If you're not paying for the product...

Todd Handy | VP of Advertising & Performance, DDM | @ToddHandy | November 2, 2015

Stop me if you’ve heard this one before. A smart kid decides that music costs too much. Who wants to buy a CD when perhaps only one or two songs are "worth it"? Why not break the CD into individual digital tracks and make them available via download — for free. The kid builds a peer-to-peer service and puts it out to the world. Suddenly, everyone else agrees: "Music costs too much. Why would I buy a whole CD when perhaps only one or two songs are 'worth it'? I think I’ll just download this song. And that one. And this one. Oh, and I’d never thought about this artist, but since it’s all free, I’ll download this one. And this one. And this one."

Or, stop me if you’ve heard this one. A smart dude sets up a web hosting site and allows users to upload files. Some of these “files” happen to be movies. Full copies. New releases. Some even in theaters at the time they were uploaded. People across the world think, "It's $9-$10 to see a movie in a theater, $15-$20 to buy the DVD, $8-$10 for a Netflix subscription, or free to download a movie from this website. I’ll just download this movie. And this one. And that one."

Yeah, you’ve heard these stories. Both of them. And many others when it comes to disruption. And, since all of us here are publishers (or at least in the digital media space), we’ve had our share of disrupting and being disrupted. It seems like each month there’s a new disruption, either from the competition, from the marketplace, from ad tech, etc. But one of the biggest disruptions going on right now that has all publishers a little nervous is a little thing we call “adblocking.” Yeah, maybe you’ve heard of it?

In September I attended the Digiday Publishing Summit in Miami. Adblocking was one of the top five takeaways from the entire summit.

I’m also a member of the Executive Committee of the Local Media Consortium, which recently tasked a sub-committee with tackling the landscape of adblocking, creating a position statement for what we as LMC members see as the way forward with adblocking, and documenting best practices for publishers to deal with adblocking. In a two-week period this committee did some amazing work and produced a white paper, which can be downloaded here.

So, where am I going with this? As digital publishers we continue to be disrupted, as well as being faced with various hurdles that threaten to impact our businesses revenue — see viewability, NHT, programmatic, etc. These three mentioned here each individually portend future potential impact to digital publishers’ revenues and business models. Enter adblocking, the newest potential impact to publishers’ business models. A recent report produced by PageFair and Adobe places the 2015 impact of adblocking at $22 billion — yes, billion with a B! (Full disclosure: Many in the industry have taken exception with the $22 billion number, as that reflects the cost of all the lost ad impressions as direct sold instead of programmatic. That’s a fair argument. That said, I’d argue it's still a large number with a B, not with an M. Business Insider pegs the iOS 9 impact at over $1 billion itself.)

All that is set up for what I’d like to spend the rest of this article proposing.

Publishers create content. Content has value. Digital media companies have business models. Those models center on content. Most publishers offer their content in an ad-supported model. Some charge for it. Most don’t. Therefore the content which has value, which is core to the business model, can’t simply be accessed for free. There is a quid pro quo. The quid pro quo for digital content is this: You access my content (quid), you pay me for it (quo). The real question we should be asking ourselves is not, “How do we block those who are running adblockers from accessing our content?” That’s a thermonuclear war option. The question we should be asking ourselves is, “Which payment are we willing to accept (the quo) for our content (the quid)?"

Proposal: Acknowledge the value of your content. Take ownership of the relationship with your users. Engage in a dialogue with them that says, in effect, “I see you’re running an adblocker. My content has value, and I’m happy for you to consume it. But, I need to have some kind of payment for my content. Currently the payment model I employ is ad support. Advertisers pay me to have access to my audience (you), and in return I give you my content for free. If you’d like to continue with an ad supported model, please turn your adblocker off or whitelist my site. If you aren’t a fan of ad support, that’s OK. We have other options. You could watch a preroll before accessing my content today. You could look at an interstitial. You could provide me with your e-mail address to be added to a weekly e-mail newsletter. You could subscribe to my digital product. Basically, I have all kinds of options for you to 'pay' for my content, most of which don’t actually involve money. But, my content has value, so I expect to be 'paid' for it somehow."

Why do I make this proposal? Because it’s incumbent on us to step up and protect our business models. My wife used to regularly tell our daughters as they were growing up, “If you don’t stand up for yourself, no one else will.” So, let’s stand up for ourselves. Let’s stand up for our industry. Let’s let our users know our content has value, and we’re happy to engage in a dialogue about it. But, we will get value back from them for our valuable content.

Here’s the other reason why I make this proposal. Regardless of what the PageFair/Adobe study purports, most users aren’t willing to pay for our content with cold, hard cash. And that’s OK. Because I think when push comes to shove, the model they are most likely to adopt is the one that’s currently in place: ad support. I’m sure you remember studying inertia in school? You know, inertia: An object at rest remains at rest, an object in motion remains in motion unless acted upon by an outside force.

The textbook definition of inertia is, "Inertia is the resistance of any physical object to any change in its state of motion including changes to its speed and direction or the state of rest. It is the tendency of objects to keep moving in a straight line at constant velocity.” In other words, our users have a state of motion: They come to our sites regularly, and they consume our content. Sometimes they click on an ad. Most times they don’t. But, we give our advertisers a chance to access our audience multiple times per day and per month. The outside force? Adblockers. See that? Our users will remain in motion unless acted on by an outside force. That outside force changes their motion, their direction. But, we’re also an outside force, and we can put our users back into motion, renew their direction, and get them back where they were going. It’s all about the value exchange.

So, what’s the support for my proposal and my argument? Well, in the case of music and Napster, it was iTunes, Rhapsody and others, which gave way to Pandora, Spotify, Apple Music and others. In the case of Megaupload it was Netflix, Hulu, Amazon Prime and others. In the case of the digital media industry, we are the solution. Instead of just being disrupted, let’s disrupt. Let’s own our own destinies. As for support, take a look at this blog post from Flurry. Granted, it’s specifically dealing with apps vs. the local media space, but the paradigm and use case are the same. When faced with paying $.99 or more for apps without ads, or accepting ads and paying $0 for the apps in the App Store, 90 percent of users in 2013 chose the free route (up from 84 percent in 2010). Said another way, users who could pay to not see ads decided instead to not pay to allow ads to be served. Will they tap? Will they convert? I don’t know. At some level that’s incumbent on the advertiser to provide strong creative, good calls to action and compelling offers. But, inertia for app users says they’ll stay in motion — the "free" motion, even when an outside force can be applied.

OK. I’ve gone on long enough. I hope I’ve made my case in a compelling manner. Don’t get me wrong, adblocking can and will hurt. We’re all going to be impacted by it at some level. But instead of going all thermonuclear war, I advocate a dialogue with users to determine their “currency” of choice, and then that we “charge” them in that currency.

As for the title of this post, you may have heard the full adage" "If you’re not paying for the product, you are the product.” Our users are our audience. Our audience is what we “sell” to advertisers. In other words, our audiences, who are not paying for the product, in essence are the product. As a product myself, I understand the quid pro quo and engage in that value exchange every day. To the extent that I don’t have to pay for it, I consume lots of digital media, a little bit of HD TV over the air, limited music on Pandora or via radio, etc. And I’m fully aware that I’m not paying for the product, hence I am the product.

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