Why digital ad sales are declining on newspaper websites
Jennifer Saba poses and answers a critical new question for the newspaper industry: What ails digital ad sales? They were supposed to be the growth engine that will cover continuing print ad losses. But in the first quarter of this year, they were flat – up only 1 percent, according to the Newspaper Association of America. Several companies – The New York Times and The Washington Post – actually had declines.
There is some talk of a softening economy among newspaper company executives. But Saba suspects, as I do, that the real culprit is falling prices. For a long time, growing inventory at an array of sites has been making generic digital buys cheaper. And ad networks facilitate shopping for cut-rate space, as Saba’s story explains:
Advertising exchanges are electronic platforms that allow buyers to bid on and purchase advertising space at drastically reduced prices. Many websites -- not just newspaper sites -- rely on these exchanges to sell unclaimed advertising spots, known in industry parlance as excess inventory. The thinking is it's better to get something than nothing at all.
But it also trains ad buyers to expect lower advertising prices. "It's like a publisher trying to sell me an Armani suit for $3,000 but I can walk around the corner and buy it from Google for 90 percent less," said Shawn Riegsecker, chief executive of Centro, an agency that specializes in buying and selling digital ads, and counts many newspapers as its clients.
Advertisers "are buying audience instead of context and they don't care what sites they are on," said Gordon McLeod, president of Krux, a company that helps websites interpret data.
Is there a solution? At conferences, I hear consultants urging newspaper organizations to stop selling through ad exchanges and to use better targeting and other strategies to create premium-priced ad placements. That is happening some, but as much else in the industry, slowly.