Saturday, January 31, 2009

Pajamas Media and the demise of blog network advertising 

Pajamas Media has notified its participating blogs (we are not, actually, one of them, but only because I did not want to sign up for the indemnification provisions in their contract) that it will no longer be placing ads. There was no explanation in the letter posted at Protein Wisdom, but Glenn Reynolds says that ad-network model is not working.

That's too bad. The original premise, which I thought was smart, was that there was a pricing gap between blog advertisements and those on other media sites. Studies showed that blog readers were wealthier and more robust consumers than the general internet audience, yet blog advertising rates (controlling for audience) were much lower than those prevailing on mainstream media sites. Roger Simon's idea, if I understand it, was that this disparity exists because blogs are too fragmented and too small to negotiate well. The promise of Pajamas Media was that it would act, in effect, as a collective bargaining agent for its network of blogs. Media buyers could reach hundreds of thousands of affluent readers by dealing with one player, which would then distribute those ads over hundreds of blogs simultaneously. According to this thinking, Pajamas Media would deliver value to media buyers by making it possible for them to reach blog audiences easily, and to bloggers by improving their bargaining position and thereby their rates. Alas, like many intuitively sensible business ideas, this one has run aground on the rocky shoals of reality. The question is, why?

There are probably a number of reasons, but the main one -- the decline of conventional internet advertising -- overwhelms the otherwise reasonable premise behind Pajamas Media.

Conventional internet advertising is generally down. Mainstream media sites have seen a huge surge in traffic in the last few years, but a decline in online revenue. Suffice it to say that this is very bad news for the big news organizations, which were hoping that online business would grow quickly enough to sustain their newsgathering operations. It is also bad news for people who want to sell ads on blogs, because it means that they are competing with a very hungry mainstream media.

What accounts for the decline in conventional online advertising? I am no expert, but it seems to me there are at least three likely causes. First, we have been in a recession, and advertising, with its unclear rate of return, is easy to cut. I am very familiar with the budgeting process at one brilliantly run company, and it has cut its advertising budget to the bone.

Second, I am told that web site banner advertising suffers, in a sense, from too much transparency. Media buyers know what they pay "per click through" and per dollar of directly attributable revenue, and therefore tend to value banner advertising according to these concrete metrics. Ironically, that puts internet banner advertising at a great disadvantage to print and broadcast advertising, the value of both of which are much more difficult to measure. Corporate budgeteers can measure a superficially accurate rate of return for internet banner ads but cannot for television, so if the former is too low they kill it before they ax the thing they cannot measure. There is an obvious problem with this thinking -- the banner ads get no credit for "building the brand" through impressions, which is in principle one of their great benefits -- but nobody ever said that corporate bean-counting cannot drive stupid thinking.

Finally, the quantitative mentality is driving internet advertising dollars from banners to search engines, particularly Google. Search-driven ads may or may not do as much as banners to drive brand identity, but they seem to do a better job of driving measurable sales. In tough economic times especially, sales today are more important than brand awareness some day.

In a final bit of irony, the sames trends that are doing in the major newspapers are threatening independent "professional" bloggers, at least some of whom have delighted in that industry's troubles. It turns out that one's ability to monetize the intertubes may not depend entirely on the character of one's content.


By Blogger D.E. Cloutier, at Sat Jan 31, 01:55:00 PM:

Filmmaker Walt Disney said, "Lick 'em with product." But industrialist Andrew Carnegie said, "Pioneering don't pay." Oil tycoon John D. Rockefeller agreed with Carnegie.  

By Anonymous Anonymous, at Sat Jan 31, 03:05:00 PM:

It's not the click through measure as Cable TV is now overwhelmed with per contact ads. I was watching a Movie on AMC last night and it was entirely adds for a very low rent "male enhancement" supplement. The spokesmodels were the skankiest I've ever seen.

When you can't even fill the time with Shamwow or Bowflex ads, you know the market is down.  

By Anonymous Anonymous, at Sat Jan 31, 03:47:00 PM:

I have long wondered the same thing, TH. Why would an ad placed at, say, the online version of the NYT, be worth only a tiny fraction of a similarly sized ad in the print NYT? Advertising strategy is obviously too complex for my feeble mind.  

By Anonymous Anonymous, at Sat Jan 31, 04:35:00 PM:

I don't understand the terms or the business model. But, I have stopped clicking on AOL news pages and others.
The "teaser" too often leads to a page(s) that does not live up to the teasser. My impulse interest seldom goes beyond one click and since so many are designed to force me to see new teasers, I just don't hit the first click any more.
There is no question, however, that my shopping habits have changed. I got the some issue of Consumer Reports. There were some things that winked at me, too. In the old days, I list what I wanted and review all the Sunday newspaper advertising to see if it was on sale. Today, I just go to Amazon.com or Pricegrabber.com first and only.  

By Blogger Unknown, at Sat Jan 31, 06:18:00 PM:

If blog readers are more intelligent, they, I suspect, install an ad blocker and none of these advertisements are ever seen.

When I am blog reading, I am not shopping. I will visit a site linked t in content, not sitting there on the side begging for attention. Then again, I rarely see those sitting on the side.  

By Blogger Dymphna, at Sat Jan 31, 06:53:00 PM:


I pretty much shop the same way you do, the only difference being that when I can't get an item on Amazon Prime (free shipping), I will look around for cheaper prices for S&H on other sites.

For example, Amazon went up 15.00 in their S&H for a Needbak rebounder in the space of several days. From 28.00 to 40.00! I got back on and did a search for Needak's soft bounce rebounder(the specific product I wanted) and found a much cheaper shipping price from a place with a good rep.

The nice thing about Amazon, when shopping for a popular item, is the feedback section. People are very specific about their complaints and kudos. Makes one's purchase decisions a bit easier.

Also, of course, I make a fair amount of money in the form of certificates for items on Amazon since I have one of their credit cards and put every single thing I possibly can on that single card.

I just figured out that paying my taxes that way works too. Yeah, the gov't approved site for paying by credit card charges you, but Amazon points give you more than enough to make up the difference so it leaves you ahead of the game.

Last year, what with the price of gas, groceries, doctor bills, taxes, etc., I got back somewhat more than six hundred dollars in certificates. That ws my Christmas shopping and then some (we went Christmas Simple a long time ago).

Their system certainly permits me to order more books than I would otherwise feel able to pay for out of household funds.

As for the PJM crew, they banned us a long time ago for daring to discuss the possibility of genocide in Europe if the demographic and violent crime stats continue on their downward spiral.

We took pains in the opening remarks of that post to make sure people unerstood that our writer (a worried Brit intellecutal who had returned to his country from South America) was discussing various scenarios as *possibilities* given the present decline in the rule of law in his native land.

Those in charge at PJ don't understand the basic difference between normative and descriptive statements. So we got the boot for talking about genocide. That word is not permitted within the halls of PJM.

Fortunately, our readers took up the slack with donations and we are able to operate without ads. Our readers cover expenses, plus a little extra for investigative trips.

Being cast into the outer darkness turned out to be a blessing -- and not very disguised at all. Within ten days of being booted, we had enough funds to operate for the rest of the year.

In return, we made a deal with our readers: no more ads. People limited to dial-up connectivity were most appreciative.

What the experience taught me was that for all their talk about inclusion, PJM is essentially a 9/11 conversion site with a very narrow bandwidth re politically correct ideas and words. Stray from that narrow path and they become scared.

Other leftist converts seem to have that tic, too. Strange...I guess no conversion is ever total, especially if you fail to do your reading assignments in history and political philosophy.

One Ground Zero does not a conservative make...  

By Blogger The Leading Wedge, at Sat Jan 31, 07:40:00 PM:

I'm with RDOwens on this one. I've hardly ever seen an Internet ad and don't plan to let them dominate the CPU on my computer anytime in the near future. I don't mean to imply that I'm more intelligent than the average. I just can't stand banner ads.

Ad-blocking technology is spreading so will cut ad revenues over time.

That said, not everyone wants ad-blocking. I installed it on my dad's computer and it took the joy out of the Internet for him. I had to remove it. His PC runs slow again, and the fan blows constantly, but he's more happy.

Anyway, Adblock rules.  

By Anonymous Anonymous, at Sun Feb 01, 08:44:00 AM:

Word-of-mouth is the best form of marketing, and the Internet is a fantastic word-of-mouth tool, perhaps offsetting traditional ad tactics.

I believe that advertising folks will look more to product placement to avoid ad-blocking technology and become a part of the word-of-mouth "movement".  

By Blogger Sisyphus, at Sun Feb 01, 11:07:00 AM:

It sounds like what PJM needed to do was try more advanced models for payment of banner ads, like cost-per-click or cost-per-action. The latter continues to grow, probably because it directly leads to sales, rather than impression-based brand advertising on a cost-per-thousand model. Lots of the bigger advertising networks are going to that and making considerably more money on those deals, now that the brand premium has been reduced.  

By Anonymous Anonymous, at Sun Feb 01, 01:07:00 PM:

I also agree with RDOwens. When I'm blog reading, I'm not shopping. Of course, everything advertising interests me, its my business. As such I have no adblocker. I also suspect that because blogs tend to attract and sustain an audience that is there primarily because of their political ideology, we are visiting blogs because of the content, not actively scoping ads. Someone else mentioned that cpc or cost per action is the way to go to attract and keep advertisers interested. I agree completely, especially in an economic downturn where every penny is counted. Great article Tigerhawk.  

By Blogger TourPro, at Mon Feb 02, 07:34:00 AM:

Don't worry, when it comes to advertising, we all have "feeble minds".

The Process  

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