GUEST POST: Maximizing Digital Media Revenues via Monetization Mix Targeting
ABOUT THE AUTHOR:
Sudhir Kaushik is senior product manager in the Cisco Media Solutions Group‘s Digital Advertising practice.
According to Comscore’s report from January 2009:
- 6.8 percent of the total U.S. Internet audience viewed online video.
- The average online video viewer watched 356 minutes of video (approximately 6 hours), up 15 percent versus December.
According to PWC Global Entertainment and Media Report (2009), IFPI:
- Digital music now accounts for 25% ($ 3.7 billion) of total music sales.
- Consumers downloaded 1.4 billion units of music in 2008 alone.
Paradoxically, at a time when media consumption (photos, audio & video) is at an all-time high, media companies are struggling with declining revenues as they try to find the right monetization mix. Monetization mix is the set of revenue streams for a media company that work together to achieve company’s objectives. Traditionally, online media revenue has been derived from advertising, commerce and subscriptions.
- Online ad revenue is comprised of search, display and/or video ad revenue. Publishers sell the inventory on the site (either directly or via ad networks) to advertisers. Advertisers attempt to reach the right audience based on historical traffic statistics. By doing so, advertisers and publishers simply replicate the issues plaguing TV today where poor tracking and lack of data limits the ability to connect with the right audience.
- Online commerce pioneered by Amazon and eBay consists of consumers buying physical or digital merchandise either on the company owned stores or other retailers. With commerce, media companies look for efficient ways to manage catalogs, create custom storefront experiences and implement recommendation systems. Average funnel conversion on the store and the average revenue per order per user are key optimization metrics.
- Subscriptions are a pricing strategy to achieve content and user segmentation. The definition of premium and non-premium content is based on the aggregate of users rather than specific segments of users.
In the following section, we discuss the key factors that render the traditional “monetization mix” strategies less effective in the digital age.
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Technology Issues
Fragmentation of these monetization verticals is primarily due to the proliferation of technology platforms While Amazon pioneered ecommerce, ad platforms such as Doubleclick innovated around ad delivery and ad targeting. More recently, there have been a slew of technologies around video advertising (Freewheel, Brightroll, Scanscout etc) and content recommendations (Choicestream, Baynote, Aggregate Knowledge etc). The reality is that each of these platforms brings a unique way to manage content, analyze users, target content and optimize revenue. Unfortunately, when these technologies are put together in a typical deployment, they individually target the same user without the ability to share information across the platforms.
This is primarily due to the lack of a common platform that can tie all of these solutions together. So, rather than collectively trying to maximize performance, they individually attempt to do it. As a result, there is inefficiency in the system. Let us consider the example of the user who never shops online but always clicks and interacts with online ads. In today’s world, the commerce system—while it knows about the users shopping behavior—knows nothing about the users’ behavior when it came to ads and vice versa. So, there is no way to optimize the system as a whole. In the case of this user, if there was a common platform to address monetization, all “buy links” on the site would instead have been replaced by more compelling (to that user) advertising units.
Organizational Issues
Exacerbating the technology issues is the traditional organizational structure of media companies. The digital divisions within many media companies today have structured their organizations along the afore-mentioned areas of monetization. The formation of these organizations has largely been driven by two reasons – technology and poor access/sharing of data.
The Ecommerce organization focused on developing the company’s ecommerce strategy However, it spent little or no time looking at advertising or subscriptions. There was little incentive to do so since its goals were around maximize funnel conversion and increasing the revenue per order. The same is true for both the advertising and the subscription organizations. Instead – if each of these organizations had been focused and incented on increasing the overall revenue per registered user regardless of where the revenue came from, they would have ended up with different business decisions. E.G. For a user who has never shopped online – the valuable real estate on the site devoted to online commerce might be better used for other revenue generating opportunities.
This type of alignment is possible, but has been difficult in the past because of the fragmented data each team had to work with.
User and Content Fragmentation
The final contributing factor to the decline of the “traditional” monetization mix is the increasing fragmentation in where the users consume the content (Media sites, Social networks, TV) and in how they consume the content. Media consumption is no longer restricted to a single device or website, format or even time. Consumers are consuming content on the TV either live or time shifted, online on publisher portals or within social networks and/or on their mobile phones. Not only now is it important to solve the organizational and technical issues mentioned above, but also it is also important to make sure that the solutions work in this fragmented world. New metrics need to be defined to calculate the efficacy of each of the channels in terms of quality of users; the value of each user and the value of the content in each of those channels.
How can media companies adapt?
Media companies need to fundamentally change their business and strategy along two key areas – technology and organizational structure. It is extremely difficult for them to focus on creating great content (their core competence) and connect with their audience efficiently given the plethora of solutions they use today. They need a single, unifying platform that provides them with end-to-end capability to manage their content, manage their communities, learn about their audiences and most importantly monetize their content.
Technology alone though is no panacea.
Media companies also need to align their organizations with the changing business landscape and consumer behavior. Rather than having distinct teams focused on the different areas of monetization and competing over the same set of resources, the teams instead should focus on the audience and have a more coherent monetization strategy. At the end of the day, the important business decision is how they can increase their revenue, regardless of whether the revenue comes from advertising or commerce, etc. Revenue maximization will only occur if the right monetization mix is delivered to the right user at the right time on the right device. This is what I like to call “Monetization Mix Targeting”. There is no better platform to do that than the Internet.
Media companies are at an inflection point - Successful companies will be those who adapt their technology and organization to maximize revenues and reduce wastage via “Monetization Mix Targeting”.
Posted by Scott Brown at 09:19AM PST
Niko Sep 8, 2009
Hi. I like the way you write. Will you post some more articles?
This post was submitted by Niko