Dear Content Owners: Broadcast Ads Will Never Pay You Better Than They Already Do

Sarah Gray   ·   2020-05-29

Content owners, especially those who monetize primarily through ads on third party platforms, often wonder why they can’t keep doing the same thing and just get paid more.

After all, they know their content is valuable (and they certainly know that they spend a lot of money to create it). The platforms they monetize on are rolling around in huge piles of money from the same ad revenue that leaves content owners struggling.

Sadly, that’s never going to happen – at least not in any way that leads to a profitable future for content owners.

The Ad Money Flow On Platforms

Ad revenues come from advertisers: businesses who pay to display ads alongside content such as yours.

The total amount of money generated by an ad-supported platform (and available for distribution on monetized content) is the outcome of individual advertisers deciding how many impressions (ad deliveries) to buy and at what price.

Thus, the total “pool” of ad revenue that comes in is ultimately determined by how many ads advertisers want to deliver and how much those ads are worth to those advertisers.

While the ad market determines the total ad revenue earned by the platform, the platform determines everything else.

The platform controls the price of the ads, the placement of those ads throughout its platform (e.g., which content to display ads against), which of those placements will be monetized on behalf of the content owner, and how much of the ad revenue from that impression will be shared with the content owner (e.g., revenue share percentage).

The ad revenue that makes it to you, the content owner, is a function of these two processes – and you don’t do well in either.  

Broadcast Digital Ads Are Worthless To Advertisers

Ad revenue comes from businesses buying ad impressions, and reflects the value the buyer places on the ad impressions. Unfortunately, each individual ad delivered is worth virtually nothing to the advertisers.

Ads that are delivered alongside content are "broadcast ads.” The advertiser distributes these ads through a third party middleman (the platform) to its audience by inserting them next to content the audience wants. This is an uncertain process, as – despite all the fancy targeting they pay extra for – the advertiser doesn’t know to whom its ads are delivered or what comes of it.

With broadcast ads, the advertiser knows that not everyone who has a chance to see the ad will actually see it. The advertiser also knows that the vast majority of people who do see the ad are not interested in it. Therefore, the advertiser has to hit many, many viewers with the ad in order to reach the handful of people who are going to interact with the ad.

This means that the value of a single ad delivered to a single person is basically ZERO: most of the impressions are literally worthless to the advertiser.

Naturally, the amount that advertisers will pay for the ads is capped by the value that they place on those ads. The total ad revenue brought into the platform is pegged not to the value of your content (which may highly valuable to your audience) but to the significantly lower value of the ad impressions to the advertisers.

At Scale, Content Is Worthless To Platforms

At volume, those low-value ad impressions aggregate into a literal fortune for the platform – who is, just like you, in the business of ad delivery. Unlike you, the platform makes out nicely indeed.

Why can’t the platform pay you more for your content so that you can earn a living, too?

The answer is that it technically could (ignoring its obligation to maximize profits for shareholders) … but it definitely won’t.

In this process, you are a supplier of content to the platform. But, just like the advertisers, the platform does not care about your content; the platform cares about the opportunity it offers to deliver ads.

When the platform decides how much to pay you, its decision isn’t guided by how great your content in or how much their users love it. Instead, it’s capped by the value they place on delivering ads with that content – a much lower figure.

While that represents the maximum amount the platform will pay you, the amount that the platform actually pays you is the lowest amount that it can get away with paying you.

This is where you get screwed a second time: at scale, the platform can get away with paying you close to nothing.

A sufficiently large platform has a virtually unlimited supply of content from content owners – many of whom are willing to forego immediate financial profits for the chance to reach the platform’s audience.

While the content supply is seemingly infinite, demand is extremely limited: there are many ad-supported platforms, but only so many that are sufficiently large to be attractive to both content owners and advertisers.

The characteristics of supply and demand in this market (content for large ad-supported platforms) are such that the demand-side can dictate any terms it wants. This is plainly visible: they do dictate whatever terms they want, and content owners accept them despite being unhappy about it.

The Broadcast Ad-Supported Platform Isn’t Built To Be Profitable For Content Owners

The broadcast ad model is insanely profitable… for the middleman platform. It’s a loser for content owners (unless they happen to also be a platform owner, like an independent news site).

The revenue that content owners receive in a broadcast ad-supported platform is pegged to the value of the broadcast ads to the advertisers, not to the value of the content to the audience. Then, the content owner’s share of that meager revenue is in the platform’s absolute control; the platform holds all the leverage, and has no reason or incentive to not underpay them.

While your content is indeed worth more than you are being paid, and the platform certainly could pay you more, the unsustainable revenues you earn from your content are the predictable result of the market dynamics. The only way to change the result is to change those dynamics. Until then, yes, you could (even should) be paid more – but you won’t be.

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