Why Should You Care About Direct Reader Revenue?
Written by: Celia Wu, COO of XeePay for News
This is the first of a multi-part series on direct reader revenue and the news media. This first part looks at the state of digital advertising for news publishers.
Digital advertising continues to soar, overtaking non-digital advertising in 2017, per the Pew Research Center’s 2018 report. According to the Internet Advertising Bureau, digital advertising in the U.S. grew to $107.5 billion in 2018, up 21.8 percent from the year before. The same report revealed that 75 percent of internet advertising revenues in Q4 2018 remain concentrated with the top ten leading ad-selling companies.
Globally, digital advertising is dominated by the “duopoly” of Google and Facebook, with no other digital advertising site in the U.S. with a market share above five percent. eMarketer projects that in 2019, of the total global digital advertising of $327 billion, Google and Facebook would receive nearly half of the spend - $102.4 billion and $67.3 billion respectively.
With digital advertising spend dominated by the “duopoly” globally, and the top ten internet sites in the U.S., how are local and independent news sites competing for these ad dollars? The Wall Street Journal (WSJ) warned that local journalism is in danger of vanishing: “While Google and Facebook have siphoned ad dollars away from all publishers, local news publishers have been the hardest hit. …The shrinking of the local news landscape is leaving Americans with less information about what’s happening close to them.” The WSJ continued to report that in the past 15 years, nearly 1,800 local newspapers have closed, leaving 200 counties with no newspaper, and half of the 3,007 counties in the U.S. with only one paper.
In his book, The Internet Trap: How the Digital Economy Builds Monopolies and Undermines Democracy (2018), Matthew Hindman gave a bleak outlook of the state of digital media: U.S. news sites get only three percent of web traffic, and only one-sixth of that traffic goes to local news. Hindman believed that digital survival’s dependence on stickiness makes it “the most urgent problem facing journalism today.” He continued, “If journalism needs an audience to succeed, then most digital publications are failing. This dearth of digital readers is especially dire with local newspapers. …Like it or not, preserving local journalism is thus mostly a question of helping local newspapers adapt to the digital age”.
Hindman concluded that, bottom line, “newspapers cannot monetize an audience they do not have,” meaning local media’s value proposition is scant for digital advertisers who traditionally buy at scale.
So what is a local or independent news publisher to do? In the face of this advertising climate, is it time for publishers to make readers their customers, and not just the advertiser? How can this be accomplished?
In subsequent posts I’ll be looking at direct reader revenue models: subscriptions, donor models, membership models. Please check back in, would love to hear your thoughts too on this topic.
Celia Wu is COO of XeePay for News, a micropayments platform designed for digital media content. She is also currently writing her thesis on journalism sustainability as a graduate student at the University of Missouri’s School of Journalism.