Passive Income, YouTube And the Google AdSense Program

For anyone who is familiar with online advertising, you no doubt have read stories about how convoluted it is. You might have read stories about CPM’s fluctuating, more Web sites and publishers tinkering with a subscription model to offset pressure-packed margins from advertising, or even one story written in Mediaweek on the heels of the Interactive Advertising Bureau’s (IAB) Annual Meeting subtitled “Web publishers totally screwed or aren’t they?”

For anyone confused with how complex online advertising has become, you can thank the lack of complexity (and effectiveness) from traditional offline media, particularly print. Years ago, if you wanted to run an advertisement in a magazine that you felt fit your demographic, you would reach out to a magazine and they would quote you a price based on a “market-based” CPM. You would negotiate, and then place the advertisement. If a big brand advertiser, you would target high-end and high-cost publishers that fit your clientele and brand image. Direct-response advertisers might instead opt for advertising in a channel with a lower cost, such as Sunday circulars, knowing the campaign’s success was based on a quantifiable ROI. The two advertising worlds rarely actually had reason to collide.

Technology, and the growth of the online medium, changed the game entirely. In the example above, the advertiser agreed to pay a $5 CPM for a campaign, and the publisher collected the $5 CPM. Offline, it is relatively simple. Online, there are considerably many more players. 소액결제현금화

Tolman Geffs, from The Jordan Edmiston Group, estimates that in a similar online buying scenario with a $5 CPM, the agency gets $.75, the ad network gets $2, the data provider gets $.75, the ad exchange gets $.25, and the ad server gets $.25. What’s left for publishers? $1.

Combine these estimates with the fact that the online medium is much more widely used now, that there is more free content on the Internet, and there is major variation (and explosion) of the sites and types of sites people consume every day – and online publishers are rightly looking at alternatives to turn that $1 into something more.

A likely alternative for publishers? Charging subscriptions. In other words, making users pay to view the content on their site. This can work, but rarely does with any major scale. The Wall Street Journal Online has been covered extensively as an example of a Web property, as they have had considerable success with their subscription model. Newsday, on the other hand, spent $4 million redesigning their site as of January 2010, with a subscription pay wall. The result? 35 subscribers willing to pay $5/week – grossing only $9,000.

I conducted the very same analysis when I was driving the online business and marketing for Playboy. The web site got a ton of traffic and we moved to a subscription-based model, which worked famously. The content was unique and edgy, and we had a strong well-recognized brand, loyal following and it all added up perfectly for charging subscriptions.

But that was seven years ago, an Internet lifetime ago.

The challenge for premium publishers in monetizing their traffic via subscriptions is that so few sites now have content unique and strong enough to truly warrant a subscription fee. WSJ and a few others can. Most others can’t get away with it. However, make your content and inventory valuable, and you will increase demand and command a viable economic model.


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