Mark Zuckerberg is neither showman, nor salesman, nor attention seeker. And in a sense that is the audacity of his position, that you don’t have to possess any of those elemental media attributes, but can still be in the media business.
That is the central bet, one that for a number of years quite cowed the media industry, that you didn’t have to be in the media business to supplant it.
The problem, which Zuckerberg sheepishly avers, is that what is overwhelmingly most effective for building revenues at Facebook turns out to be video. Can you succeed in the video business without making actual media—without being in show business?
6
TRAFFIC PATTERNS
I’ll know it when I see it used to be as good a method as any of identifying a valuable audience.
New York magazine, for instance, in 1985, its most profitable year, was one of the most distinctive and most imitated magazines in the country. It defined what was just coming to be known (and not yet disparagingly) as a yuppie. It helped create that sensibility (i.e., you could buy your identity). And part of that identity, in perfect commercial symbiosis, was New York magazine.
The three networks, each defining in their way an ultimate audience for American’s must-have products, were also at their apogee in 1985.
A good media brand defined a good media audience.
And so valuable were these audiences that the imperative became lowering all barriers to building them. Network television, on its part, was wholly perplexed by and dismissive of the pay cable model. What did it get you to limit the size of your audience with a fee, when you could realize much more than that through advertising? Indeed, you could earn exponentially as your audience grew exponentially.
Magazines like New York—indeed, all consumer magazines—did everything possible to charge as little as possible so that, while still being officially “paid,” they were in fact free. (Often with subscription promotions you could actually come out ahead by subscribing to a magazine. Even now you can get a free NFL-approved windbreaker from your favorite team when you pay $26 for a year’s subscription to Sports Illustrated.)
Two things happened. These audiences became so valuable that almost everybody tried to inflate them both with free offers and with general sophistry. And they became so expensive that a separate discipline—the media buyer, or the media-buying function—grew up to measure and monitor these audiences.
Dennis Holt, part of the entrepreneur deal-making and freelance sales talent that follows the media business, something like prostitutes following armies, is often credited with starting the first media buying agency. The premise was simple: buying ad space required different skills from making ads. This became a hotly debated argument in the 1980s, and by the 1990s—Holt’s own business, Western Media, had reached $5 billion in billings—had all but transformed the ad business.
As audiences became more valuable, the business of buying media became about measurement. It was about the quantification of an audience. The value was not in what you said to the audience, but in how you defined it. (The brand used to define the audience; now the buyers of audiences claimed to define them.)
Digital media saw the clear opportunity. In the most profitable media model, it would assemble an ad-supported free audience, but it would provide vastly more accurate and detailed “measurability” than traditional media ever could. In fact, it would provide absolute measurability—a precise count of viewers, their actions, their attentions (and lack thereof), and, too, their various personal data and preferences.
This, however, proved to be something of a tragic flaw. To the extent it was measurable, its behavior showed it to be ever less valuable.
It wasn’t an audience, truly, it was traffic, which shortly became the live-and-die word of the medium. Not people gathered to pay attention. But people moving to and fro, taking a more often than not random path, seeing little, absorbing less (attention, that is, time on page, measured in fractions of a second). The better metaphor surely was a highway billboard slipping by at sixty miles an hour than a thirty-second spot.
This created a more and more difficult situation. If people weren’t paying attention to ads, if they could avoid them, if they were clicking away from them in microseconds, if there was no structural way to make people pay attention, then their value would go down—a negative result of measurability. (On the other hand, for some technology people this was quite a positive result, or at least part of a deep ambivalence, with many techies sharing a basic Adbusters mind-set: suspicion, even paranoia, about the seductive appeal of traditional brand advertising long being a part of engineering culture; the inherent fakery of it offending the community in its pose as dispassionate believers in science, fact, and clean code.)
Beyond measurability, the lack of rumble, or echo, of jingles resonating in the brand consciousness of the nation, the absence of enthusiasm or even collective irritation for a commercial message, certainly wasn’t making prices go up.
The prices went down. This was particularly good for cheap advertisers, abs-tightening-type advertisers, where the math of getting one sale could outweigh, however incrementally, the cost of having to pay for a thousand nonbuyers not paying attention. But it was off-putting to big-budget advertisers who were looking for prestige and singularity and emotional and cultural connection (and, of course, stroking of their own media and pop-culture egos).
The result was a clear new media math: to overcome falling ad prices you had to redouble audience growth.
The other side of measurability, of a traceable audience with definable behavior patterns, is that as well as counting it and categorizing it, you could manipulate it. You saw what stimuli it responded to. You could begin to see what stimuli the entire system responded to. In part that was the ad pitch—we know what people respond to, therefore, we can put that knowledge to the service of your product. At the same time, it was put to the service, not of selling more products (a more complex outcome), but of moving or producing more traffic (quite an easy result).
This became a key skill of digital media: traffic aggregation. Arguably, the key skill. And something of a black art. It was so valuable and necessary and refined an art that high masters of the trade became oracular, sought after, and with schools of imitators.
The point of the craft was to perfect your particular strategy before someone else—so your traffic numbers leapt ahead of your competition’s. And then to come up with a new strategy before everybody else figured out your last one to stay ahead. As a strategy was established and more and more people figured it out, the traffic baseline rose ever higher. And so then you had to figure out something else to raise your base even more (and on and on).
In the beginning there was a pure arbitrage of simply buying traffic for less than you could sell it to an advertiser. But ad buyers getting smart to the arbitrage drove ad pricing down just as the demand for traffic went up (making traffic more expensive), so the arbitrage no longer worked. Then came an era of gaming search engines—search engine optimization. Everybody needed an SEO specialist, spawning a small industry of consultants. The skill here was in what information you put on a page to prompt Google and other search engine algorithms (though, of course, mostly Google) to put your page higher in their search rankings.
That is, whoever was searching on a particular keyword—“Maui,” for instance, or “dialysis,” or “organic”—would see your contribution on the subject, meager though it might be, first.
This had the additional and unintended effect of helping to change the very nature of a media brand. You didn’t go to The New York Times, per se, you went to Google, who suggested not a source so much as a page, effectively freeing and leveling all information. It was surgical selection of information rather than information in the context of a particular source with an identity and history and sensibility that a reader or user in some particular way had a kinship with.
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bsp; Merely grabbing a slice of information because of the ranking on a search engine—a ranking that had little to do with sensibility or context or usefulness (and, often, not much to do with information either)—created not only a new sense of informational disposability (reject, reject, reject, yeah, a little helpful), but a confusion about who was actually supplying the information, and, finally, a break in the relationship and understanding that advertisers have previously relied on and paid for between an information brand and its audience.
This provoked another fall in advertising rates, and another search for new ways to get more traffic to offset the fall.
SEO techniques became so successful that many media businesses came to be created out of providing the bare minimum level of information—functionally valueless in its lack of originality, sourcing, vetting, and accuracy—with a sophisticated level of search optimization. All of which, once more, discredited and lowered the value of digital media to advertisers. Still, if the optimization was advanced enough, that could compensate for the fall in advertising rates—again, traffic arbitrage.
This was, for a period, state-of-the-art digital media, only ultimately disrupted by Google’s concern about falling cost per thousands, and hence, its calculated disruption of search algorithms, having a grievous effect on some of the biggest “content farm” businesses. (Shortly after Demand Media went public, for example, Google’s first tweak to its algorithm in 2011 cut the traffic to Demand’s schlock ehow.com by 20 percent; further tweaks in subsequent years delivered a series of hammer blows to Demand’s stock.) This, in itself, dramatically identified another problem in digital media: traffic, because it flows downstream, can always be obstructed further upstream.
But the caravan moves on. Search engine optimization moved to “social strategy”—that is, an orchestrated plan, and precise processes, for appealing to (or drawing in—or tricking) Facebook’s users. The founder of BuzzFeed, Jonah Peretti, has been open about the company’s focus on social clicks coming out of an early experience seeing their SEO traffic choked off by a slight change in Google policies.
In other words, nobody owned their audience; they just owned technology and process, which could at any time be disrupted and made obsolete by Facebook and Google. (At Facebook this resulted, in essence, in killing the game Farmville, almost entirely marketed through Facebook, and hobbling Zynga, the company that owned it.)
And, too, there developed a perpetual loop of traffic exchanges, such that it might begin to seem that digital traffic was merely a small base multiplied by itself an infinite number of times. Sites exchanged traffic, or they “syndicated” their content into the context of someone else’s content, or they became agents of third-party strategies to aggregate and sell and recycle traffic.
In fact, for most readers, the last time they read New York magazine was probably because they clicked on a sponsored link on another magazine’s site. Outbrain, for instance, pays a large number of sites to carry its widgets (those small blocks of random stories you might find on a page). Sites agree to do this because Outbrain pays $1.50 to $3.50 per thousand views—higher than many advertisers pay. In turn, other sites contract with Outbrain to have their content displayed in these widgets with a link back to the site. For this, a content provider might pay as little as 1.5 cents per click and as much as 7 cents, depending on the level of exposure you want and the amount of traffic you seek. If you are willing to pay 3 cents a click, that might reliably earn you a million visits a month—7 cents might get you tens of millions or more. The only problem is that it is almost impossible to sell a click for more than that—though you might do less poorly if you dump a user into multiple page view slideshows or other force-you-to-keep-clicking formats.
You see the problem here: even using legitimate practices, you produce at best a drive-by audience, and one that costs more to get than you can make on it, which is, fundamentally, digital media economics.
What’s more, you don’t really own an audience. No audience is truly seeking you out. No audience is actually saying they like what you do. No audience is in the end attesting to your value. Other than through gimmicks, you, the audience aggregator and digital media destination, don’t really exist. Or, to the extent that you do have a core audience, it is too small to support the business you’ve built off the illusion of a much larger audience.
None of this is without precedent in other media businesses focused on selling ads. During the 1980s when advertising was as plentiful for magazines as it has ever been, it became more profitable to add circulation to take advantage of advertising revenues at the expense of subscriptions. That is, circulation money came in more slowly than advertising money. Therefore, it was better to lose money on circulation and make it up and more on advertising. This meant, in effect, giving subscriptions away. This tactic had become so widespread that the 1990–91 recession, with its sudden deep drop in advertising spending, effectively realigned the magazine business, which had taken on a huge circulation cost that it suddenly had no ad dollars to support.
In other words, digital media had recreated the same circumstance that had imperiled much of traditional media, or at least print media—a low-value and insupportable audience.
7
THE SELF-PROMOTERS
The traditional publishing business has three sides: editorial, circulation, and advertising. Editorial created the brand (i.e., sensibility), circulation provided the readers, and advertisers bought, in an artful mix, both the brand and the numbers (neither was particularly compelling alone).
Now, circulation has always been a suspect business, from buying or muscling your way onto newsstands or supermarket checkout counters, to dumping copies in hotel lobbies, to the parascience of direct mail, which is where most magazine subscriptions came from. The direct mail model was focused on a single number: response rate. If you sent out a million solicitations, how many people would respond? That number was usually well under 1 percent. So the entire job became how to lift that number, how to move the dial from .006 to .008. This was done with discount offers, or contests, or free merchandise. But, more economically, it was done by measuring the effectiveness of a range of stimuli—colors, type size, exclamation points, peel-off stickers, pictures of animals, or, in Time Inc.’s great leap forward, by developing a technology to individually address each direct mail recipient. This was the intersection of data and psychology. It was hardly the proudest part of the business; indeed it was scandal prone (organizations like Publishers Clearing House and other sweepstakes firms were always being singled out for egregious abuses at the intersection of data and psychology), and the focus of more and more regulation by state and federal laws.
Still, beyond the promotional flimflam, there was a product. The magazine, however aggressively or fraudulently it was marketed, still stood for something. It was something. You could evaluate the worth of the product.
In a certain curious way, digital media, and social media particularly—that perfect medium of data and psychology—has devolved only to a circulations strategy, for all intent and purpose eliminating an independent editorial product, and even advertising sales. The business is overwhelmingly, in many instances exclusively, focused on response rate. Marketing is no longer a separate function from editorial—the editorial is the marketing. The editorial is the confection, endlessly measured and adjusted against the real-time data, designed to increase response rates. There is a vast funnel of greater and lesser successful techniques at that sweet spot of data and psychology, all meant to make you click, like, share. The right tactics might increase your response by ten times, and hence, sustained over time, your VC valuation by ten times. Not incidentally, in the publishing business the promotions people were the lowest paid; in the digital media business this same function, now needing CS/engineering/math degrees, is the highest paid. It’s the leadership job.
The problem is that, with most resources and skills directed
at response rate tactics—and not at the creation of a message or sensibility—the only thing an advertiser has to buy is the number. (And, indeed, the method of advertising buying has become increasingly about efficiently buying those numbers—those eyeballs.) There is no unique thing to buy. Nobody is buying sensibility. Hence, the entire game is in producing greater numbers. That’s everybody’s game. Everybody gets ever better at producing an ever-higher response rate. But if everybody is better at it, then there are ever more eyeballs to sell, and, since every eyeball is just a function of data and psychology, no eyeball is meaningfully different from another. Not only do prices go down as inventory rises, but nobody has created a distinct product to actually capture or own those eyeballs. Every eyeball has to be captured again—as though for the first time.
Here’s the effective business formula: increasing clicks (or likes or shares) + declining ad rates = billion-dollar valuations. Obviously that’s an unsustainable proposition that everybody sees (and applies great sophistry in an effort not to acknowledge) and is trying to race ahead in some mostly terrified fashion (albeit with a veneer of cockiness) to correct.
BuzzFeed, Vice, and Forbes have been among the most adroit exploiters of these new promotional techniques—and all have understood the need to escape the confines of a model that ultimately resembles nothing so much as a pyramid scheme (not only do the techniques flatten but eventually the eyeballs run out).
In the instance of BuzzFeed and Vice, the effort is to use the digital promotional pyramid to build a brand and bootstrap themselves into a much more traditional television model; for Forbes the effort has been to use digital promotion to help distance itself from print—but, alas, without an endgame, or an endgame only into digital, this resulted in the destruction of its brand and the necessity of a fire sale.
Television Is the New Television Page 4
