One of the many dilemmas facing publishers in 2016 is whether they should invest in third-party platforms. On the one hand there’s a strong case for proactively pushing content out to wherever audiences are spending their time; on the other there are strategic considerations when it comes to ceding control to the tech giants. Here Jonathan Wilner, VP of Product & Strategic Planning at Ooyala, maps out what the platforms are offering and evaluates the pros and cons.
In 2015 we saw a significant rise in publishers distributing content to third party platforms, most notably Facebook pushing Instant Articles, as well as emerging platforms such as Snapchat Discover and Twitter’s Moments. While these platforms have shown success growing profits for publishers, the question needs to be asked: at what cost? These same platforms have pivoted their strategies, changed algorithms or simply shut down products altogether, often ripping the rug out from underneath the publishers that rely on them to grow readership and revenue. At the heart of these strategic considerations is the tug-of-war over the control of data and who ultimately controls the audience.
Evaluating the risks isn’t easy. When do the benefits of a third-party partnership outweigh maintaining an owned and operated business model? Is there a grey area? Certainly publishers have seen value with third-party sites, though for the sake of building a profitable site of their own, publishers should consider a hedged approach.
The Case for Third-Party Platforms
The third-party deals are typically straightforward. For Facebook, the company provides massive audience reach that advertisers seek and are willing to purchase. Publishers opting to distribute their content to Facebook get the option to receive either 100 percent of the ad dollars their articles generate by selling the inventory themselves, or to take a share if they have Facebook sell it. In exchange, Facebook gets high quality, highly engaging content that’s easily shareable, and, in some cases, a share of the revenue.
Snapchat has a similar model, although they take a cut regardless of how the inventory is sold. They take 30 percent if the publisher sells the ad, or an even split if Snapchat sells the ad.
Largely, for Facebook, the pitch has appealed to publishers and they’ve attracted roughly 350 marquee publishers to-date, enticing the likes of BuzzFeed, Vice, VOX Media, The New York Times, National Geographic, ESPN and others.
Snapchat is continuing to grow and see success. Publishers have been able to demand high prices for ads on the platform. ESPN, for one, has reportedly sold nearly $100,000 per day with ads on the app. And Snapchat is pushing to do more. Recent reports state the company is considering building a programmatic platform and continues to experiment with advertising to continue driving revenue.
Sounds like a win-win, right? On the surface, sure. Until it’s not.
The rub occurs in two scenarios. First, when the third party platform changes or pivots its business model, taking a jackhammer to the foundation that the publishers saw as a mutually beneficial relationship. John Herrman gives a step-by-step walkthrough of this, citing dropping readership for publications using third-party sites in late 2015 and how internal newsrooms reacted.
Second, it boils down to a “damned if you do, damned if you don’t” scenario. As these platforms promote publisher’s content to attract audiences, building a unique pipeline of income for the publisher, these same audiences begin to rely and become accustomed to finding content on sites other than the publishers. Walking this tightrope requires a tempered approach; one that leverages new platforms to their greatest potential without being detrimental to your core, owned and operated site and experience.
Look at the business models
At it’s core, Facebook is an advertising powerhouse that happens to be a social platform, chock-full of rich and insightful data of which has helped attract $2.9 billion in mobile advertising alone in Q3 2015, representing 76% of the site’s total advertising revenue. The numbers are alluring, particularly for publishers, as Facebook shows potential in helping return dollars the digital age snatched away from traditional press.
Yet, in November 2015 an algorithm change from Facebook caused top publishers to see a 32% plummet in traffic. That was just one of several instances. Each time causes publishers pause, showing just how much trust they’re placing on Facebook’s golden promise, which, can be altered with a simple code update that’s completely out of their control.
Snapchat has challenges of its own. All of its advertising experimentation and controlled chaos, the company has been scrambling to find the perfect ad scheme to prove its hefty valuation. All the while, brands may be forced to evaluate alternate options, especially when Snapchat is asking ad prices to the tune of $750,000.
So what’s a publisher to do?
Do you hand over the keys to third-party sites, let them control the destiny of your content and ad revenue? In Facebook’s case, publishers have pushed upwards to 60 percent of their content to the site. Or do you take a step back, rethink options and take a more owned and operated approach, controlling your content, data and ultimately revenue?
Again, there is no one-size-fits-all solution. It comes down to weighing risks and knowing to what degree you are willing to give up control of three things: data, distribution and dollars.
For data, the publisher is told what reporting is provided and what isn’t. This is vastly different than what publishers have grown to expect with publisher-specific tools in the space.
Then there’s losing control of distribution. In Snapchat’s case specifically, the time and resources it demands are not small. Take a recent story in the Wall Street Journal about women-focused site, Refinery29, and its dedicated Snapchat team. The stakes and demands are so high to produce fresh content and make good on ad commitments, it has a company-wide ‘do not disturb team Snapchat’ policy, to prevent them from getting distracted and off course. All for one platform. To support and maintain such a team and accommodate all the resources it needs to produce high quality video content on a weekly basis is without question costly.
Lastly it comes down to dollars. Yes, the Millennial demographic is elusive, yet lucrative, which is why the curb-appeal for third-party sites is so high. In exchange for reaching that audience, publishers are willing to forfeit significant percentages of the ad dollars their content generates to maintain relevancy, viewership and revenue. Though, it’s a viewership increasingly shifting allegiance from your site to the third-party platform.
There’s no question the allure is powerful among publishers, and has caused the subsequent sprint to third party platforms that promise guaranteed reach and revenue. And while, yes, publishers are seeing profit coming from these platforms, the truth is there is no true silver bullet. It does come at a price with substantial risk, and there are further measures publishers need to take.
Publishers should consider taking a hybrid approach. Yes, take advantage of the audiences large social platforms can generate. But don’t give up the keys. Invest first and foremost in owned & operated sites where you have control of all aspects of your content, how it’s used, how it’s presented, and remaining hands-on with the revenue it generates. Originally produced content has a huge pull with audiences, so look at how your site can develop more unique content. Publishers cooperate with other publications whether in private marketplaces or other mechanisms where they can have more power over how their content is sold.