My friend Shaun went to the University of Indiana. I don’t know what was in the water in Bloomington then, but Cam Jaeb, the founder of was a student there around the same time. Jaeb met Todd Wagner, a local attorney, Wagner brought his pal Mark Cuban in. At Cox we became their very first customer and after that, the thing snowballed. They sold to Yahoo! in 1999 for $5.7 billion. A disaster for Yahoo! but exultation for Cuban. He took out a billion and never looked back.

Shaun had big ideas, too. He wanted to start a magazine focused on college sports. His father said he should go to New York to talk to ad agencies to see if they thought the idea might fly. He handed Shaun a same day, round-trip ticket.

All day Shaun knocked on doors up and down Madison Avenue. No bites. Finally came one last attempt, in the late afternoon before the evening flight back home. The big one on his list. Ogilvy and Mather. He took the elevator to the executive suite on the 32nd floor and asked the lady behind the desk if the president, Michael Lesser, was in.

“Well, yes, he’s in, but he will not see you without an appointment,” she said.

Shaun asked for her number. He took the elevator back down to the lobby, found a public phone booth, picked up a pay phone and called the very same lady. “Good afternoon,” he said. “I have flown here all the way from Indianapolis with a unique marketing idea for Mr. Lesser. I wonder if he might see me for 10 minutes?”

The kind lady took pity on the young rube from the Midwest. “Certainly sir,” she answered. “Come on up and I’ll take you in to see him.”

Sometimes in business, more often than people think, you encounter unusual kindness.  

This was it. The big fish. Shaun went for it. “10,000 sports-mad students. A captive audience. Quality journalism. A chance to establish brand position that will endure through their peak earning years. Subsequent roll-out possibilities to other campuses.” He finished. Breathless.

Lesser swiveled in his chair to gaze out the window over Manhattan.  He lit a large cigar. There he sat, lost in thought, enveloped in blue cigar smoke, for an eternity. Finally, he turned to face my pal Shaun, now slumped in a chair across the other side of his desk.

“That’s a great idea, son,” said Lesser. “Original, and very well presented. I have only one question for you.”

“What’s that,” said Shaun, brightening.

“Where the fuck is Indiana?”  

No national advertiser is interested in reaching a singular audience of 10,000 people. National advertisers live at the top of the marketing funnel, where building brand awareness is what matters the most. To build such awareness requires expansive reach and heavy frequency. It’s a tonnage business. A multi-market, big-volume impressions business. Multi-market advertising is difficult to buy and place, so ad agencies evolved to fill that role. (It was particularly complex with regards to newspapers, because each newspaper jealously held to its own pricing structure and production standards) Upon the advent of the consumer internet, programmatic advertising developed quickly to reduce complexity for digital advertisers. Computer exchanges replaced RFPs, manual placements and bid negotiations. Programmatic agencies take the pain out of a multi-market buy, just as traditional ad agencies did for television and newspaper advertisers.

Shaun returned to Bloomington. He founded his little magazine and filled it with local advertising, instead. After graduating, he sold it to the local newspaper. He went on to become the chief executive of a media company in the Northwest, where he lives in happy retirement to this day. (Hi Shaun!)

One day in New York, one big lesson about advertising.

Most publishers, even those working in digital media, could use a day like that. They cut their teeth in editorial. They neither understand nor appreciate advertising. They’re skeptical of it, even though it often pays their salary. They really hate low-end programmatic ads don’t we all? – but make the mistake of thinking the low-end defines the entire business. I think it’s significant that many publishers I’ve known seem never to have met an advertiser, even one who buys their own product.

A friend of mine is an executive with Vox Media. Earlier this year Vox acquired Group Nine, a publisher of vertical media products including The Dodo, a fast-growing feel-good site for pet lovers. The day the deal was announced, she got a call from a publisher friend. “So,” he said, “how does it feel now that your salary is being paid by pet food companies?” See what I’m saying? Advertising makes editorialists feel a bit like Kris Kringle, seasonal employee of Macy’s, sending kids and their deep-pocketed parents across the street to Gimbels to get the good stuff. Self-righteous, and just a little guilty.

As large and small publishers develop a new product or refine an existing one, advertising – or assessing the fit with potential advertisers’ priorities – is an after-thought. The only exception is the magazine business, where no new title is ever approved without confirmation that it has a base of advertisers to support it. Of all that I have learned about advertising sales over the years, the most important lesson is hold your price. A close second is the need to establish a co-presence with the advertiser, so together a campaign can be built to achieve a particular marketing objective. And third is the need to understand the structure of advertising spending by business sector. For example, local car dealers allocate marketing dollars for very specific reasons, auto dealer associations deploy manufacturer dollars in the same marketplace to achieve quite different promotional objectives. Most publishers in the news media business don’t have the faintest idea of how to do these things. Nor do they have the inclination.

So, the shift to digital subscriptions felt right to them. If you wanted to sound smart at a media business conference in the last five years, or vent self-righteously in a column, or position your media start-up for investment or a sale, you talked about the rise of digital subscriptions and boasted about your independence from advertising.

The Wall Street Journal, Netflix and Spotify led the way in getting consumers to pay every month for their digital products. The New York Times, The Washington Post and many others followed. Soon, everyone was hawking media subscriptions, from the owners of the SpongeBob SquarePants TV show ($5.99 a month) to Reuters ($35) to literally thousands of newsletter publishers ($4.99 here, $9.99 there) to my friend Jaime who wanders aimlessly around Barcelona and tells you what he has stumbled upon (€3).

The digerati proclaim “advertising is dead”

The digerati loved the move to subscription media. Like this guy, Professor Tim Wu of Columbia University, author of The Attention Merchants. By saying this, in The Atlantic, he earns himself the first blast today from BlastofWinter:

We have to get over our addiction to free stuff. Suck it up and pay. A lot of people say, ‘I hate ads, I’m sick of ads, I’m sick of clickbait, I’m sick of this race to the bottom…well, you have to put your money where your mouth is

Note how oblivious this tenured academic is to the spending decisions regular folks must make each day to make ends meet. Notice also the connection he insinuates between advertising and “the race to the bottom,” as if all advertising is comprised of flashing banners and irrelevant programmatic junk, as if advertising by its very nature dooms any prospect of good journalism. How about that, Saint Walter Cronkite?   

And like this guy, an otherwise quite insightful writer with a newsletter you perhaps should check out:

“Good ads,” he says in this post, “can actually be helpful.” See that word “actually?” Thus down the gurgley is tossed the engine of the entire consumer retail economy, as flippantly as Trump flushed away his top-secret docs.

I know, it’s beginning to sound like a pile-on. I just can’t help myself when I’m inundated with this inanity. So, how about this one, from James Breiner, in something called “Entrepreneurial Journalism,” in March:

The business model that depended on advertising to support journalism is moribund and nearly dead…Publishers have no way to compete with the dominance of programming and targeting of ads. It’s time to burn the ships and not look back  

I’m guessing this guy has missed the move to vertical markets, the return to direct selling over programmatic and the development of high-value niche audiences. Right?

Ev Williams, co-founder of Twitter and also the founder of Medium (a platform where I happen to publish my short stories) gets the gold medal though. This is still up on his blog:  

“It was not a dumb idea. It may even have been the right idea at the time. That is: With no printing costs and the ability to reach a much larger audience, publishing – the kind that had been traditionally supported by a combination of direct consumer dollars and advertising – could be supported by advertising alone. If so, it would be a huge win/win. Free information for the world and strong businesses with global reach…

…The only thing that went wrong was the inevitable. Business always optimizes for where the money comes from, and advertisers weren’t in it for the public good. Which means they eventually got the better end of the deal, with the rest of us suffering through an experience that was necessarily compromised…

…the ad-only experiment has decidedly failed.”

“Advertisers weren’t in it for the public good.” Every single one of them? Really? Wonder how long they’ll stay in business then?

Okay, that’s enough, Winter. We get the point.

Let’s just say that people who think they know it all are really annoying to those of us who do.

But it’s not just publishers. Investors loved the idea of subscription media, too. Direct-to-consumer economics seem more predictable, more reliable than advertising. They piled on bigly, supporting mergers and acquisitions and public offerings with mammoth valuations for subscriber-based digital news products, few of which were differentiated from their competition and all of which breezily dismissed concerns about the cost of subscriber acquisition, churn and a rapidly saturated marketplace. No matter. No advertising. All good.

But wait. Just how valuable is my product?

If your publication is not acquiring audience at a good clip, it’s not valued by your market. And, if it’s not valued, why would an advertiser buy it?

Here’s a fact of life: Advertisers go where the audience is

A quick dive into the history of the news media business may be instructive. I know the television and radio business well, but let’s focus on newspapers since their way of doing business seems the most germane to the digital news marketplace.  

Only about 20% of a daily newspaper’s revenues were derived from distribution, that is, from subscriptions and single-copy sales. The remaining 80% came from advertising.

Distribution provided a sense of geographic penetration, which helped with advertising sales. It also helped defray some production expense, though the extent of contribution depended, obviously, on price and subscriber retention. Newspapers famously used short-term discounting to prop up subscriber numbers as per capita circulation declined – a decline which began in the 1950s, when television began to eat into market share. Subscribers were highly price-sensitive, churn was a perennial problem.

It’s important to remember that the news was never “free.” It was, however, cheap and frequently discounted. That legacy has been a millstone around the neck of newspapers in the digital age and for any native digital news company, as well. The financial value of “the news” was diminished in the mind of consumers long ago. They don’t expect it to cost much at all.

Consider the latest numbers from Gannet to see how that expectation plays out today. A USA Today subscription, (Monday through Friday) billed annually, is $275. That’s just 80 cents or so a day, even less if you factor in the subscriber discount program. Unlimited digital access is $4.99/month or about $60 a year.

Unlimited digital access to the company’s Louisville Courier-Journal is currently on sale for a buck…for six months. Same as the Detroit Free-Press. In fact, the bigger newspapers across Gannett are each currently featuring this same offer.

When chief executive Mike Reed says things like “digital-only paid subscribers were up 49% compared to the prior year quarter,” you should ask him for the churn number. The numbers are up as the result of aggressive discounting in a marketplace that expects it. Once the offer times out, too many subscribers do not renew.

Clearly, Gannett is stuck between a rock and a hard place here. Print is declining, but digital is supposed to offer substitute sources of revenue. It can’t. They know that, too, they’re not stupid.

Gannet has a product-value perception problem that imposes a ceiling on the price its properties can charge for digital subscriptions – at the same time, frequent discounting to artificially boost subscription numbers results in high churn. They’re on the familiar glide path down, talking a good game but focused solely on extracting enough cash annually to keep Fortress Investment Group happy.

Only the very best news product could break through this consumer pricing expectation which means advertising sales is going to make a real difference to profitability as they descend along that glide path. Absent advertising, they lose altitude, crash, and burn.

Like I said, a rock and a hard place.

Yet still it persists. The Association of Online Publishers (AOP) in the U.K. released in March a study of publisher revenue expectations over the next five years. 55% of them said their primary revenue source would be subscriptions. Like Gannett, they had better learn how to radically improve the marketing potential of their products if that’s going to be the case. If you’re a regular around here, you’ll know I’ve got plenty of ideas about how to do that. But I’m not sure they want to listen to the likes of me.

Whoops! Pandemic + Subscription fatigue

So, everybody was talking subscriber revenues and hard paywalls – and then, a few unexpected things happened. It became clear that relying on subscription revenues alone was going to make it difficult for publishers of any size and market to achieve sustainable profitability. The high cost of promotion of subscription-only news products came as a big surprise. Fighting for subscriptions is expensive. Daily habits are superhard to change. Given that media consumers are so price sensitive, churn is an expensive problem. As a stark example, Netflix hiked its prices in the U.S. market and saw 3.6M Cancels in Q1’22 (Source: Antenna) To make things worse, subscription fatigue set in, not just in the news sector but across all media categories. (In a post here last year I asked just how many newsletters one person needed, so pardon me, in this age of self-congratulation I’m taking a bow, too)

In the publishing sector, everyone from the Washington Post to the Atlantic to newsletter publishers is now reporting stalled subscriber growth.

Something else changed, too.

The old, unfashionable, immoral, tawdry, advertising business took off. Consumers, hunkered down at home, shopped online in record numbers. Now, the marketing dream of a post-pandemic Roaring Twenties boom has got advertisers pouring money into virtually every platform, but digital media most of all.

Ad spending is red-hot right now. The economy is cranking up, travel and leisure are coming back, and consumers are emerging from their pandemic cocoon

Henry Blodget, Founder, The Insider

The pendulum had swung too far, in that classic American way. The herd piled on with its “advertising is evil” groupthink, the herd once again got its comeuppance. If only they’d stopped to look at the historical record – and the numbers.

Let’s stay with newspapers a moment longer…

Before “the penny press,” newspapers were an elite, upmarket product that sold for a high price, largely because they were expensive to print. Then, in the 1830s, along came Benjamin Day, a New England printer. Reasoning that working-class New Yorkers, including newly arrived immigrants, would read a newspaper if they could afford it, Day launched The Sun. He was 23 years old, and risked what little he had on the deceptively simple idea of offering his paper for a penny, amassing a big reading audience and then converting that audience into a product that could be sold to advertisers. It worked. Mass media was born.

Day was the world’s first attention merchant. He revolutionized American journalism. His paper featured lots of lurid crime and sensationalism, but for the first time in the United States, the news – or at least, his version of it – became available to a broad audience, broader than just the Manhattan rich.

Naturally, the elite press was aghast. There were calls for the abolition of crime stories for fear they could generate violence, (sound familiar?) and calls for the advertising to be “more informational and less persuasive.”  *

*Dicken-Garcia, Journalistic Standards in the Nineteenth-Century America

Similar anti-advertising calls were heard as the medium of radio took shape. “It is inconceivable that we should allow so great a possibility for service to be drowned in advertising chatter,” said Herbert Hoover in 1922. Later, he changed his mind. He had this to say when honored with a special citation of the Radio and Television Executives Society in 1960:

…even in the pain of singing commercials, I justify even these by the realization that from the support of advertisers you have kept the wave lengths and channels in the safer hands of private enterprise rather than in those of government

So you see, say what you will, advertising is a mainstay of the American economy. U.S. advertising expenditures have been tracked since 1924, as radio took hold. Apart from World War 2, the advertising industry has accounted for about 2% of GDP every single year. That’s nearly a century of holding steady. Overall U.S advertising spending is forecast to rise 7% this year, according to Cowen International’s latest annual ad buyers’ survey – it’s the highest year-over-year growth projection in the survey’s 10-year history. The global advertising business is worth about $600 billion a year – at least half of that, and growing is digital.  

The problem is, as we all know, the business is dominated by a few very big companies:

For publishers of all kinds, success in advertising will depend on how effectively they position their products to pick up a share of what’s left by the big guys. I’ll talk more about that in a moment, For now, let me just say that irrespective of the media era, the advertising marketplace has always been dominated by a relatively small group of players.

For example, the local advertising marketplace used to be dominated by daily newspapers happily inflating ad page counts and ad rates year over year to secure operating margins of 30% or more. They dominated, but they were also surrounded by other media outlets that managed to do just fine. Four or five local television stations – affiliates and independents – competed in metropolitan markets. The top two might have free cash flow of $50 million. Clusters of radio stations owned by three of four fiercely competitive parent companies chased audience segments in a brutal ratings war where the top two in any listening category took the lion’s share of the money. At least one local business newspaper. Cable television advertising sales, small, but significant. Alternative newspapers, Free weeklies. The Yellow Pages. Direct mailers like Val-Pak, whose franchise-holder took $150,000 clear out of a market from maybe no more than five mailings a year. Catalog companies. Well, you get the point. Lots of competition, lots of money at play and ankle-biters everywhere.

It’s ironic that most of the complaining about the dominance of “Big Tech” in advertising comes from the newspaper lobby. What they’re actually whining about is their inability to make as much money as they did when they dominated the show. Now that their monopoly is bust open and they can’t extract the same extraordinary level of return, the sky is apparently falling in. Democracy is dying, the Republic is teetering. Somebody save me from this tawdry self-interest. We’re drowning in news, whatever they might say.

But don’t people hate advertising?

Annoy the 90 percent of your audience that’s not interested in your product to reach the 10 percent who might be…The Google model is exactly the opposite: Use software to show the ad only to the people for whom it is most relevant

“Free: The Future of a Radical Price” Chris Anderson

Every consumer survey into advertising that I’ve seen in 45 years in the media business concludes that people hate it. People don’t hate it. What they hate is advertising irrelevant to their current purchase interest. That’s when they find advertising “intrusive.”   

But even then, even when it’s not immediately relevant, the creative can still sustain the message, intrigue the viewer or user and create a desire where previously there was none. Advertising creative is an art form. That’s why we all talk about the commercials in the Super Bowl as much as we talk about the game. 

Often, what we think of as irrelevant reach is not actually wasted reach at all. To some extent, the waste in mass advertising is the part that works. An expensively produced brand ad in primetime signals strength, security, and stability, and may awaken a consumer to a new possibility. In this way, product awareness is created and the catchment market for a product is expanded.

That’s because brands provide functional and emotional benefits, and self-expressive ones, too. We are what we have. People will spend thousands more on a Lexus SUV than a Toyota Highlander, even though the Lexus rides on the same chassis and drive train. Why would otherwise quite sensible people do this? Because they want to be the envy of those who cannot afford it.   

But branding goes beyond signaling wealth Doc Marten boots say something, and Wrangler and Levi’s say something else. Oatly is not milk, but it is a statement about who you are.

Having pointed out how malleable consumers are with regards to brand advertising, I should also say that American consumers are savvy like no other. They know a good deal when they spot one. They make the trade-off between access to content and advertising every day. Look at me and my music, for example.

My daughter is a manager with YouTube Music. It is therefore obligatory that I subscribe to YouTube’s Premium offering at $10.54/month. (If you’re a parent, you’ll understand this kind of obligation). But, I happen to prefer the way Pandora packages and presents the music I like, probably because I’m 190 years old, I’ve used the service forever and I’m comfortable with it. Like I said, daily habits are superhard to change. So, I also subscribe to Pandora’s free, ad-supported, basic package. Let’s see. Access to a world of music I happen to enjoy at the cost of a 60-second audio ad break every 20 minutes? No-brainer, I’ll take it.

I’m so glad I did. Without Pandora advertising, I’d never have found out about Harry’s Razors. “A great shave at a great price!”

This is exactly why 70% of Hulu’s streaming subscribers select the advertising option. It’s a good deal.

And it explains why Disney is considering a cheaper, ad-supported version of its Disney+ service. Such a move means Disney would follow NBCUniversal, Discovery, Paramount, WarnerMedia and even Amazon in offering low-cost or free streaming tiers that carry ads—making Netflix and Apple the ad-free outliers…for now. Reed Hastings of Netflix said in late-April that he is considering doing the same. When your share price has fallen 25% and it’s become clear that you are uncompetitive on price, then, only then, do you think about the unthinkable. Advertising!? Hell hath frozen over.

This is a useful article on attitudes towards advertising:

I’ve noticed that many of those who say “people hate advertising” consider themselves immune to it. Ask them what car they drive, and why. What soap they use. What magazines they subscribe to. You’ll discover they’re not so immune to advertising after all.   

Why does advertising work?

The concept of a purchase funnel was first published in 1925, in Edward Strong’s “The Psychology of Selling and Advertising.” He credited E. St. Elmo Lewis for coming up with the idea: 

Many changes in selling procedure have of necessity been made in the past fifteen years. Among them is the growing recognition of the buyer’s point of view. The development of the famous slogan – ‘attention, interest, desire, action, satisfaction’ – illustrates this. In 1898 E. St. Elmo Lewis used the slogan, ‘Attract attention, maintain interest, create desire,’ in a course he was giving in advertising in Philadelphia. Later he added to the formula, “get action.” About 1907, A.F. Sheldon made the further addition of “permanent satisfaction” as essential to the slogan

The purchase funnel is also known as the “AIDA Model.”

First, a marketer has to make the buyer aware of a problem or a need. Then the buyer become interested in solving that problem. Next the buyer becomes interested in your particular solution to the problem. Finally, the buyer acts, and buys your solution.

Television – or more precisely, video – is optimal up at the top of the funnel, where discovery, that is, creating attention and interest, kicks off the path to purchase. In contrast, newspapers specialized in “price-and-item” advertising at the bottom of the funnel. It may not be as exciting as video, but down there at the narrowest part of the funnel is where all the action is – and where all the money is. In print and for that matter, in digital media –  there is no time constraint; points of competitive difference can be explained and short-term promotions offered to close a sale.

You can see why CTV – connected television – is attracting a growing share of advertising spending. It plays a role from the top of the funnel all the way down to the point of sale. The most sought-after digital advertising outlets today are products like Roku, Hulu and Viacom’s Pluto TV. Yes, those platforms put old-fashioned television ads next to old-fashioned television shows, but they also provide advertisers detailed data on who is watching.

Network television came to dominate national advertising for several reasons, including ease of buying and competitive pricing, but principally because of the creative power of video. Typically, only 10% of a daily newspaper’s advertising revenues came from national advertisers. 45% came from local retailers, the other 45% came from local classified advertisers trying to sell a used car, a house, or Grandma’s old sofa in the attic…today.

The New York Times was always the outlier here, having buffaloed national advertisers into thinking it had built a national readership of well-off influencers – while 75% of its readership lived in the Tri-State area. More than 50% of its revenues have always been derived from specialty national advertisers. Tiffany was always my favorite. They occupied a quarter page spot on page 3 of the printed paper for 125 years before finally ditching it in 2021.

Say what you like about the Times, and I do, the company figured out long ago where it stands in the marketing funnel. And, it has sustained that position for a very long time.

Let’s get back to that funnel again.

The internet – and ‘the market of one’

Until 1995, when the Netscape IPO kicked off the internet age, media salespeople made a great living by exploiting an advertising marketplace that was highly inefficient. The term “gross ratings points” used for years to justify spending on big TV ad campaigns inadvertently signals this very inefficiency – “gross” is hardly precise. But advertisers, like the rest of us, want to get as much bang for their buck as they can. They’re looking for precision. They want their advertising to be cost-efficient.

Efficiency in advertising is a product of two things; the ability to target an ad and the ability to measure response to it. The drive for better targeting and more accurate measurement underlies the long journey in advertising from broadcasting to narrowcasting, from mass to class, from firing out the same message to a large, amorphous, unqualified mass market to targeting a specific appeal to a pre-qualified audience segment whose behavior is highly predictive.     

As I said here recently in “This is a Stick-Up,” search is the most potent advertising channel in history. It resides at the bottom of the funnel, the point of maximum leverage for marketers, where it supports trillions in consumer purchases. For an advertiser, the more certain you are that you are showing advertising to a receptive customer, the more you are willing to bid for that ad slot. Google made $149 billion in revenue from advertising against search results last year — greater than the total for global TV and radio businesses, and soon print, combined.

When you look back at how we got here, the rise of Google – and other new advertising products operating at the point-of-sale, like those of Amazon and Walmart – looks inevitable. History has a way of doing that! The internet has taken us down a path towards a long-anticipated destination. We know where digital media is headed. It’s headed towards the fabled market of one. 

I’ve written about this here previously, in You Gotta Pick Your Shots and here, in The Horse Has Bolted.

The great Peter Drucker predicted it. In the 1970s he wrote that the perfect advertisement is one on which the consumer could say “this is for me, and me alone.” Direct marketing thought leader Lester Wunderman saw it coming too. Because the baby boom generation “demands attention to their unique differences rather than their similarities,” he wrote ,“we will one day end up developing technologies that will allow us to achieve the marketing miracle of selling the right thing to the right person at the right time.”

But, we need to be wary of the pendulum swing. There is space in any marketing plan for channels which provide broad reach brand building and there is space for narrowly-targeted sales activation. There is room for those that exploit both passive and active attention. There is place for the expensive but effective and a place for the inexpensive yet efficient. These are complementary, not competing approaches. They each work. It’s a question of the advertiser’s budget, product cycle and marketing purpose.

And of course, what the publisher brings to the table.

What about Meta?

In the digital world of targeted advertising, Facebook has been the  principal tool of discovery and data for advertisers, with an operational presence right down through the entire funnel. This is how it worked:

•       Facebook shows a user an ad, and records the unique identifier provided by their phone (IDFA, Identifier for Advertisers, on iOS; GAID, Google Advertising Identifer, on Android)

•       A user makes an e-commerce purchase; Facebook’s software kit, which is embedded in the e-commerce site, again records the IDFA or notes the referral code that led the user to the site, and charges the advertiser for a successful conversion

•       The details around this conversion, whether it be which creative was used in the ad, what was purchased, how much was spent and so on, are added to the profile of the user who saw the ad

•       Advertisers take out new ads on Facebook asking the company to find users who are similar to users who have purchased from them before (Facebook knows this from past purchases seen by its software kit, or because an advertiser uploads a list of past customers)

•       Facebook repeats this process, further refining its understanding of customers, apps, and e-commerce offerings in the process, including the esoteric ways (only discoverable by machine learnings) in which they relate to each other

The critical thing to understand about this process is that everyone has collectively deputized Facebook to hold all of the pertinent user data and to figure out how all of the pieces fit together in a way that lets each e-commerce retailer acquire new customers for a price less than what that customer is worth to them in lifetime value.

(I have leaned heavily here on Ben Thompson’s post “Privacy Labels and Lookalike Audiences” on his blog, Stratechery)

Here’s the bad news for Meta; this nice tidy collective world has been blown up. First, due to privacy concerns voiced loudly by the Europeans, cookie-based, cross-site, third-party tracking online is going to disappear. Second, through an initiative called App Tracking Transparency, Apple about a year ago made the IDFA an opt-in on mobile phones behind a scary warning about tracking. Users are declining to opt-in about 80% of the time. Earlier this year, Google announced it would begin doing the same thing on Android phones. This means more than just less data for Facebook, which would be a bad outcome for the company in its own right. More important, it became suddenly impossible for Facebook to tie together all of the various pieces. Ads are now hard to tie to conversions, conversions are hard to tie to users, which means that users and advertisers are hard to tie to each other, resulting in less relevant ads for the former that cost more money for the latter. The monetary impact is massive: Facebook has forecast a $10 billion hit to 2022 revenue. Its market value has been cut by a third.

The easiest and most obvious solution is for the shopping to take place within the social media app. This is the most surefire way to connect ad spend to revenue. To this end, Facebook announced in 2020 the ability to build storefronts directly into a brand’s Facebook page. Another solution requires advertisers to hand over to the media partner their entire conversion data set from within the ad run period, so that the partner can apply machine-learning algorithms to compare it with the impression data set they have. Then they can uncover, without violating individual privacy, the performance of a campaign within specific audience segments under specific conditions.  

So, you ask, being a smart BoW reader, how come Google and Amazon are doing great? Well, because Apple’s ATT only restricts third party data sharing, which means it doesn’t affect Amazon or Google at all. Amazon has data on its users, and it is free to collect as much of it as it likes and leverage it however it wishes when it comes to selling ads. All of Amazon’s data collection, ad targeting, and conversion happen on its own platform. Same for Google. They have first-party data.

First-party data is everything now. It has made so-called “retail media networks” a red-hot phenomenon. It’s what lies behind Amazon’s incredible advertising growth, Walmart’s highly successful entry into the advertising business to compete with them, and efforts by other retailers, from Walgreens to Macy’s, to participate directly in the advertising business as well.  

Yes, even Walgreens has its own “Advertising Group” now. The group has access to a wealth of data about 95 million rewards members and insights from about one billion customer touchpoints a day. Walgreens even has its own self-serve programmatic offering for advertisers now, and “clean room” software from database giant Epsilon to match user-level data without sharing raw data, which might violate customer privacy.

This is a story being repeated across the retail industry.

Everybody’s in the advertising business now.

Where does all this leave publishers?

Where does all this leave publishers?

Up the proverbial creek?

No. Not necessarily.

I’m an immigrant. For me, economic determinisn is profoundly un-American.

But when I talk to publishers, traditional and native, big and small, about these things, they look at me with a weird, cross-eyed look, like “what is this guy with the funny accent even talking about?” Maybe I’m not communicating these ideas clearly enough. Or, maybe they don’t track the ongoing evolution in thinking in their own business, the business of publishing. What else can I conclude?

So usually, I retreat to the fundamentals.

I tell them that subscriptions and paywalls done well are fine, advertising done well is fine, but the idiotic clamor of the digerati notwithstanding, a blend of the two is even finer. It all depends on whether or not you’re building audience to significant scale in the right market. Product, as always, is everything. If you are, then it next depends on what you’re trying to get done.

It’s not an either / or.

The revenue stream choices any publisher must make depend on

  • the consumer’s perception of product value
  • the publisher’s clear-eyed understanding of that perception
  • the publisher’s business and revenue objectives 
  • the publisher’s audience, user growth and retention
  • the publisher’s direct advertising sales capability

If you believe in a strict subscription-only approach, you’re probably going to stiff-arm a prospective customer with a hard paywall the moment they follow a promotional link into the site. The Wall Street Journal does this. Can you get away with it, with your product? Is the consumer’s value perception of what you’re offering really that high? No, really that high?

It didn’t prove to be for Quartz:

If you’re not the Wall Street Journal, then when someone pops in to sample a news article from your outlet a couple of times a week as part of a free, limited trial but consistently clicks off the interruptive pop-up subscription solicitation, providing no first-party data at all, the potential value of the interaction cascades down to zero in less than a minute. Can you really afford to let that happen? Would advertising produce more value for you in this case?

This is why so many publishers are softening their paywalls, increasing the number of free metered stories and returning, again, to advertising.

It’s a living, publishing. There are a million ways to skin the cat. A one-person newsletter that fulfills a need for an audience in a particular vertical market can throw off $100,000 a year based on a couple of sponsorships and a subscriber fee of $9.99 a month. Hey, it’s nice work, for as long as you can keep it up.

On the other hand, 6AM City has no subscriber fees at all, it’s a pure advertising play. This local newsletter company just crossed a million subscribers a year drawn from 25 markets and is now out directly selling national advertising at a $12 CPM. It averages 2-3 people a market as it tries to match its spend to the revenue opportunity it believes exists. It’s a smart little company that will do just fine.

But the harsh truth is, if you’re not a general new publisher with broad national scale the New York Times – or a publisher with both deep reach into a high-value vertical audience and high product differentiation – the Athletic, Bloomberg, Pinterest, Every, Dive, Vox Media, Stratechery – when it comes to advertising, you have a product positioning problem. If you have by now not built a multi-dimensional database of first-party subscriber data, that problem is compounded. If you don’t use ‘lookalike marketing’ to promote your own product, you probably can’t deliver lookalikes for your advertisers, either.

There’s no point hitting the street with a 1990s ad brochure that says you have 190,000 page views a month, that 55% of your users are female, that 50% are college educated and earning $100-$150,000 a year when the competition, hustling the same street either in person or remotely, has more than 50 specific data points about their own audience, including who is in the market. for what, right now. This is, after all, 2022.

That’s why so many publishers emphasize subscriber revenues in their Wall Street quarterlies. They have to. It’s really all they’ve got. Their lack of both product traction and saleable audience data means they don’t have a prayer of building and growing an advertising business. Unless…

There is a way forward. The trendlines are clear, the forces driving them are irresistible. Although, as I have said, broad-gauge, mass advertising still has a role to play in marketing, what advertisers want most of all today is reach into tightly-segmented audiences containing lookalike prospects for their products or services. Examples are everywhere, from the resurgence of the magazine business to the success of digital niche networks like Group Nine, which I mentioned earlier, and Morning Brew, which did $50 million in ad revenues in 2021. The implication could not be clearer: For publishers, this means building niche products for vertical markets and creating data, lots of data, on the users of those products.

The economics here are very different. The key is for publishers to think of their business vertically, not horizontally.

I can illustrate this by asking you to change the way you consider the nature of a newspaper. How about you think of that business not as a bundle of content for the same homogeneous audience, but as a network of vertical products? The network delivers scale within a common demo. The vertical focus brings targeting. Absent the crutch of monopoly, a product like a newspaper delivers broad reach at low cost. But a niche product, targeting say, millennials, perhaps a parenting vertical or a pet vertical, delivers specific segmented reach at a high price. The tighter the market fit, the more an advertiser will pay to access it.

In an age where a few big guys have the scale to dominate the marketplace, the trick is to get scale where it matters.

My dear brethren, there’s nothing new here. In business, when you’re facing both share erosion and pricing pressure, the age-old maxim is to run for the niches.

Don’t get stuck on my use of newspapers to make this point, local newspapers will never unbundle in this way. They are risk-averse by nature, don’t like to invest in product and indoctrinated to margin preservation, no matter how diminished revenues might be. They’ll remain on the glide path down, holding margins at 5-10% as the top line shrinks, year over year. Long ago I was in the selling business. I know how their salespeople must feel. They begin each day already discouraged by the brutal street-fight with Google reps, Facebook reps, reps from Autotrader and and all the rest. Desperate for a buck, unskilled even in the art of packaging inventory for preferred or private marketplace programmatic deals, they find themselves stuck in a low-return, low-quality programmatic environment. Most simply do not have the product traction or data assets to do much more than put their hand up for low-end programmatic CPC and sponsored content buys from bottom-feeders like Outbrain.

Not only do these return little by way of revenue, they also have the unfortunate effect of diminishing product perception. They signal desperation. The combination of weak product and inferior advertising is not a good look. Yes, like I said, they need a revitalized product that sheds the skin of newspapering and speaks to segmented millennial audiences. But they also need to maximize what they have left. And here’s something: As cookies and third-party trackers go away, newspaper struggling to survive in the digital era might just have a chance to secure a unique sales proposition in a new way.

It feels weird, to be making this point. In 1998, while at Cox Enterprises, I became the founding CEO of a venture called New Century Network, an internet consortium of nine of the largest newspaper companies in the United States. NCN sprang from the recognition that newspapers were islands in far-flung newspaper chains, and none could survive the coming digital onslaught on its own. So, we built the first-ever news aggregator (no, HuffPost was not the first) and we set up a seamless advertising network that provided advertisers reach into a high-demo audience in curated, quality news environments in more than 200 cities.   

NCN collapsed for all the petty internecine rivalries you would expect. It would be a tragic irony if the same thing happened to the Local Media Consortium’s NewspassID project. Tragic, because it’s the last chance newspapers have to reconstruct a significant position in the digital advertising marketplace. The fact that cookies are going away and trackers are being limited to first-party data has created an opportunity for newspapers to establish their own identifier – and that’s what NewspassID is. An identifier. It tracks newspaper readers, and sells them based on their quality, not their volume.    

The thinking behind NewspassID can be traced to a lot of work done by my colleague Bill Densmore, the founder of Clickshare Services and now CEO of ITEGA, a digital privacy advocacy company. 

Recently, LMC announced the results of its first test. Conducted with LMC members McClatchy, Lee Enterprises, E.W. Scripps and Tegna, the test showed shares using NewsPassID in open programmatic auctions led to significantly better outcomes for publishers, including not just higher CPMs for inventory sold but for larger percentages of that inventory getting sold as well.

You can find out more about the Local Media Consortium here: Local Media Consortium

Is this idea just some quixotic folly? As the owners of traditional media companies manage down their fading newspaper properties, will it ever garner the investment it needs? Will NewspassID ever get big enough to matter? Can it provide national advertisers with both the volume and the audience segmentation they need? These are big questions. The answers to them will test the commitment of leaders across what’s left of the industry.

NewspassID is not too little, too late. I fear it may be too big an idea, and too late. I hope, for just this once (!) I’m wrong.

In the meantime, be nice to see less stridency from the anti-advertising crowd. I’ve always wondered why so many journalists know so little about the financial dynamics of their own business. Makes me think of that wonderful piece of wisdom from Epictetus: “It is impossible for a man to learn what he thinks he already knows.”


That must be it.

And now, the Update:

The usual summary of what I found interesting in the media business since the last time we were together. Might seem a little rando, but each seemed important in its own way. Most have already appeared on BlastofWinter’s FB page – you may want to follow that.

  • Pity for the poor Twitter employees who want just one day without drama. Pity for the stock-picking saps who argue that “value” is the basis of a company’s valuation. Musk buys Twitter and the world goes apeshit. Like Zuckerberg, Pichai, Tim Cook and Shouzi Chew of TikTok he’s about to learn that “free speech” doesn’t mean you can shout “fire” in a crowded room. But, watch him separate out the core business (and the social graph) from the apps and unlock all that value
  • If you’re on Twitter and have resisted the urge to flee, check out this marvelous tweet storm from former Reddit CEO Yishan Wong. In a media world devoid of common sense and nuance, what he has to say about the tricky business of moderation online is a revelation: 
  • Fascinating research study by MIT and the University of Regina up in Saskatchewan into why people happily share fake news. Turns out accuracy is not an issue. Once again, that immortal truth – news does not create a point of view, rather, it reinforces an existing one
  • CNN+ bites the dust and the digerati is wallowing in self-congratulatory “I told you so’s.” Making available online what is failing on cable – CNN is in third place after all – doesn’t solve the essential problem: Nobody knows what the network stands for. And predictably, a lot of people inside were resentful. But let us not forget that CNN Digital is the world news leader, with 143 million unique visitors a month. (The New York Times has 89 million)   
  • BuzzFeed reported its financial results for the first time as a public company. It reported quarterly revenue of about $145 million, up 18 percent from a year earlier. Its profit rose 29 percent to $41.6 million, though this was bolstered by tax provisions and other accounting items. But newsroom cuts were made and senior editors resigned as the company refocused its efforts in news…again, this time to vertical video formats
  • Meanwhile, just a few blocks away, The New York Times Company reported that it achieved $2 billion in annual revenue in 2021 for the first time since 2012 and produced the highest operating profit since 1990. At last the company has a leader who understands that revenues are one thing, but margins, however, are everything
  • Business newsletter publisher Industry Dive is on track to make $110 million this year. It’s been profitable since 2014. Dive has a network of 53 newsletters serving 22 different industries. CEO Sean Griffey says, “For us, the strategy was to find valuable people and aggregate them. Even though they’re going to be smaller audiences, they will be valuable, and to achieve scale we just had to do that multiple times.” He must have been reading BoW, where I’ve been banging on about this very thing for eons, like I did up there today, godhelpme
  • Here’s one of those charts that speaks for itself. TikTok engagement April 2022

That’s it for this one. On re-reading it, I’m afraid it might give new meaning to TL;DR. so thanks for making it through and I hope you enjoyed it. Thanks also for your emails, keep them coming at Spring has sprung up here in Maine, but the garden will wait as I read them, every single one.

And, as always and especially at this time, go in peace.

Posted by Peter M. Winter

Peter is a traditional media veteran and a digital media pioneer. He is an active angel investor and occasional consultant. He advises established companies on cultural regeneration and also consults to digital start-ups, helping them incorporate management process without sacrificing speed. He holds five technology patents. Peter is an award-winning public speaker and writer. His new book, "The Cannibal in the Room," will be published soon — it is the ultimate insider account of the battle to find a digital future for newspapers when the Internet came to town. He blogs on media and leadership here at and publishes his unconventional ideas about management on his LinkedIn page: His collection of short stories can be found at

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