Did the Digital Eyeball Economy Set Media Up to Fail?

My very first job in media has become my favorite example of just how ill-prepared the industry was to transition to digital. At 21 years old, right out of university, I was hired to—wait for it—review online shopping sites for a print publication about online shopping. Published by Meredith Corporation, Shop Online 1-2-3 (no joke folks, this was a real publication that existed) was to be a quarterly companion to Better Homes & Gardens. As ridiculous as this sounds today, at the time we didn’t realize we were floating on the last gasp of both print publishing and the dot-com bubble. We all made decent salaries, and the long-time editors I worked with all owned homes and supported families without too much trouble. At least once a month we had a team lunch at some ridiculous San Francisco restaurant, charged to the company card without a second thought. We spent small fortunes on photo shoots, consultants, and cover designs. A small prototype aside, after a year of production, that publication never went to print. Our staff of five was let go in 2001 and, while disappointed, no one seemed overly concerned about finding another job.

Within five years, none of my colleagues were still working in media, and I had taken a day job as a proposal writer for an engineering firm (yes, it was as exciting as it sounds) in order to pay my rent, while keeping a toe in the media world by freelancing on the side. We were not alone. Daily newspaper circulation peaked in the late 1980s and early 1990s before beginning a precipitous downfall after 2000. Newspapers and magazines charged ad rates based on their subscription and readership numbers, and with fewer subscribers and readers, ad rates had to drop. When ad rates dropped, profits plummeted. Newsroom layoffs began en masse, and according to the Pew Research Center, the number of people employed as reporters and editors dropped from well over 60,000 in 2004 to around 40,000 in 2015.

Most publishers got their content online fairly quickly and in the early years, they saw a short-term increase in ad revenue. But by 2008, advertisers had realized that online readers weren’t as valuable as print readers. The initial growth of online advertising tapered off dramatically in 2008 and 2009, with online revenues falling flat or even decreasing. Online advertising was only accounting for 10 to 15 percent of revenue for magazines and newspapers by 2009. Meanwhile, readership was jumping from print to online by the droves. Despite all that, social media platforms such as Twitter and Facebook were busy grabbing multi-million-dollar investments from venture capitalists who saw potential profits in the hundreds of millions of users they projected to accumulate over the next decade.

If you didn’t work in media during this time, the idea that publishers could simply transfer their content online and call it a day, a strategy that went hand in hand with the decision to give away content for free online, probably seems preposterous. But for print publishers at the time, it made perfect sense. Shortly after my ill-fated first job in media, I landed an unpaid internship at a local arts and culture magazine, which I subsidized with SAT prep tutoring. Within a month, the managing editor and her staff had walked out for reasons that would become painfully clear to me in the ensuing months, and the unpaid intern (me) was plopped atop the masthead and told to sink or swim. I swam, but that’s beside the point. What that job really gave me was insight into the business side of media: Because our ad rates were based on the number of readers we could reasonably claim were seeing every issue, our publisher was in the habit of dumping stacks of magazines all over town–on apartment stoops, at beauty salons and doctor’s offices, coffee shops, really anywhere he could get away with it. Everyone did this, I would see our little stack next to stacks of various other local rags in the foyer of my building every night. In this context, it’s easier to understand why publishers would automatically give their content away online: more eyeballs had always equated to higher ad rates.

Online, however, advertisers quickly realized that readers were less valuable because ads were easier to ignore. And so the stakes for audience size were raised exponentially. Forget tens or even hundreds of thousands of readers, you now needed to be targeting an audience of half a million or more to make the ad-revenue model work. As Ethan Zuckerman, the man who brought us the pop-up ad explained in a 2014 apology in The Atlantic, advertising once again became the default business model on the web in part because it’s what publishers knew and in part “because it was the easiest model for a web startup to implement, and the easiest to market to investors. Web startups could contract their revenue growth to an ad network and focus on building an audience. If revenues were insufficient to cover the costs of providing the content or service, it didn’t matter—what mattered was audience growth, as a site with tens of millions of loyal users would surely find a way to generate revenue.”

In his now-legendary talk on humans and the internet, programmer Maciej Cegłowski explained how, in the web world, it’s not the ad revenue that keeps your boat afloat so much as the role potential ad revenue plays in what he calls “investor storytime.”

“Investor storytime is when someone pays you to tell them how rich they’ll get when you finally put ads on your site,” he said. “Pinterest is a site that runs on investor storytime. Most startups run on investor storytime. Investor storytime is not exactly advertising, but it is related to advertising. Think of it as an advertising future, or perhaps the world’s most targeted ad. Both business models involve persuasion. In one of them, you’re asking millions of listeners to hand over a little bit of money. In the other, you’re persuading one or two listeners to hand over millions of money.”

The content boom

So, both legacy publishers and media startups quickly realized that to make the ad revenue model work online they would need to grow massive audiences, which further fueled the need to provide more and more content for free, which in turn drove down pay rates for said content.

All of this contributed to the rise of clickbait and the hot-take culture we’re still living in today. And then, aha! A few internet folks (Ariana Huffington and Lewis Dvorkin are the most often mentioned) realized two things: first, they could get a lot of people to write for free if they loosened up the rules a bit and allowed more opinion, advocacy, and promotional content in addition to traditionally reported stories. And second, if they allowed CEOs and other executives to contribute content they could not only get free content but actually get paid to run content. At a minimum, offering a CEO a blog on your site could sweeten the deal when selling a company an ad package. Companies were in, especially when it meant contributing to media platforms with a certain amount of credibility (credibility built on the backs of underpaid journalists, mind you): Forbes, FastCompany, Entrepreneur and, for tech companies, some of the early startup darlings like Pando and VentureBeat.

At first, it worked. Forbes, for example, doubled its online audience from 15 million unique users in 2011 to 30 million in 2012 thanks in large part to nearly 100,000 posts created by more than 1000 contributors.

I was one of those contributors, so allow me to explain how it didn’t work for journalists or for anyone who cares about journalism as a public service. From June 2011 to April 2013, I was a contributor to Forbes.com. When I started, most of the other contributors were journalists, too. But by the time I stopped, we were in the minority. Most of us had been driven out by a combination of the abysmally low pay—$50 a post, which doesn’t really allow for the sort of reporting time required to write a decent story—the click-bait incentives (a $500 bonus if you hit 30,000 uniques, plus a penny more for each unique after that), and the fact that the site had been all but taken over by CEO “thought leaders” and industry shills. But wait, that’s not the punchline. It’s this: In the year after I left, I contributed a half dozen more stories to Forbes.com, not under my own name, but as a ghostwriter for a couple different CEOs. For that work I was paid—no exaggeration—TEN times what Forbes ever paid me to write for its site, but Forbes paid nothing for those pieces.

I stopped doing that sort of work in 2014, and in recent years “thought leader” posts have been on the decline, replaced by the euphemistically named “native advertising,” through which companies hire the publication to create an “ad” that’s more like a story, and the even more insidious practice of companies hiring “journalists” to place stories for them in major publications. I myself have been approached by half a dozen firms in the last two years looking to hire me to pitch reported stories on their clients to publications I write for. In one case I asked for a list of other journalists who were doing this and was surprised both to receive it (the firm had no idea, apparently, that what they were doing was unethical) and that it was quite long. I forwarded the list to Jon Christiansen, who put a call out in various writer groups asking for examples of this, and recently published an expose on the practice. Christiansen spoke to four different journalists who admitted to accepting money from companies to insert them into articles they contribute to prominent outlets. One of them, a contributor to FastCompany and other outlets, “described how he had inserted references to a well-known startup that offers email marketing software into multiple online articles, in FastCompany and elsewhere, on behalf of a marketing agency he declined to name,”Christiansen wrote. “To make the references seem natural, he said, he often links to case studies and how-to guides published by the startup on its own site. Other times, he’ll just praise a certain aspect of the company’s business to support a point in an otherwise unrelated story.

The content-ads-privacy nexus

Sites needed content in part to grow their audience and optimize their search results, but they also needed it to better provide the only sorts of online ads companies were willing to pay for: targeted ads. More specifically, targeted ads that perform better than Facebook’s ads. To wit, no media site is going to get more than Facebook’s 2.07 billion users, which means they need to show that each of their users is more valuable to an advertiser. The answer? More data, enabled by more user surveillance. As Zuckerman notes in his apology for online advertising, “demonstrating that you’re going to target more and better than Facebook requires moving deeper into the world of surveillance—tracking users’ mobile devices as they move through the physical world, assembling more complex user profiles by trading information between data brokers.”

Getting more and better data, of course, all but ensures that sites will continue to offer content and services for free. Give them what they want for free, and many millions of Internet users will tell you everything you want to know about them. Publishers and social media companies are unlikely to stop gathering user data because it’s the only real benefit advertisers see to online ads.

At the same time, users have become accustomed to free content. Moreover, there’s a valid argument to be made that at least some content–the news, for example–should be free for all to access. In order to “pay” users for allowing themselves to be spied on, publishers and various other content providers have promised them “personalized” content. Sounds good, but taken to the extreme, if we’re all reading our own personalized version of the newspaper, it also contributes to those bubbles we keep hearing so much about.

All of this, of course, could shift dramatically if the repeal of net neutrality laws sticks. If independent publishers struggle to reach readers and revenue online, we may see a doubling down on the status quo. In the meantime, the media’s digital transformation has had an impact on who can afford to work in media, which in turn impacts what sorts of stories get told, and how. We’ll tackle that in detail in the next installment of this series, and dig into the funding issue in the final installment.

This is the second installment of a four-part series on the state of media today. In part one, we looked at the history of U.S. media.