NB: This is a guest article by Gary Arndt of Everything-Everywhere.
As we have all heard, old media is dying. Ad revenues are drying up, journalists are getting laid off, ad pages are shrinking, yadda, yadda, yadda.
Yet, as large as the shift to the internet has been, there is still an enormous disconnect between time spent on new media vs the amount of money spent on advertising.
Former Morgan Stanley analysts and current partner at Kleiner Perkins Caufield & Byers, Mary Meeker estimates that 28 percent of all time with media is spent online, yet only 16 percent of advertising is spent on the internet. This disconnect between media consumption and ad spending is estimated to be $50 billion annually.
That $50 billion dollar disconnect falls most squarely on print, which gets 26% of all ad spending but only 12% of media consumption based on time. Television has only an 8% disconnect, whereas radio is in the same boat as the internet.
Where is that $50 billion going? It is basically a transfer from corporations to media companies. As large as the woes for the print media industry have been, believe it or not, they are still receiving enormous economic rents from advertisers in terms of what they are providing compared to the overall media market to the tune of a cool $50 billion.
This also means that there are some enormous bargains to be had online for companies who are savvy enough and smart enough to search them out. In particular, the bargains are to be found in the blogosphere.
Lets take a look at some examples in the travel industry.
Top travel magazines such as Conde Nast Traveler, Travel + Leisure and National Geographic Traveler charge around $100,000 for a full page ad for a single issue. Volume discounts and variable pricing for a four color vs two color ads may come into play, but $100,000 for single full page ad for a single issue of a magazine is a reasonable working number.
Likewise you can expect to pay in the neighborhood of $20,000-25,000 for a 1/6 page ad. The circulation numbers for the above publications range from 715,000 for National Geographic, to 800,000 for Conde Nast Traveler and 957,000 for Travel + Leisure.
To reiterate the point….$100,000 for a single flip of a single page of a single issue of a single magazine.
Now compare numbers for a travel blog. For illustrative purposes I'll use my own site, Everything-Everywhere, but you can find similar number for other travel blogs. I average about 100,000 unique visitors per month.
I've had approximately 1.5 million unique visitors during the last 12 months, with approximately 4,000,000 page views, according to Google Analytics. My audience isn't as large as any of the above mentioned travel magazines to be sure, but unlike many print publications, my audience is growing, and most importantly, they know and follow me.
For the sake of argument, lets say my audience is 1/10th the size of one of the above publications. (if you think that is too generous, and I don't think it is, you'll see the same point can be made if you assume 1/100th the audience.)
My audience is smaller, but my cost structure is MUCH smaller. My entire operation consists of one person, a laptop and some camera equipment that can be carried in a single bag. Compare that to renting office space in midtown Manhattan, having a staff of hundreds and the shipping and printing costs of a magazine.
I could get by on $50,000/year where as a major publication might lose money on $50,000,000/year. The difference in our audience size might be an order of magnitude (or two), but the difference is our burn rate differs by THREE orders of magnitude!
Even for smaller print publications, there is still an enormous difference in costs. Take a great, small travel publication like Afar. They claim a circulation of approximately 100,000 people, which is in the neighborhood of what my blog brings in per month.
They charge about $15,000 for a full page ad. Again, it is $15,000 for one page of one issue of one magazine. (Also, Afar only publishes six times a year, so my annual audience would be larger)
For the cost of a single ad on a single page in that publication with an audience on a par with my website, I could travel in style for a month, upgrade my equipment, and hire an assistant.
The difference in advertising prices between print and online are so out of whack that online travel publisher Matador Networks recently announced that it is launching a print publication… and paying writers 10x what it is paying them to write online.
Why would an online company enter a declining industry that is laying off staff, shutting down publications and seeing industry wide drops in revenue, AND pay an order of magnitude more for content in the process? Because print advertising rates are so inflated. I really can't fault Matador for making the move.
Taking into account the differences in audience size vs the difference in cost structures, there are efficiencies of 10 to 100 fold to be found in the blogosphere. I'm not talking even double or triple the benefits, but one or two orders of magnitude.
Please re-read the previous two sentences to let it sink in.
There has been talk in media circles of turning analog dollars into digital dimes. Most traditional media companies are desperately trying to bring in enough revenue keep their companies operation. Sadly, it is a fools errand. They will never be successful.
The promise of the internet is not and never has been making more money. The power lies in reducing costs. Analog dollars are going to turn into digital dimes, and there is nothing that can be done to stop it. What people fail to realize is that even though revenues may shrink from dollars to dimes, costs are going to pennies.
To give you a rough idea of how massive the cost savings can be, the New York Times online gets approximately as much traffic as the Huffington Post. The New York Times has 1,800 people on staff where as the Huffington Post has about 50. Perez Hilton is able to command an audience comparable in size to People Magazine, but with a shoestring staff.
Yet the disconnect still exists.
Yet, you will not find any serious advertisers approaching most bloggers, especially in the travel niche. Most bloggers have to fight tooth and nail to earn a living for themselves, often through Google Adsense ads or selling ebooks.
In four years of running my site I have never been contacted by an advertiser that would offer to pay the equivalent of even 1/6 of one page of one issue of one magazine for an entire year of sponsorship of my site. I do not know of any other blogger who has either.
So why the massive discrepancy? There are enormous economic potential waiting to be claimed by advertisers, but no one is picking up the ball. I'd like to think that somewhere in a conference room there is a meeting being held where someone is deciding between advertising on blogs vs magazines and newspapers.
The reality is, however, blogs aren't even part of the conversation at this point. There are several reasons:
1. Many blogs exist outside of the travel industry.
I have one of the larger travel blogs out there, and I have no background in travel, tourism or journalism. I have never attended an industry event save for the annual Travel Blog Exchange (TBEX) conference.
I have few contacts in the travel, public relations or advertising world. I don't have a staff that can represent me and I'm usually traveling, so I'm not available to attend industry events to network, even if I wanted to.
I didn't even attend PhoCusWright because the $500 blogger admission was too expensive (see the above part about my low cost structure).
Everything I do is direct to consumer. I travel and talk directly to my audience via my blog, Facebook and Twitter. Hundreds of other bloggers like me are having a conversations about travel with the public and for the most part, the industry has no clue that it is even happening. If anyone is familiar with travel blogs, they are probably only familiar with the subset of blogs which cater to professionals in the travel industry.
Until they realize we exist, it is hard to expect them to spend advertising dollars on blogs.
2. Inertia is the most powerful force in the universe.
What is the #1 reason companies continue to spend so much money on print advertising? Because they always have. There is an old saying that no one ever got fired by hiring IBM.
Likewise, no one will ever get fired for buying an ad in Conde Nast Traveler. Large print publications are established, reliable properties and if it has worked for years - why rock the boat?
Working with a blogger on a sponsorship, even if it is for a fraction of what is spent on print advertising, will draw attention to it because it is different. In a world with lots of layoffs, it is probably a better career move to do the safe thing that has been done before.
I know one independent travel blogger who actually tried to launch a small print magazine just because he found that advertisers were more likely to buy if they saw something printed. It felt more real when it was on paper.
Also, don't underestimate the power of the 15% commission that ad agencies get for doing ad buys.
3. Blogs have a perceptional problem.
Being the new kid on the block, there are a lot of stereotypes floating around about bloggers. Some true and some not so true. They have a reputation of being people who spend all day in the basement wearing pajamas, or they are lose cannons, etc.
The fact is, there is a far greater range of professionalism in the blogosphere than what you will find in traditional media. There indeed are bloggers out there that you wouldn't want to associate yourself with. The long tail is something you never had to deal with in the analog world. If you could afford to publish a magazine, that itself was a test of professionalism.
Many companies would like in an abstract and vague sense want to work with "bloggers", but they have no idea where to start or who specifically to work with.
4. Stuck in a page view paradigm.
The idea of page views is something that caught on quickly because it was an online analog of what you saw in the world of print: pages with advertising.
The problem is, CPM rates, cost per click, cost per action and other forms of display advertising don't take into account anything other than eyeballs. Almost all money spent online for advertising and marketing is spent in form of the above methods.
Certainly, having a large audience is beneficial. However, just counting views and clicks doesn't capture things such as trust, authority and influence in a world with social media. In this world, individuals matter and are trusted more than anonymous brands.
Having an influential blogger on your side as an advocate who really loves your product is qualitatively different from just serving up banner ads. To give an extreme example, how much was the value to Australian Tourism of Oprah's decision to move the show there for a week? Estimates I've read are in the "several hundred million dollar" range.
Granted, no bloggers are anywhere close to Oprah, but the point remains. It had nothing to do with advertising, pageview or any other normal metric. The power of Oprah's decision had to do with the fact that she had an audience who trusts her opinion.
Bloggers are better.
I'm certain that many people with a vested financial interest in print media (and lets be honest, I have a vested interest in the success of travel blogs) will go to great lengths to explain just why print advertising is worth the money
They will tout the higher quality of the publication, they will trot out statistics by publishing groups to explain why advertising in print is still a great value.
It is all hogwash.
Even if you could justify two, three or even a four-fold increase in value for a dollar spent on print advertising, there is no way you could justify a ten or 100 fold increase in price.
I've heard it said that if you really want to change an industry, you can't just be better; you have to be better by a factor of 10x. Bloggers have that and I believe it is going to be the next big opportunity for savvy businesses.
Their low cost structures, plus the trust and authority they can generate as independent actors, makes them excellent candidates as marketing partners for companies.
2010 has seen the first steps in this direction in the travel industry. Not surprisingly, it has been small to medium size companies with internet savvy CEO/founders who have been the first ones to take the leap.
This year Scott Jordan, the CEO of Scottevest, sent Rolf Potts around the world with a No Baggage Challenge. The story was picked up by multiple major news outlets and the entire project was set up to build buzz and discussion, not pageviews. He has already conducted a second No Baggage Challenge with Peter Shankman.
Likewise, Bruce Poon Tip recently launched the Wanderers in Residence program for Gap Adventures. In 2011, some of the most influential bloggers in the travel industry will be talking, tweeting, and blogging about trips they are taking with Gap Adventures around the world. Moreover, by acting early, Gap Adventures has shut out most of their competition from working this group.
[NB: Disclosure - I am one of the bloggers in the Wanderers in Residence program)
The economic case for working with bloggers is overwhelming, especially in light of the cost of traditional media alternatives. Low burn rates plus personal attachments to their audience make them compelling choices for companies in the travel industry to partner with.
I predict the small handful of companies who have chosen to work with bloggers at the end of 2010 will grow into one or two dozen by the end of 2011.
The companies who are nimble and smart enough to embrace the blogosphere will be the ones who reap the greatest rewards.