising Revenue Crumbs

Where are you accessing your digital content? There's a chance that you're on Facebook and/or YouTube at least once a day. That's where the advertising revenue is. Book publishing companies cannot compete - or can they?

With all the free content dominating internet space, the question for book publishers is how to make profit from their content. It's time they took a critical look at their publishing business models and transformed their approach in the digital world.

Competition is stiff

The demise of magazines and newspapers globally offers great insight into the mistakes those publishing houses made when the world turned to electronic media. Many just rolled over and handed victory to the internet.

Social sites like Facebook are fascinating in the sheer scale of their statistics: 2.41 billion monthly active users (June 2019), five new profiles every second, and 83 million fake profiles, among other interesting facts. That feels like insurmountable competition.

Publishing strategies need to change, there's no doubt. 

This is according to Greg Piechota, who studies technology-enable disruption patterns across industries at Oxford University and Harvard Business School. According to him, Google and Facebook own 70 percent of the advertising space in the US, while the remaining 30 percent is left to publishers. And who's making the money on this? Advertising technology companies are getting the lion's share of this expenditure at 60 percent, while publishers are getting 30 percent.

‘Because [digital] platforms have aggregated such large audiences, they win at the attention economy,’ he said. ‘Platforms are the mass media of today, with no publisher near the size of the main platforms. We are no longer in mass media business, we are in niche media business.'

So tailor the content to your users

Where social media and search platforms win, is that they're targeting their content and advertising at specific - and narrowly defined - demographics. And they're the ones profiting from online advertising, while publishers scramble to compete directly. 

Jonah Peretti, Buzzfeed CEO has recommended that book publishers merge with other companies to grow their own consumer base. This would affect their brand and identity though, about which Greg Piecheta is sceptical. 

‘When publishers think of changing their business model, we should think about content portfolios, [i.e.] different content with different business models. Doing this changes the operational context for publishers,’ said Piechota. ‘We’ll have some content that will attract new users. We’ll have some content to retain customers. People who are subscribers have different needs from those who only come as visitors to your site. Then we’ll have some content used for [upselling]. In this way, you will increase the Average Revenue Per User (ARPU) from the audience you have.'

Basically what he's saying is that publishers should look at their content consumers and break them down into groups. From there, they need to identify how to create a revenue stream from each demographic niche. 

Controlled content is a good thing

While the Googles and Facebooks take over the world of digital content, publishers should be focusing on new strategies rather than trying to compete directly. Publishers play a different role to those giants. It's true, publishers have to safeguard their content, as we discussed in a previous blog: 'How digital publishers can fight fake news.'

The key difference between publishers and social media sites, is that content is created by users. This has created a malady of fake news and propaganda. The silver lining here is that advertisers have become hesitant to place ads near possibly dubious content. Where content is strongly controlled, fake news has little chance of propagation. Publishers need to step in here.

It's time for them to start looking forward rather than lament the state of the industry. 

This energy should be spent on rethinking business models and revenue streams and looking at opportunities - which do exist! Consumption has changed, but this isn't necessarily a publisher's worst nightmare. Printed titles might not be the best suited medium to young adults who are grabbing content via their phones. But how can this be capitalised? Adding rich media to ebooks may be worth considering, for example.

Social media has a place in all of this: it's a tool to draw audiences. But book publishers have strengths that internet players don't - they're in control of their content and it's targeted at specific audiences. Publishers shouldn't shy away from technology, but rather use it to their advantage.

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