Cup of Joe: Transparency is Killing Ad Profits.
Not long ago we reported that Hulu is now attracting more viewers than Time Warner Cable. However, despite that, the cable networks that own Hulu are still making the majority of their ad profits from traditional media.
Hulu is not the only one suffering from failed ad programs while their user base rises. Facebook now has a user base larger than most first world countries. Despite this they have failed to turn a profit even after releasing a sophisticated ad platform.
Even as users are flocking to online media, traditional media companies are still making the majority of the ad profits. Lets take a look at how traditional media is making loads more than online publishers.
How to Be a Traditional (Rich) Media Fat Cat.
- Develop addictive content, that preys on people’s emotions.
- Use preexisting infrastructures to scale and distribute.
- Keep your advertisers in the dark.
- Sell ad space at inflated margins.
Notice that I put an emphasis on point 3. This is the most important aspect of the above formula because with out it, point 4 won’t fly.
The truth is, most of the corporations that buy ad space in traditional media have absolutely no idea if it works or not. Sure they can look at their sales numbers over time and predict that this ad or that commercial was successful or not, but compared to Internet marketing they are literally in the dark.
With Internet marketing we can use analysts tools, sophisticated tracking techniques and even user behavior analysis to nail down conversion rates to exact numbers. Couple this data with PPC and CPM ad models and we can calculate ROI to the penny–in real time–and make adjustments to ad spending instantly. All of these exact measurements can enable the advertisers to only spend the bare minimum needed on ads.
And this is why online publishers are failing at making a profit. Traditional media companies make huge profits on wasted ad spending. In an attempt to lure big money to the Internet, companies like Google pushed tools and ad platforms that enabled advertisers to spend less. In the end the only way a company can make substantial profits in this radically transparent environment, is to monopolize the flow of information.
Hey folks I just reread this post for the third time, and I realized that its incredibly boring! I am sorry about that. To make up for the above, here are a few things to look at that I think better represent my regular style of content. Enjoy!