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There’s a Digital Media Crash, But No One Will Say It

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Re: There’s a Digital Media Crash, But No One Will Say It

#11
post #3

I agree, but my question is, why hasn't the crash happened yet? Doesn't everyone know most clicks are by bots?

This is anecdotal but I feel it's much more common than we talk about: when I was in ad tech, I saw first hand how advertisers would spend money on impressions for the sole purpose of being able to report to their higher-ups how many impressions and click they got. Particularly for brands where conversion attribution was difficult to impossible.

The media agencies spending on be half of the brand also have virtually no reason to NOT spend ad dollars on fraudulent clicks and impressions - again, they're just trying to get paid.

And of course the publisher doesn't care if the impressions are fraudulent.

Basically, there is a very large rigged economy in ad spending that both sides perpetuate for their own good.

Re: There’s a Digital Media Crash, But No One Will Say It

#12
post #7

Relevant... I got told a few days ago that: "Buzzfeed writers have to generate at least 1 article per day. There is no minimum limit on words on the article, and the topic can be anything (within reason)." Once I knew this, the prevalence of low-quality Buzzfeed links all over the web suddenly made sense.

Publish or perish?

Re: There’s a Digital Media Crash, But No One Will Say It

#13
post #7

Relevant... I got told a few days ago that: "Buzzfeed writers have to generate at least 1 article per day. There is no minimum limit on words on the article, and the topic can be anything (within reason)." Once I knew this, the prevalence of low-quality Buzzfeed links all over the web suddenly made sense.

Publish or perish?

[deleted]

Re: There’s a Digital Media Crash, But No One Will Say It

#14

It's the inevitable come-down from over-inflating digital media start-ups in the post great recession era. The business is mostly a terrible one with mediocre margins, vast competition and audiences that are fickle. There is also no real moat, other than extremely deep pockets (which can help sustain a journalistic advantage through ups and downs in the business). Content like that is almost like food when it comes t…

Splitting off from that comment, is the matter of reasonable valuations.

Allow me to propose that something like Buzzfeed, with $300 million in expected 2017 sales, is really worth more like $400 to $500 million, less than two times sales. Why? Its future growth rate is likely to diminish going forward with scale (ie its fastest growth days are almost guaranteed to be behind it). Its present growth rate is already down toward 10%-20%. Entities like the NY Times set the ceiling on what Buzzfeed can ever likely hope to be (in terms of business size), and that would be an extraordinary outcome. The NYT is worth $2.8 billion, with $1.5 billion in sales (so less than 2x sales), and has always struggled to have even OK net income margins of 10%.

Buzzfeed was perhaps once worth a reasonably high multiple on sales, back when it had $20 million in sales and a high growth rate. All of these companies have similarly rapidly run out of growth steam: HuffingtonPost, Business Insider, Gawker, Mashable, and so on.

What's a low to medium growth, low max ceiling, low margin, high competition, no-moat business worth? An appropriately low multiple, that's what. Anything else is playing with fire, where you see a $1.5 billion valuation turn into $200 million in a liquidation sale.

The dotcom bubble had a version of this. The Industry Standard was actually highly valued (similar to Mashable's prior $250m valuation) for a brief time back then.

So what's the argument for Buzzfeed being worth a future $5-$10 billion or more (such that a venture capitalist would value it at $1.5 billion in a round)? There's only one argument: another rich person wanting power, narrative control, media influence, and to just generally play in that rich person's sandbox, which is a story that gets repeated over and over again whether it's a traditional tycoon or just a rich venture capitalist. Rich people play in the news & media world like they do in art, swapping the assets around at prices seemingly disconnected from reality, dumping them when times are tough, paying hilariously overpriced rates for them when things are booming.

Re: There’s a Digital Media Crash, But No One Will Say It

#16
> there is basically no publisher in existence involved in any sort of news or political news coverage who says to themselves, my readers are demanding more of their news on video as opposed to text. Not a single one. The move to video is driven entirely by advertiser demand.

What's true is that no representative group of readers who have said what that hypothetical publisher claims they said exist.

But publishers make the claim that they would say that all the time.

I recently was assigned a project to convert all our technical manuals into 100-second Youtube feature highlights. You pay me, I will do what you ask, so it's done...but the analytics don't look good. Not even bots are watching those videos.

> Another way of putting that is that the future that VCs and other investors were investing hundreds of millions of dollars in probably doesn’t exist.

It doesn't need to exist for most or even an above-average VC. If those hundreds of millions were invested by 100 investors at $1M in each of 100 companies, and 99 tanked but 1 unicorn made a 100x return, they would continue to behave in that way.

Re: There’s a Digital Media Crash, But No One Will Say It

#17
Ad-driven revenue models are just not reliable long term for media publications anymore. All these sites dying or having issues were built on the old world model created by newspapers 200 years ago. These models aren't even working for the big TV networks. Their news is now basically 20 minutes of old people new stories (stuff about Jesus, medicare, health care breakthroughs) book-ended by ads for prescription drugs and adult diapers. Their only viewers are 60+, and aging.

The new model is, actually, the oldest model: Sponsorships. Remember how things like the Jack Benny Show were sponsored by Jell-O and Lucky Strikes? That model actually works again. It's strange, but it's really is a bit liberating (I work for a sponsored pub). We actually have the funds and time to do extremely expansive pieces on deep topics we choose.

Having fewer people to keep happy means having fewer editorial bonds to advertisers. In a pub with dozens or even hundreds of advertisers, all in the market on which you're reporting, it's tough to not piss them off by reporting on bad news about them. This happens all the time. ALL THE TIME. "You ran that story about our listeria outbreak, now we're not advertising Chipotle on your site anymore!" In the video game world, bad games with ads get good reviews, or ads are pulled. Movies are the same way. Many publications cover the very stuff they advertise, so it's a tricky situation.

You'd think sponsorships would be the same way, but they really aren't. Instead, sponsors get to post their own content alongside the real good stuff. Paid-for-content, as it were, which isn't even always bad, it's just stuff these companies want to get out there where people will read it, rather than sitting unread on their corporate blogs.

I am now convinced the sponsorship model is the way out of this. It might not work as well outside of a confined vertical, however. One thing is for sure, sponsors love being able to tell their side of the story to our readers, and I feel like the readers just skip stuff they find too marketingy in favor of our really good, deep content anyway, so it's kind of a win-win.

The other thing I like about sponsorships is it brings the colluding onto the table instead leaving it hidden. In the past, I've worked at places where they've been adamant about separation of church and state: advertising and editorial are divided and do not talk, collude, or work together at all. You couldn't take more than a $15 lunch for free, could take no free trips or hotel rooms, and couldn't keep neat tchochkes or product samples.

Meanwhile, these same places would ALWAYS put their foots on your neck, subtly, to influence content. They'd even send the lead sales guy and the head of editorial out to do joint meetings which were only designed to sell ads. If someone bought a large ad and you wrote a bad story about them, it could be reworked, or even killed entirely.

Sponsorships, however, are known to be collusion, right? Now that I am at a sponsored publication, I can take trips, dinners, hotel rooms. It's great! I'm still making a great effort not to be compromised, but now I can do that in Spain for a week at a conference. Makes a huge difference, frankly. I'm much better at covering a show far away if I am in the show hotel instead of the cheapest place my failing pub could afford to set me up, 20 miles away on the side of the highway.

Journalists know how to be fair and balanced. It's kinda their whole bag. The policies publications put in place to dictate this stuff are the first to be ignored when things get thin and business goes sour. It's why some sites sell their entire skin to McGriddle: that's sales getting creative with the design team, because they can't get close to editorial. Not officially, anyway. Frankly, stuff like that is to be praised. It's innovative and likely kept some edit staff from being laid off or influenced.

In the advertiser model, the editorial team gets slapped around all the time when revenues sag. Once the layoffs start, editorial integrity usually goes out the window. Sadly, if it doesn't, the pub usually dies.

The nature of the business creates this death spiral where sites churn more and more bad content, faster and faster in favor of getting the most possible eyeballs on the most possible ads. The content becomes an after thought. The more controversial and wrong it is, the more people read it, kinda like how Howard Stern had lots of listeners who hated him for years. Steal from Reddit, add 3 lines, post.

I once met a guy from Engadget who said he was in the Guinness Book of World Records as the world's fastest blogger. He could do 15 stories an hour. And he bragged about this, openly, like it was a badge of honor. Given some of the content on these buzzfeed-like sites, I could do 30 crap stories in 10 minutes, but who the fuck would want to? They'd all be wrong and have kitten pictures in them to grab hits.

I guess this is a long way of saying this: Digital media actually made journalism shitter for a while, but maybe this culling will fix things by making outlets figure out better, more innovative business models, allowing new, better voices to come to light. It's the easiest time ever to start your own outlet. Making money, however... that's always been the hard part.

Re: There’s a Digital Media Crash, But No One Will Say It

#18
post #3

I agree, but my question is, why hasn't the crash happened yet? Doesn't everyone know most clicks are by bots?

"everyone" meaning everyone who buys ads?

No, they probably spend their marketing budget on "online marketing" because they were told it's necessary

Re: There’s a Digital Media Crash, But No One Will Say It

#19
There are plenty of extremely profitable and growing ad-supported digital media businesses. It's just not the Vices and the Buzzfeeds of the world.

Spending a ton of money up front to generate a huge volume of largely undifferentiated visitors and then selling their ad impressions at very low CPMs is not a winning strategy. And building it on top of the whims of Facebook's algorithm was worse.

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