The Realities of Big Web Traffic and Advertising

Major news sites that rely on advertising as their primary revenue stream need to log hundreds of millions of page views per month to attract significant attention from advertisers, according to a new report from Lauren Rich Fine, research director of ContentNext.

From Advertising Age:

“Based on our research, the conversation [with advertisers] gets interesting at 200 million page views plus a month, but much more so around 800 million,” Ms. Fine writes …

… The report also looks at whether the [New York] Times could ever succeed as a web-only product, and concludes that it could — once starts generating 1.3 billion page views a month.

(Note: Advertising Age cites ComScore Media Metrix figures that put the Times’ traffic at 173 million page views in October, but the Times communications department says this figure is very low).

Traffic estimates in the hundreds of millions and billions are a shock to the system, but they’re nothing new. Jeremy Liew analyzed the online media industry in early 2007 (a time when Web advertising was still enjoying double-digit growth) and concluded:

At large scale, without a great deal of targeting possible, a startup’s “run of site” or “run of network” advertising might be able to get to the $1 RPM range (Revenue per thousand impressions, including CPM, CPC, and CPA models). To get to $50m in revenue you would need 50 billion pageviews in a year, or just over 4 billion per month.

This type of analysis — which is certainly on target — is why it’s important for publishers to acknowledge the reality of Web advertising by addressing two deeper questions:

1. Can I reach sustainability faster by aggregating advertising across sites or building a smaller organization? — Limited choice shoehorns audiences into large groups, but the Web disrupts channel lock-in by allowing individual consumers to find material on their own terms. Big organizations are in trouble because the transition from limited channels to distributed channels means audiences are smaller (ie: 1 million vs. 10 million, 100,000 vs. 1 million, etc). There’s still significant value in reaching 1 million people, or even 100,000 people, but smaller audiences attract less advertising revenue. So the challenge is to either scale businesses down so audience size, advertising dollars and sustainability even out, or, aggregate advertising revenue from a large number of targeted sites. Both options are arduous, but both are also realistic. Finding and maintaining billions of page views per month is not (the New York Times being the exception here).

2. Can I diversify beyond advertising? — Ad-only Web models are inherently flimsy because the thing advertisers want is the thing most Web sites can’t attract: huge crowds. A lot of lip service has been paid to the Web’s targeting argument — and in Google’s case, that’s proven effective and lucrative — but the analysis from Fine and Liew shows that advertisers still can’t shake that “big crowd” mentality. So if that’s the reality, advertising needs to become one revenue stream among others.

Folks like Mike Masnick, Clay Shirky, Kevin Kelly and Chris Anderson have addressed these “other” revenue steams at length (all are recommended reading), but the abridged analysis of their work generally comes down to one word: scarcity. Digital content is not scarce. It’s easy to find, distribute and copy (even if publishers lock it down). Because of this, audiences don’t often equate “digital content” with “pay.” Publishers can fight consumer expectation by creating artificial scarcity (DRM, pay walls for general content), but that same energy is better directed toward products that are naturally scarce: things that solve a problem (recommendations, education), offer an experience (readings, concerts, trips, conferences), grant access (consulting, POD for out of print titles), save time (curated information), and offer value on an individual basis (customization). All of these are outside publishers’ comfort zones and none are guaranteed to catch on, but models that work in conjunction with the digital world offer a better shot at sustainability than those built on artificial limits and unrealistic audience sizes.

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