If 2018 was digital media’s Year of Great Upheaval then 2019 is starting off like a year determined to snatch that title for itself.
Before the first month is even done we’ve already seen Buzzfeed announce plans to cut 15% of its workforce and Verizon reveal plans to cut somewhere in the region of 800 jobs in its Verizon Media division including HuffPost, Yahoo and AOL.
In a sign of the times it’s also been reported that the WarnerMedia investment arm which helped to boost the coffers of the likes of Mic, Mashable and Bustle has turned off the taps and will no longer be investing in media companies.
It’s all helped fan the flames of a narrative that is already pretty bleak: that the economics for digital publishing are irreversibly broken.
As NBC reporter Chris Hayes despairingly asked on Twitter: What if there is literally no profitable model for digital news?
What if there is literally no profitable model for digital news? Or none that actually scales and endures without, say, the established readership base and brand of the NYT. This seems…increasingly likely to me?
— Chris Hayes (@chrislhayes) January 23, 2019
Certainly, this picture doesn’t look particularly pretty when it also includes a list of exhibits such as: Mashable being sold for $50m when it had been valued at $250m 18 months previously; dmg media writing down its investment in Elite Daily and then selling it for a reportedly knock-down price; and Vice putting a freeze on hiring after missing revenue targets.
Then you had millennial-focused site Mic laying off its entire editorial staff at the end of 2018 before being sold for a fraction of its previous value to Bustle Digital Group. As she left the business, Mic Publisher Cory Haik talked of “macro forces” at play, “unsettled” business models and how “tough” the business of journalism is.
In this instance the “macro force” at play was Facebook’s decision to cancel the Mic Dispatches show on its Watch platform, for which Mic was reportedly being paid $5m a year. This seemingly was the final straw for a publisher which was overly reliant on Facebook for its audience and which had already suffered when the social media giant reduced its focus on news content in early 2018.
Facebook has been given the blame for various other recent digital media failings. The shuttering of LittleThings and Cooking Panda owner Render Media were directly blamed on declining love from Facebook, while the plights of TheAwl in the US and Unilad in the UK were at least partly put down to Facebook’s changing focus.
Along with Facebook, the other major player taking the blame for much of digital media’s ills is Google, with the two together forming the so-called duopoly which is draining the internet of its advertising money, leaving very little for publishers to fight for.
Google and Facebook’s dominance of digital ad money is such that research group eMarketer estimates they took 58% of all market spend in 2018. That did slip from 59% the previous year, but only because another tech behemoth, Amazon, grew its share of the $111bn total spend.
And that dominance is making it increasingly hard for publishers to make money from the web. The digital ad ecosystem rewards scale over quality and there is no shortage of inventory to be had – at mostly rock-bottom prices.
So it’s not hard to understand the current narrative of doom and gloom around digital media, with seemingly no obvious way out of the current predicament.
But when looking at the big picture it’s important to note that there’s a pattern on show here, one which involves digital publishers getting big audiences in a short space of time and, often, taking on significant levels of investment to try to make the most of that growth. But when the money doesn’t come in at the same levels to balance out those investments then a correction is needed. Sometimes that correction is slight and sometimes – sadly – it’s terminal.
What the industry does appear to be doing, however, is slowly learning from what is going on around it. Amidst the apparent chaos, there are signs of a positive future, where quality and genuine engagement trump scale.
At the Times, which stubbornly refused to get drawn into a battle for digital eyeballs, instead staying firmly behind its paywall and keeping its journalism only available to subscribers, the accounts are back in the black after a year where pre-tax profits hit £9.6m. There, digital subscribers now outnumber print for the first time and together equal more than 500,000.
Also in London at DMGT, the MailOnline now appears to be showing signs of being a reliable money maker after years where costs outstripped revenues. While audience numbers have been slipping over the last year, revenue is on the up, increasing by 14% in the last three months of 2018. Notably, DMGT highlighted that future growth will be “driven by increasing engagement with the direct audience”. Not by trying to keep up with the tech giants on scale.
There are other green shoots to take hope from, as digital publishers increasingly focus on delivering a value exchange direct to their most loyal and engaged users. This “pivot to readers”, as it has been knowingly termed, has been gathering momentum in 2018 and early 2019.
The Guardian is the poster child of the membership model which has successfully seen it step back from the precipice of financial meltdown towards returning to the black as a result of 1m donations from readers keen to back what The Guardian stands for. This model has apparently been so successful that internal discussions about a paywall at the publication have now been taken off the table.
Meanwhile Dennis, which publishes The Week among others, has seen success from a different approach to generating revenue direct from its readers – through ecommerce. Through its Buyacar title it has been linking its motoring content with a car sales business with the result that it expected 40% of total group revenue to come from this stream.
There are many other potential revenue streams being discussed and experimented with, from micropayments to events to blockchain technology. Some may work, some may fall by the wayside – and the same is true of digital publishers.
What’s clear is that the endless pursuit of digital scale without a clear prize in sight is over. Now, more than ever, it will all be about delivering something that people value. And ideally value enough to put their hand in their pocket.