Online Publishers Need To Stop Selling Space
1 min read

Online Publishers Need To Stop Selling Space

I wrote a long post trying to explain why the page view/CPM model for valuing online media is so problematic, particularly for traditional media companies like newspapers that are trying to transition their business models online. But Jordan Bitterman of Digitas summed it up in two sentences (in a Fortune piece about future of the Washington Post):

“You’re almost always going to be able to find inventory,” says Jordan Bitterman, director of media for Digitas, which buys Internet advertising for American Express, AT&T and General Motors. “So the buyer has more leverage than in the print category.”

Advertising in traditional media, whether newspapers, magazines, or TV, is all about selling a scare resource — space.

The problem is that on the web there’s a nearly infinite amount of space. So when traditional media companies try to sell space online the same way they sell space offline, they find they only have a fraction of the pricing power.

That’s why the newspaper industry is worth about $60 billion offline but only $3 billion online — they only have about 5% of the pricing power that they did when there was only a finite amount of space in for printing ads.

Newspapers sell classified “listings” in print and they sell the same listings online. But in a newspaper, there’s only a finite amount of space for those listings. Online, on Craigslists and dozens of other “listing” sites, there’s an infinite amount of space.

So what’s the lesson for newspapers and other traditional media companies trying to transform themselves into online publishers?
Stop selling space.**

Google doesn’t sell any space. It sells user intentions, i.e. what’s on people’s minds. And that’s a scare resource — there’s a finite number of people thinking about buying a digital camera today.

So what else is a scarce resource online? Locality.

There are only a finite number of people in ever city and town. Only a finite number of customers for every local business. Online a finite number of people in a particular locality seeking news and information online.

Wherever there’s scarcity, there’s opportunity.