The Washington post made an unexpected move today. They launched a product called blogroll where they will give certain blogs rotating space on the Washington Post home page, and push advertisers to those blogs.
Steve Rubel has good information on what Blogroll is offering. The advertising system seems most like Blogads, where blogs are grouped by topic and advertisers can purchase space on the blogs in bulk. The revenue split appears to be 50/50.
Whenever a new advertising platform is launched I check out Jeff Jarvis’ blog because he’s tried them all and is a good judge of whether of not something will work. In this case, he’s very bullish, saying the combination of promotion and sales creates a “virtuous circle”.
I’m more lukewarm on this. I think more ad networks are good things, but mostly because they will compete with the other networks and drive margins inevitably down. I consider the 40% I pay FM Publishing, my agent, way too high. But they are still a young service and I’m sticking with them. Eventually, though, they will have to fall to more sustainable levels or risk losing their bigger properties. As blogs get larger, hiring an in-house sales person becomes much more reasonable that paying ad networks 40-50% of total revenue.
I also think there is more room for business model innovation where blogs and other websites take much less risk than they currently do. At this point, if ads don’t sell, the blogs are out of luck. Something I’ve suggested to FM is that they simply negotiate with me every three months for a set fee to “own” the advertising spots on TechCrunch. We’d get guaranteed revenue, and FM would take the capital risk if they don’t sell the ads. They also get the upside if they sell more than they anticipate. When risks are properly allocated in this way things become more efficient. FM would have less incentive to focus on getting new blogs into the network and more incentive to sell lots of ads to the sites already in the network (something Newsvine commented on and then updated). So far FM hasn’t responded to this request, but my guess is that they or someone will eventually adopt this model.
Mike - good point, business models must evolve. I’d agree this is a surprisingly savvy move for a media company, making use of their key asset of brand and traffic.
I’m lukewarm on this as well, but have yet to see how it will play out.
With regards to FM, the real question for them — I believe — is whether the premiumness of the network they are creating is going to translate into noticeably higher CPMs than standard run-of-site ads in the long term. We think it might, so that’s the theory for now. Since the time we posted that Newsvine article, FM has actually sold almost our entire site out — at good CPMs — and that’s great. Couldn’t have come at a better time either as we’re doing record traffic. If this continues, I’d say FM is worth the 40% for now (other networks can take as much as 60% by the way)… although you’re right that competition can drive this down.
I think what’s good about the strategy you’ve taken at TechCrunch is that you allow for the outsourced sale of targeted CPM ads (by FM) but you are still able to sell sponsorships yourself and keep 100%, as well as other revenue opportunities. In the end, targeted CPM ads (and thus, FM) should only be one component of a revenue stream.
Mike,
Why not just set your own ad network with some OSS ad server? That’s what FM does it anyway with Phpadnews on the backend.
If blogroll can do it, why not you!!
russ: We have indeed built our own ad system in-house and it’s ready to roll whenever we need it. We’re lucky enough to have the guy who built the entire ad system for the Disney Internet Group as our CTO, so this was a natural for us.
It’s really not a question of serving, tracking, or any of the other operational aspects of ad serving for us. It’s more about the selling. As an early stage company, you have two options for selling your ads: do it yourself with a full-time sales staff or outsource it. AdSense tends to make people believe that the entire advertising world is just a question of building up traffic and then letting the ads pour in automatically, but the reality is that a good sell through rate at a good CPM requires a dedicated sales staff, whether it’s internal or external.
By building our own ad system in-house, we can use FM as long as it’s a valuable relationship (which it is), and then if god forbid something goes south, we’ve got the flexibility to plug in other options or do everything ourself. Right now, we’re happy though…
I wonder what do the consider a blog. Would they consider a website that is more of a e-zine a blog if it holds to the blog format or would they look at it as just a website?
Well anyway, I am not sure if it is a good idea or a bad one. I guess in time we will all see. If I get excepted as one of their blogers (if they consider my site a blog in the first place), I’ll see for myself if it is something I can use and how I will consult others to use it if applicable.
Somewhat reminds me of BlogBurst
What is the point of introducing such a feature when most readers will not notice it only. Blogburst has tried doing the same thing but there is still no huge success. Instead of having a blogroll, why not make a column where every blog author gets a chance to write maybe once a month on select topics.
At CrispAds we pioneered the model of blog advertising with automatic switch over from direct sponsor ads to CPC ads when direct sponsor ads are not sold (this generates some ‘placeholder revenue’). We also have the option to have the space shrink to nothing if CPC ads are not preferred. When the ad spot shrinks there is no space taken up, so there isnt really a loss in the perishable good we call ad space. Many bloggers prefer our CPC ads because they can control the targeting down to the keyword instead of getting ads for ‘blogs’ and ‘rss’ all day. CrispAds is for sale and this article shows that a newspaper might be a good fit.
40% is not sustainable?
How much as a percent of revenue do you think brand sales efforts cost the largest web publishers?
Now factor in turnover associated with operating a network
As for the efficiency of a rep firm buying out inventory and reselling — there is a liquid market for that and the effective cpm for a site like Techcrunch is probably about $2
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