The writer and media entrepreneur John Battelle describes a form of media arbitrage in the ad industry today:
A big publisher like Buzzfeed or Cheddar sells a million-dollar advertising deal to a marketing brand. The media company guarantees the marketer’s message will collect a certain number of audience impressions or views, charging the marketer a “cost per thousand” for those impressions. (Known as “CPM,” cost per thousand pricing ranges widely, from a few pennies to $25-40 for “premium” placements)…
Because (Facebook and Google are cheaper, have better targeting), publishers have become audience buyers on Facebook, Google, and other networks. Enterprising publishers began packaging their own content with marketing messages from their sponsors, then they got busy promoting that bundle to audiences on Twitter, Facebook, and Youtube, among others.
This is where “the arb” comes in: The publisher will charge the marketer, say, a $15 CPM, but acquire their audiences on Facebook for $7, clearing an $8 profit on every thousand impressions.
But marketers still prefer this approach to simply advertising on social themselves because they
… still believe that the context of a media brand can help their messaging perform better, and they’re not wrong in that belief. So they’ll pay a bit more to have their messaging associated with what they believe is quality editorial.
These practices – “packaging their own content with marketing messages from their sponsors” on social media – will lead to the erosion of the media company’s brand.
The one way sponsorship works is when the publisher has a direct relationship with a defined, loyal audience. Think of websites like Daring Fireball, podcasts like Joe Rogan’s or newsletters like the Morning Brew, each of them their own micro-brand. In this case when the sponsor’s message is packaged with the publisher’s content, the targeting is sharper, it happens on the publisher’s medium, the publisher controls the narrative, and the audience hears about it in a transparent context – this last is Battelle’s main point, the intermixing of content and marketing on social ruins context, which is why it’s disingenuous.
Sponsorship via direct-to-audience properties becomes the norm in the 21st century. This value that these independent publishers capture is the return they see on the capital they have built up in the form of their audience.
(Part 2 – what about the Internet makes micro-brands more attractive than large publishers)