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A Tale Of Two Media…And Their Revenue Models

So let’s be clear – all media companies are struggling as both the basic models they operate under (online and offline) are challenged, and as the economy means they no longer have the cushion of good times.

Let’s look at two responses to the problem.

The LA Times ran an ad that wrapped the front page for the film Alice In Wonderland; that was controversial, but what made it deeply controversial is that the ad was designed with copy and font to look like the Times’ front page…with an ad layered on top of it.


It’s eye-catching to be sure, and the Times supposedly got well over a half-million dollars for it.

But it cost the Times something as well.

Robert Niles, a former journalism instructor at USC commented on replacing the front page with ads stating, “It’s a pretty dangerous road to go down for any news organization to actually sell advertising that covers up your news reporting. It really shows a lack of respect for the audience and a lack of confidence in your editorial product.”

Worse, it leverages the actual credibility of the Times – the logo, type and headlines – to make them a part of the ad experience itself.

The Times has done this before.

And while it’s a nice hit, and helps “keep the doors open” as publisher Eddie Hartensen said – how much does it drain the social capital of the Times to do this?

How would we know? Well, we might look at circulation rates, which are falling faster for the Times than for its peer papers (3Q 2009 – 11.1% for the LAT as opposed to 7.3% for the NYT and 6.4% for the Washington Post).

By running ads like this, the Times treats its readers with contempt – they are eyeballs to be sold, rather than an audience to be cultivated.

Let’s take a (much smaller) counterexample.

Ars Technica is a moderate-sized geek website (about 850K uniques/month per Compete) that realized they had problems with their readers’ ad-blocking software.

The technology site Ars Technica has a tech-savvy group of readers, of which about 40 percent have installed ad-blocking software in their web browsers. That’s a plugin that allows you to avoid seeing most ads on a site. The financial consequence for Ars is “devastating”, editor-in-chief Ken Fisher explained in a post. Ars sells ads based on impressions, not clickthroughs – which means it takes a big financial hit because of browsing habits of its users.

On Friday evening, Ars tried an experiment: Readers running ad blockers got a blank page instead of the story they intended to read. The move was a technical success, but caused an uproar (and confusion) among users. In hindsight, Fisher told me, the site’s experiment in retribution was the “wrong approach,” causing confusion among many readers.

So they took a step to protect and grow their revenues and screwed up.

What happened next?

But the experiment still generated positive returns for the site’s bottom line. Fisher wrote a lengthy post on Ars (similar to many the site has run before) about its goals and why ad blocking was a big problem for the site:

My argument is simple: blocking ads can be devastating to the sites you love. I am not making an argument that blocking ads is a form of stealing, or is immoral, or unethical, or makes someone the son of the devil. It can result in people losing their jobs, it can result in less content on any given site, and it definitely can affect the quality of content. It can also put sites into a real advertising death spin.

And since Saturday, Fisher has received about 1,200 emails from users saying they had whitelisted the site – meaning they had told their ad-blocking software it was okay to show Ars’ ads. Based on Ars data from IP addresses, 25,000 users whitelisted the site in a 24-hour period – evidence that the goodwill the site has built up with its audience could be converted into user acts of generosity.

So Ars Technica took a stand – but explained it to its audience and explained that revenue is critical to the site. They treated their audience as partners and adults – and in return, got a significantly positive response from them.

The LA Times apparently lost 100 subscriptions over the Alice ad, and the only commentary about it is on the Reader’s Representative page, which simply notes the consternation the ad caused, and leavens it with “but we have to’s.”

I don;t think the response from the Ars Technica readers was generosity – it was self-interest. They wanted to keep reading the site, and if it takes removing ad-blocking software, many of them were willing to do so.

Why is it that we can’t imagine the LA Times treating its readers in the same way as a medium-sized technology blog? What would that look like – and how would it work??