The Dish, The Death of Online Display Ads and The Future of Digital Journalism

On January 2nd an event occurred in the digital journalism world that is likely to send shockwaves throughout the blogging world, and shivers down the spines of many digital media outlets. Andrew Sullivan, the power blogger whose Daily Beast-owned blog “The Dish” has more than one million monthly readers, is leaving the Daily Beast in order to continue The Dish independently behind a freemium-based meter at www.andrewsullivan.com.

In an emotional and well-thought out blog post, Sullivan explained why he thought that now was the right time to strike out on his own, and why he believes a paywall ($20/year) for highly engaged users is more sustainable than seeking venture capital, relying on a wealthy parent, or putting his faith in advertising. He said: “The decision on advertising was the hardest, because obviously it provides a vital revenue stream for almost all media products. But we know from your emails how distracting and intrusive it can be; and how it often slows down the page painfully. And we’re increasingly struck how advertising is dominated online by huge entities, and how compromising and time-consuming it could be for so few of us to try and lure big corporations to support us. We’re also mindful how online ads have created incentives for pageviews over quality content.” Only time will tell if Sullivan’s gamble pays off, but it is a bold move, and one that acts as a glimpse through a door that leads into a world free from banner and display ads. As more and more of our lives are conducted online, with smartphones and tablets helping drive digital engagement to unprecedented levels, display and pop-ups ads that were once tolerable have become unbearable (it’s no coincidence that adblock plus is the most popular extension on the Chrome web store). Conversely, once we recognize that we are now obtaining almost all of our media content digitally, the concept of paying for content online is beginning to become less taboo, and instead becomes a reasonable value proposition, especially when it enhances the quality of the content and the reader’s experience. While Google’s AdWords and Facebook’s Sponsored Stories have flourished, digital newspapers have floundered, and it is no secret that the journalism business is in a state of crisis. For 12 years, advertising revenue for newspapers has been in free-fall, as Derek Thompson of the Atlantic articulates most clearly: “The scariest thing about the newspaper business is the idea that digital newspaper advertising is theoretically “alive” and “the future” even though it’s growing at 1/50th the pace of print’s decline. In the last five years, we’ve basically figured out one big thing about digital advertising — the power of search — while banner ads, native ads, and sponsored ads, and other non-search-advertising innovations haven’t been rich enough to pay for anything except the most shoe-string of journalism budgets. Basically, the digital ad business for newspapers stinks.” So if advertising stinks, then where is the light at the end of the tunnel for journalism? Despite it’s many critics, professional investigative journalism is clearly too valuable a public good to simply let disappear, but to date no one has been able to come up with a winning business model for journalism in the digital age. In December, Rupert Murdoch’s once heralded, iPad-only The Daily shut it’s doors; meanwhile, the biggest brands in global journalism - The New York Times, The FT and The Wall Street Journal - have all implemented paywalls on their sites, with better than expected success, but they are merely slowing, rather than reversing declining revenues. While most newspapers have faltered under shrinking revenues over the past decade, there is a success story that rarely gets mentioned. This success perhaps offers a solution to journalism’s predicament, albeit an unconventional and controversial one. I am talking about the global rise of the BBC. From its launch in 1997, the BBC’s digital credentials have grown exponentially, transforming the national broadcaster from the stately granddaddy of global news into pioneer of the digital revolution, led by bbc.co.uk and followed by the BBC iPlayer, the free instant streaming service that was the first of its kind when launched in 2007, and now deals with up to 7 million program requests per day in Britain alone. The BBC’s coverage of the London 2012 Olympic games was proclaimed the first truly digital games, and the Beeb was widely praised for their handling of the coverage, with 24 separate digital channels ensuring not a moment of the action was missed. At the same time, the BBC consistently produces some of the world’s highest quality investigative journalism and documentaries, from their coverage of the ongoing Syria crisis to David Attenborough’s latest wildlife spectacular, Africa. How does the BBC thrive when others struggle? An unconventional funding model: the BBC is funded through a state-controlled license fee, a license fee that everyone in Britain must purchase to legally watch television. There is debate about whether the license fee gives value for money (roughly $190/year), but the effect of the license fee is to free the BBC to focus on creating high quality content that others, subject to advertisers interests, are unable to devote resources to. The BBC Trust is an independent body set up to ensure complete impartiality from any political bias, and in truth, independence of political and monetary pressures make the service more trustworthy than for-profit news sources. So what am I suggesting? A state-run entity funded by a progressive tax may be too much for America to handle in a time when many are calling for smaller government, but it is clear that glut of free content on the web is killing high quality news journalism. To date, the evidence shows that the majority of individuals are unwilling to pay hundreds of dollars a year to keep the presses running. This is the classic case of a public good, which everyone understands is too important to be without, but any individual who pays to maintain the good does not gain enough economic value for it to be viable. Microeconomics tells us that one of the main functions of Government is to levy taxes to pay for public goods, such as street lamps. Andrew Sullivan’s adoption of a freemium pay meter signals the death of online display ads, but only time will tell if enough individuals think his thoughts are worth $20/year to support him and his team of 6. In the meantime, as traditional journalism’s vitals continue to plunge, it is surely only a matter of time until Governments around the world emulate the BBC model and provide the life support to bring journalism back to health. Until next time! Ross Garlick Rambler-in-Chief Update: With more than $100,000 being donated to Andrew Sullivan’s Independence efforts in just 6 hours, Sullivan may be well on his way to a successful year. Perhaps pay walls will one day be readily accepted, though I can’t see it being quite as successful for news sources with a less dedicated fan base. I understand this is one of my more controversial opinions, but years of growing up and watching the BBC develop into the digital broadcaster that it is today has cemented my belief that the state can be a tool for innovation, given appropriate limitations. I’d love to hear your thoughts.