As traditional media adopts native advertising, not everyone is sold
Traditional media companies are racing to imitate their digital competitors with various attempts at the hottest thing in monetization: native advertising. Outspoken digital media proprietor Henry Blodget, CEO of Business Insider, isn't convinced native ads will work for digital or traditional media. As for traditional players, he's predicting their demise and plotting takeovers.
One of the biggest examples of a traditional media outlet transforming itself with native advertising is ninety-six-year-old Forbes Media. The company has undergone a turnaround, led in part by the success of its contributor platform, developed by Chief Product Officer Lewis DVorkin, who founded True/Slant. The model allows anyone to publish news on Forbes; at least 1300 contributors have done so. And why not? Anyone gets free reign to promote their views in a format that looks just like a credible Forbes news article.
Since launching it a few years back, Forbes' monthly traffic has grown from eight million to 26 million uniques. More importantly, Forbes' revenue has increased. The contributor network includes a product called BrandVoice, which allows marketers and advertisers like Sap or FedEx to pay to publish content. The articles all look the same as regular ones written by Forbes' editors and writers, except with a "Brand Voice" label. In other words, they are skirting the line between original news and advertising, so that readers might, perhaps, mistake the ads for credible news. Forbes, and other native ad advocates, argue that readers can tell the difference thanks to a small label on the article.
This model falls into the same category of sponsored content-style advertising that BuzzFeed has heralded as the savior of journalism. Everyone calls it native advertising, even though many in the advertising world think its a mischaracterization. Sponsored stories are different from "true" native advertising, or the platform-specific ad formats found on Facebook and Twitter.
As a result of this effort, Forbes is profitable and will generate 20 percent of its revenue from native advertisements, aka, BrandVoice. Still, Forbes still publishes a print magazine and has seen revenues fall 19 percent since 2008. Before DVorkin created the contributor network, Forbes underwent rounds of layoffs and cost-cutting; at one point the Forbes family sold off its $90 million Faberge egg collection.
The company's turnaround has emboldened its owners to try to sell the company. On Friday, Bloomberg reported that the company is seeking $400 million for itself, a price that could be described as low given Forbes' $275 million in revenue. Deal scoops are often leaked by the sell-side. Bloomberg's second source, likely from the buy-side, placed bids closer to $200 million. That price wouldn't make Elevation Partners very happy; Bono's private investment firm poured $264 million for a 45 percent stake in the company in 2006.
Last night at PandoMonthly New York, Business Insider CEO Henry Blodget made a relevant prediction about the fates of traditional media companies such as Forbes. He said traditional media companies will eventually sell to their digital media disruptors.
"Eventually, a big digital journalism organization will acquire the wreckage of companies like the New York Times and the many other associated newspaper companies," he said. "Not to put the publications out of their misery, because they are great publications. But they will be acquired into digital-first entities that make them stronger."
Of course, this is a long-term prediction. Forbes and many of its traditional media peers are still too big for any digital suitors. The biggest digital media companies have sold out rather than go for an IPO or roll-up strategy. Huffington Post sold to AOL, Bleacher Report to Turner Media, and Daily Candy to Comcast.
In the meantime, traditional media companies are imitating their digital peers, racing to adopt the hot new digital thing, native advertising. The category has become so irresistible that even the New York Times is doing it. Native is now "table stakes" for digital publishers, according to the Times' EVP of advertising, Meredith Kopit Levien, who joined the Times in July from (surprise!) Forbes.
This despite Executive Editor Jill Abramson's comments in May that the Times would not introduce native ads, because they confuse readers by blurring the line between ads and editorial. Now the Times is going native, with brands publishing content directly on its site, regardless of whether Abramson likes it or not. Score one for the money side of the house.
For his part, Blodget is a contrarian on native ads, questioning how well they work -- both the "real" native advertising on Twitter, and the wannabe kind on BuzzFeed, The Atlantic, Forbes, and, soon, the Times. From PandoMonthly last night:
Some of the stuff BuzzFeed's doing, I wonder about it. What I see is a very entertaining listicle with some fun GIFs on it, and then I see a tiny little blurb that says "Brought to you by" at the top. What I think when I see it is, 'Hey, wait a minute, the listicle has nothing to do with the sponsor, and I get a tiny little message. Whereas if I just bought an ad it would be big and beautiful, and beautifully designed, and I'd get the message that way.He noted that sponsored stories are challenging because of reach. Advertisers don't just want to touch 10,000 people who might have clicked on a listicle. They want millions of people.
That reach problem persists with "real" native ads on Twitter and Facebook, too. Blodget trotted out the big Oreo Superbowl moment on Twitter as an example. Advertisers have held up Oreo's clever Tweet about "dunking in the dark" during an unexpected blackout as the year's biggest success in social marketing.
"We are here having a collective orgasm about the fact that it got 17,000 retweets," Blodget said. But even an audience of 17,000, or 170,000 or 1.7 million people on Twitter doesn't compare to TV's biggest audiences. "It's still tiny, and by the way, they can't replicate it," he said. "Where's the next Oreo?"