The demise of digital publishers like Mic has become a cautionary tale for media that relied too heavily on Facebook, changed strategy too many times, and tried to be everything to everyone. For publishers, however, part of the blame can be placed on downward pressure from ad agencies, who, driven by their own shrinking fees and a need to prove their worth, have squeezed publisher margins. But agency buyers say it takes two sides to make a deal — and they’re under their own pressures, which means they’re looking for cheaper rates on undifferentiated, commoditized inventory.
The knock on ad buyers is they too often force publishers into striking bad deals. Former Bleacher Report, BuzzFeed and Slate executive Keith Hernandez, now the founder of a digital consultancy called Launch Angle, said publishers often need to make “unhealthy choices” when it comes to working with agencies. For example, if a publisher pitches a certain program, agencies will often come back with a halved fee and a lower cost-per-view. Many publishers go along with the deals rather than risk being left off the plan.
For example, an ad buyer recounted a deal where a publisher pitched a $100,000 content series. After crunching some numbers, the agency went back and offered $75,000 for the series. It was the first time they were working with this publisher. The publisher took the deal, even though it wasn’t financially going to work. But it hoped it would open the door to more deals with the holding company the agency is owned by. It did, but the agency now had a rate to go by.
Buyers across the industry say this does happen — but that they shouldn’t be shouldering the blame. “It’s at best an incomplete tale for a publisher to lay the blame at the feet of agencies or brands for the challenges indie pubs are facing,” said Mike Dossett, head of strategy at RPA. Dossett said that, in his experience, a lot of this is downward pressure coming onto the buyers themselves — they’re often looking basically for the more competitive rates for inventory.
And the problem is exacerbated, said Dossett, for publishers who are largely undifferentiated purveyors of content — so if it’s commoditized inventory, whether display, video or native, there is often no real value the publisher itself ads to that placement when it comes to the environment itself. At the end of the day, the foundations these publishers have built themselves on are the issue — reliance on platforms and fleeting audiences without any direct or meaningful relationship to the publication.
“It happens all the time,” said one media agency executive who didn’t want to be named. “We have a market that penalizes long-term relationships. If I have been working with a publisher year after year, you’d think they could raise prices. If I’m working with a client for years, I should be able to charge more. But I have to give a better deal to those clients. Basically, we grind down the publishers.”
Neil Vogel, CEO of DotDash, is on the side of the buyers: “As a publisher, if you can’t clearly answer why your content is needed in the world, or explain why your distribution sustainable or your advertising offering really truly valuable and not easily replaceable, you are likely going to struggle,” he said. Agencies are simply doing their job of providing value to clients.
“Niche publishers who are thriving have done so in part by becoming part of a bigger ecosystem — like Group Nine,” said Noah Mallin, who heads content and experience at MEC’s Wavemaker. “This allows them to get paid for quality custom programs while having scale and flexibility to distribute.”
Agencies themselves are under pressure. Under review more often than ever, they have to find ways to make money where they can. Clients are paying more attention than ever to cost. Even the consolidation in the agency business, like the recent mergers inside WPP, is mostly a way for agencies to reduce costs. The way agencies are billed have changed. Cuts put in place because of the 2008 recession have become the norm. Media commissions are mostly gone, and fee-based models are growing. Those fees are largely determined by clients, who are looking to cut more and more.
Barry Lowenthal, president at the Media Kitchen, thinks that agencies shouldering the blame is entirely too convenient an excuse. “Agency fees have been squeezed for years, and we seem to manage,” he said.
The post Ad buyers: Don’t blame us for the death of the publishing middle class appeared first on Digiday.