This is the third of a series of blog reports about the status of the news landscape and a challenge to create a new one. The first two were “The future begins with P: Privacy, personalization and payment” and  “Imagining the 21st-century personal news experience — and how publishers need to collaborate to create it.”  The series and report are authored by Bill Densmore, a 2008-2009 RJI Fellow and originator of the Information Valet Project.

It was a symbiotic relationship — mass-market advertising and local journalism. Now the two are heading for divorce. Is any reconciliation possible?

This report will:

• Review the state of the digital advertising marketplace
• Introduce the idea of “advisortising” — one-to-one marketing
• Suggest publisher collaboration could enhance one-to-one advertising
• Give examples of some collaboration, and why it may not involve Silicon Valley

In the 1990s, legacy media organizations rushed to put their content on the Web, assuming a gusher of digital advertising would support the move. They miscalculated. Other competing websites multiplied and the competition for online advertiser dollars became so intense that it became a buyers’ market. Rates that could be charged for mass-market national digital advertising plummeted. Thus the local newspaper media segment has been forced to rely mostly on local retail digital advertising, and on a slice of revenues from alliances with the giant ad platforms run by Google or Yahoo.

U.S. digital advertising surpassed print a few years ago and is forecast to overtake broadcast TV in two years, according to a November 2014 “ForecastView” report from Forrester Research, rising to $103 billion by 2019 and representing 36 percent of all ad spending. So the business is there, but it is being sliced and diced among hundreds of thousands of websites via Google’s platform and others. Legacy media’s share is a shrinking slice of a growing pie. Advertising is not working very well in its current forms,” says Robert Picard, research director of the Reuters Institute for the Study of Journalism at Oxford University. “The problem is that how it is being done is being left up to the advertisers — and the publishers are not taking much of a lead in that and so there are lots of problems.”

The build-it-and-they-will-come mentality of the early Web — that advertising put in front of thousands of “eyeballs” would sustain journalism — did not work, observes Jo Martin, former chair of the American Newspaper Digital Access Corp. (ANDAC), and a retired publisher at Times-Citizen Communications of Iowa Falls, Iowa. “Journalists have been giving away their product for way too long. And I’m very gratified that some of the biggest journalism institutions are coming to the conclusion they can’t do that anymore.”

Advertising is working on the Web and mobile — but the biggest winners are search and social platforms such as Google and Facebook. The sheer volume of time spent on social-media sites makes it inevitable that a large chunk of advertising will flow there. And by 2014, NewsWhip illustrates how a great deal of news is being shared on Facebook, too. (See also: “How Facebook is wrecking political news,” posted Oct. 19, 2014.) Media companies need to move away from relying on low-value, direct-response-style advertising because it requires volume — and behemoths like Facebook and Google have most of the volume, according to three Columbia Journalism School researchers in a May 2011 report, The authors, Bill Grueskin, Ava Seave and Lucas Graves, also called for alternatives to the impression-based pricing system. There are signs both of those things are starting to occur in niche areas of digital advertising.

Media companies need to move away from relying on low-value, direct-response-style advertising because it requires volume — and behemoths like Facebook and Google have most of the volume

In consumer Jane Doe’s world of digital news consumption (see last week’s blog report) commercial messages are gradually being delivered in a post-mass-market environment. Rather than collect audiences by publication, programmatic advertising systems find similar consumers by tracking their behavior across the Web, then serving them relevant advertising wherever they may be landing. An advertising buy might include ads showing up on thousands of independent websites, and a given ad might be seen by only a tiny fraction of the regular users of each of those websites.

Welcome to the world that I choose to call targeted “advisortising.” It’s a world where the brand message reaches you because you’ve already demonstrated some interest in the product, or you might be near the store that is selling it. Previously, connections occurred in a face-to-face world — your friendly bartender, waiter, retail store clerk, doorman, doctor, lawyer or accountant — knew your personal interests and catered to them. Now, digital networks can do that too, as personalization technologies advance. This approach — understanding a user’s interests and catering to them — is what I mean by “advisortising”: marketing focused not on the mass market, but on niches right down to an audience of one — just like the local store clerk or bartender.

This change is part of the reason for the separation of the business of advertising from the business of news. Google, Facebook and a slew of digital advertising networks got a head start on the news industry in the advisortising business and now publishers have to either play catch up on their own or align with the technology platforms.

But there’s opportunity. Facebook may not yet be doing the best job at advisortising.

Brand advertisers — those promoting their general name and reputation rather than specific sale items — may be wasting their time and money on social networks Facebook and Twitter, says a Nov. 17 Forrester Research analyst’s report. Because of new Facebook technology tweaks, just 2 percent of a brand’s Facebook fans see a brand post, and only 0.07 percent interact with them, wrote Forrester’s Nate Elliott.

“Brand advertisers are not happy with the decline of quality publishers,” adds Doc Searls, co-founder of a major Silicon Valley advertising agency he led from 1985 to 1998 before turning to research on customer identity management with the Berkman Center at Harvard University. “They want something besides programmatic. It’s possible some of them could help fund research.”

Is native advertising a form of advisortising?

In 2014, the phrase “native advertising” took off in the digital world. It refers to an ad placement that tries to mimic the content around it, or is presented in a story form. In its Jan. 29, 2015, report, “Advertising Is Going Native,” the Association of National Advertisers predicts a big boost in national-advertiser use of so-called native advertising, with most marketing executives acknowledging it should be clearly disclosed.

“Online advertising has a trust problem,” says Jason Kint, CEO of Digital Content Next. “I think it’s time to actually be having the conversation and creating a framework.”

Another issue: What if the ads aren’t even being seen? PageFair, a company that helps publishers combat the problem, says 15 percent of British Web users have ad-blocking software — such as AdBlock — installed. That’s 144 million users globally. In December 2014, both French and German publishers were reportedly considering suing the creator of anti-advertising software AdBlock Plus. There’s also another reason advertisements might not be seen — even if they are on a page that is recorded as “served” for billing purposes. That’s if the ad is positioned on a part of a web- or mobile page below where the user scrolls. Google is seeking to build industry consensus around methods for measuring which ads are physically seen and which are not, and price according.

A lack of trust in digital advertising market? Fraud predicted at $6.3B in 2015

Digital advertising is one area where trust is lacking today, says Tom Drouillard, CEO, president and managing director of the Alliance of Audited Media in Arlington Heights, Illinois. In an Oct. 9 speech to a New England Newspaper & Press Association gathering, Drouillard warned that there is “billions of dollars” of advertising fraud online involving the failure of online ad exchanges or other intermediaries to deliver as expected by advertisers or publishers. Of advertisers, he says, “Those are the guys that are wasting billions of dollars because of the fraud.” In a report released Dec. 9 and reported by The New York Times, the Association of National Advertisers predicted digital ad click fraud will cost advertisers $6.3 billion in waste in 2015, up from $5 billion in 2014.

“The whole industry needs to ensure that trust is involved in digital media buying or else there won’t be any,” he said in a subsequent interview with the Donald W. Reynolds Journalism Institute. “There is a ton of money being spent in the digital space and there is absolutely no assurance today. It can’t be like that forever, it won’t work that way. We are working on the other associations to work on the known problems and work on building that assurance into the system.”

AAM is a non-profit consortium of about 5,000 mostly traditional U.S. publishers, plus advertisers and agencies. It audits media circulation and usage both in print and online. As a nonprofit, its interest is in providing assurance for media buyers and sellers. It tracks metrics used to price online and mobile advertising.

Newspapers in particular need help at improving the promised impressions and forecasting — versus delivery — of advertising impressions, according to Ron Blevins, vice president of digital strategy for the Novus Media division of Omnicom, the giant advertising agency. Yet at the same time, brand advertisers remain impressed with news brands and want to be in that environment. Blevins is in charge of Novus’ In an interview for this report, Blevins also made the following points:

• Novus-Omnicom, like other big agencies, now has its own advertising trading desk connected to at least 2,600 newspaper and news sites. They can negotiate with the advertising digital exchanges real-time rates for advertising placements; they don’t have to go through Google or an advertising network. Their brand customers like not having to do the hard placement work themselves.
• The number of third-party ad networks will collapse over the next year or two to just a handful from hundreds, replaced by electronic exchanges. There are now about seven big exchanges. The era from 1999 to 2007 was the era of ad networks — at least 200 of them. The exchanges that remain will largely be owned or controlled by the big ad-tech companies of Silicon Valley — Google, Yahoo, Facebook and Microsoft.
• The supply of mobile advertising inventory is increasing dramatically.

Cooperative parsing of reader interests?

Blevins says a greater good could be served by publisher collaboration around the parsing of reader interests for advertising sales. “One of the things the small publishers may not have is a solution to buy a specific audience across their websites,” he says. “Some may have that or may be purchasing it from a third party, but they don’t have enough scale in their site to build audience segments off of, or the technology to do so.

And so a shared kind of data collection and utilization entity is very interesting.” And once that kind of cooperative comes under discussion, says Blevins, it could have positive implications for news sharing as well. “The exchange technology that is driving ad placements could be used in principle to price and exchange digital content of any kind — including news,” Blevins said.

Searls, the Berkman Project VRM researcher, says the big-brand Madison Avenue advertisers are upset and confused enough by the current marketplace that they have the motivation — and the money — to support ideas for fixing it. Newspapers, he worries, don’t have the money by themselves for such research and development. But they might, he says, working with each other and academia.

Indications of collaborative spirit — for advertisers and users

There are indications that a spirit of collaboration is emerging among big media companies to counter the power of Google- and Facebook-type platforms to either (1) Offer advertisers access to large groups of segmented users or (2) Offer public users a simple way to manage their identity on multiple websites. Two examples are a persona-sharing initiative to improve advertising targeting between two of Britain’s largest newspaper groups, and a grant-funded collaboration between The New York Times and The Washington Post to share digital identities of people commenting on stories.

• For advertisers, Britain’s Guardian News and Media and Telegraph Media Group — two feisty editorial and business competitors in the London daily newspaper field — to announce Oct. 17 their “Audience not Platforms 2.0” partnership, sharing subscriber and user demographics on roughly 43 percent of the UK’s adult population for audience segmentation and targeted digital advertising. “The single biggest disruptive impact of the Internet on advertising has been the ability of big websites and audience aggregators to offer access to huge numbers of people,” MediaBriefing reporter Jasper Jackson wrote Oct. 16 of the alliance. “That doesn’t just mean mass campaigns, it also means the ability to target smaller groups based on very specific characteristics.” He wrote that the Guardian-Telegraph alliance “offers ad buyers the ability to target the combined audiences of their two publications. … ”
• In mid-2014, the John S. and James L. Knight Foundation announced a multimillion-dollar grant to the Mozilla Foundation — the entity responsible for maintaining the Firefox Web browser — to allow it to extend the work of the In an unprecedented collaboration among The New York Times and The Washington Post, the project is building a way for public users to see and link all their commenting activity across multiple websites: a persistent identity tool. At its core, the New York Times-Washington Post project is about building an identity ecosystem for the Web and for publicusers to compete with Facebook Connect, says Dan Sinker, project director and a Columbia College of Chicago instructor. He says it will work like Twitter or Facebook to provide a network login across multiple news sites.

“We want to have systems that are actually open but also take user data and user privacy seriously and give the user control of that information,” Sinker said in an RJI interview. “ That’s the big problem with Facebook Connect — Facebook does not have a great deal of respect for the consumer and the user has almost no control over what Facebook does with the data. Facebook has all the control.”

Advertising: The “original sin?”

For most of the last 15 years, much of Silicon Valley — investors and technologists — have argued that advertising was the only business model that made sense for news, because “information wants to be free” on the Web. Now, some are challenging that assumption. One of the more prominent to adopt that view publicly is Ethan Zuckerman, director of the Center for Civic Media, part of the storied Media Lab at Massachusetts Institute of Technology.

Zuckerman on Aug. 14, 2014, authored a controversial piece for The Atlantic (also see a rejoinder by City University of New York professor Jeff Jarvis), which argues it was an original sin for media to think advertising could support news and civic information. He calls for alternatives. “It’s not too late to ditch the ad-based business model and build a better Web,” the article notes. “There is no single ‘right answer’ to the question of how we pay for the tool that lets us share knowledge, opinions, ideas, and photos of cute cats,” writes Zuckerman. “Whether we embrace micropayments, [1] membership, crowdfunding, or any other model, there are bound to be unintended consequences.”

In the end, news industry has to answer an existential question, says Tom Rosenstiel, executive director of the American Press Institute. “The question is: What business are you in? And the answer that we get close to is you’re in the knowledge business, you’re in the business of organizing information that helps people live their lives better and there are many businesses born out of that, lots of things you can do to generate revenues.”

Doesn’t Rosenstiel’s observation require that the publisher — not Facebook — know their customer? If so, it’s time for the news industry to get a lot smarter about advisortising. Could advisortising — permissioned, personalized advice to users from trustworthy brands that is more like news, but clearly labeled as advocacy — be part of the new support system for news?

Maybe. But news organizations shouldn’t necessarily look to Silicon Valley for help. Because so far, the big ad platform companies do not see themselves as needing to spend money on original journalism.

“In my last trip to the Valley, the best minds were talking about the same issue,” Atlantic Media Co. owner David Bradley told The New York Times’ David Carr. “Is the coming contest between platforms and publishing companies an existential threat to journalism? At least in the Valley, largely the answer I heard was ‘Yes.’ ”

Related links

• O’Reilly’s Andy Oram on “advisortising,” aggegation and the network
• Paul Gillin on a paid content model that makes sense
• Can an ‘exchange’ help solve the problem of monetizing digital news? 

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[1] — See “The web needs a micro-payment system,” Item No. 18 in John Naughton’s list at The Guardian. March 9, 2014.