The past few months have been ones of heavy digital media turmoil, with multiple mass layoffs, closings, and much-discussed pivots to video content. Coming on the heels of the series we did for Medium discussing the nuances and benefits of being a niche media company, the environment feels frankly more bleak each day when considering the prospects of websites and digital outlets that want to reach any kind of scale. The simple, ugly truth is that consumers have all but abandoned the idea of paying for the media they consume, even if they consume it daily, and finding a model of monetization among the wreckage that works for even a modestly-large team feels increasingly impossible.
As I said in one of our Medium articles, there is a measure of comfort in our smallness, as we are frankly too piddly to be affected by any of the big sways in media, whether it’s the gold rush of social media traffic (and its inevitable ebb), the mass pivots to video, or the fundamental changes in how ads are shown on web pages. Yes, we feel distant echoes of what is going on in the bigger world, but our scale is insignificant in the face of these landscape shifts.
All of that said, while we are surviving (and perhaps, by some humble standards, thriving) in our smallness, the route for us is by no means easy. We are lucky in some ways, because our lane (personal finance for women) is not terribly cluttered, and tends to be favored by almost every algorithm out there. But bootstrapping any media company is fucking difficult, and we are still five young women (and the occasional contracted guy) making it all work as we go, which has meant long stretches without take-home pay for Lauren and I, among other things.
As I discussed on Twitter last night, the fact that consumers no longer feel any kind of moral or consumer obligation to pay for the media they regularly consume is a huge uphill battle. And yes, we feel that sting, knowing that — even by the most generous of projections — we stand to only convert about 1-2% of our active audience into subscribers. Not having a steady stream of revenue from our audience hurts us, like it hurts everyone. But we have still been able to make it work.
Still, though, there is so, so much that we did not know about the business of media going in, and I think that content creators in general — even if they aren’t planning on starting or monetizing their own thing — would be better suited to understand the nitty-gritty of how websites make money. And audiences, too, might benefit from knowing what it really entails when that prestige piece goes on their favorite site, or a lushly-animated video is released from their favorite channel. We are only one example, but we feel pretty standard in terms of niche media monetization, at least insofar as all of the channels of making money we use are pretty well-worn. If you are interested in how a site like ours makes money, this is how we do it, along with a little information about each:
- Programmatic Ad Revenue. These are the display ads (banner ads) you see all over most websites, including ours. They can be anything from little bars along the side of the site all the way to those horrible full-page pop-ups that you have to click out of before you can go to a new page (those are called interstitials, and they are godawful). This is the baseline revenue for most sites, and as you may have guessed, one of the least lucrative (unless you are working in massive scale). The value of these is generally measured in what is called CPM, or Cost Per Mille, which generally means how much money you make every time a thousand eyeballs see that ad. And that number is extremely depressed across the web by many factors: the fact that there are so many fucking ad spots, the fact that we are essentially blind to them, the fact that people don’t engage with or even read most of the content they click on, the fact that it’s really hard to effectively target, etc. And while, yes, it is technically low-involvement and low-pressure up front (anyone can set up Google Adsense in an hour or so), in order to make any real money off of it, you have to basically “game” your CPM, which means dedicating a lot of time and effort to it, or paying a third party a commission to do that for you. There are all kinds of strategies for this, but long story short, unless you’re playing with big numbers, programmatic is never going to be your ticket to wealth. (And surprise! Sites like ours with loyal readerships are doubly screwed, as every time a person re-visits a site each day, their eyeballs get less valuable.) So despite its omnipresence on our site, for us, programmatic nets only about 20% of our overall revenue.
- Pre-Roll Ads. These are the ads that play before a video, in our case on YouTube. These are very similar to programmatic, in that they are usually not custom-sold and are more dictated by the consumer’s internet history than anything else (they are also usually measured in CPM). But at least for the time being, they are generally more valuable than display ads, in large part because the user often has to engage with them in full or in part to get to their content, and because studies have shown that they are, generally speaking, more effective. They are also somewhat easier to target. (Brands love video for these and other reasons, which is what is driving many of these pivots, not the audience demands.) For us, our pre-roll ads have a substantially stronger CPM than our display ads, and because our engagement is very high on YouTube (our average watch time is over four minutes) and our content is so targeted, we are one of the channels for whom this model makes the most sense. Pre-roll now accounts for about 25% of our overall revenue.
- Custom Content. This is anything a website makes custom for a client, from sponsored posts to branded Instagrams to shout-outs at the end of a video or podcast. For small sites like us, this is hugely valuable, because it’s most effective when reaching targeted, niche audiences so you can assure that every eyeball seeing it is the eyeball that matters to the client. And this is important, because brands pay relatively highly for this (though still nothing when compared to TV, or even radio). But to put it in context, if you were measuring a sponsored post in CPM based on your average traffic for that post, your return for doing one sponsored post versus just running regular banner ads around it can be literally hundreds of times the value. For us, and many sites like us, running custom content on text and video is the only real path to sustainability, and one of the only models that makes sense both for the client and the niche company, who is making the gamble that what they give up in scale will be made up for by their extremely precise audience and point of view. All that said, this is the kind of content that can prove a) most ethically compromising and b) most distasteful for audiences. So it’s a fine line that every publication and creator has to walk, and you are almost guaranteed to make some missteps along the way (every creator and publication is used to getting screamed at in the comments of a sponsored post, no matter how tastefully done). For us, though, custom content across TFD’s channels (including YouTube) is still around 35% of our overall revenue.
- Affiliate Marketing. This is a kind of marketing that has become more and more popular over the years, and was initially hailed as a salve to waning programmatic and subscription numbers. (As you might know, much of the Kinja empire was based on affiliate marketing.) But what is it, exactly? Essentially, affiliate marketing is when a publication links to a product or service and takes some kind of commission off of that transaction. Sometimes they get a commission when the user clicks, sometimes only when they buy something, sometimes when they sign up for an email list or survey. It all totally varies, and is also at highly-varying levels of scumminess. The personal finance media field, for example, is bursting with extremely scummy affiliate models, websites with barely-readable content whose sole purpose is to drive huge numbers through search engines to pages about credit cards or loans in order to rack up affiliate dollars. We engage in it very sparingly (we’ve found that Amazon in particular is non-intrusive for our readers and works well for us), and are constantly looking for ways to integrate it without compromising our ethics. Long story short, affiliate marketing is one of the lowest-impact models in terms of time investment and real estate it takes up on your site, but it’s also easily one that erodes the most trust in your readers. As of today, it accounts for around 5% of our overall revenue.
- Editorial Product. This is what encompasses basically all of the non-branded editorial product a site sells. This can be anything from original content commissioned by other outlets, to packages of content to be syndicated and redistributed across other channels, to books/TV/other media. There are some media outlets that put out a book a year, for example, or who license out part of their editorial brand, and find huge success with that. I would even put things like speaking gigs on the list, as it is technically selling your editorial brand as its own product, rather than commissioning it to be repurposed for someone else. A lot of smaller sites, individuals who have their own brand, and hyper-targeted media tend to make a lot of money in editorial product. For us, it really varies month-to-month (for example a book we sell would be a huge month, but that’s a one-off thing), but generally speaking, only around 10% of our revenue comes from editorial product.
- Everything else. For us, this entails everything from e-commerce to licensing to consulting for brands and individuals. These are usually not recurring streams of revenue, but are the bucket in which everything else tends to fall. It’s generally around 5% of our income at the end of the day.
Now, as I’ve said, we are not destitute — this current model allows us to live well, and to grow humbly. But there are a few key takeaways here, and things that I think everyone would be better off understanding, both as consumers and creators of digital media: none of these ad models scales very well, particularly as wider and more demographically-diverse audiences drive down the value of most of these forms of revenue. And even if you are able to maintain a very niche, targeted audience around a particular subject at a bigger scale, the sheer costs of running any digital property increase substantially as you grow. (For reference: we pay just under $1,000 a month just to keep the site and all its little tools/necessities running, and we are fucking tiny.)
And even if you are able to make these models scale, the truth is that at any time, one of them can (and often has) come crashing down, and will force you to restructure essentially overnight. If CPMs suddenly, drastically dip, or if YouTube decides to cut off your ads because you have “adult” content, or if a major client pulls out over a random piece of content, your payroll could be upended in literally a matter of a month. And while all of the inherent variables of advertising-based revenue used to be offset at least somewhat by a solid, steady base of subscriber revenue, even the most robust subscriber models have taken massive hits in the past 20 years. Without that model to fall back on, even the most prestigious publications are weighing costs (a freelance piece that might be $2,000 to publish, between all staff and contracted man hours, even if it never appears in print) against benefit (that same freelance piece which earns back less than a quarter of that in ad revenue), and struggling to keep the strings together.
I am not saying any of this to excuse an industry that often follows the wrong trends and makes terrible business decisions, and which leaves countless talented, hardworking people dangling in the aftermath. There is certainly a lot of blame to go around in the boardrooms of digital media. But I can say firsthand that the underlying issue will remain the same unless there are fundamental, cultural shifts that we all need to be a part of: if we demand quality media, we must be willing to pay for it. Because of our tiny scale and our (relatively) diverse income streams, TFD is able to get by without having a subscription model at this time, but it is by no means something we’ve ruled out. Yet we also know that we will be up against a digital consumer who has gotten used to the idea of media costing nothing, and who remains blissfully unaware of how their favorite outlets are actually making ends meet (every time someone brags about using AdBlocker, I die a little inside). If we want to make the media ecosystem a stronger one for everyone, we must all be more lucid about the roles we play, and how we can personally contribute to seeing more of what we love, and what our society deserves.
This is just how one little outlet makes their money, and everyone’s model will look differently. But one thing is universally true: just because you aren’t paying for something doesn’t mean it’s free.
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