​WILL VIDEO EVER BECOME PROFITABLE FOR NEWS PUBLISHERS?

By February 16, 2016Uncategorized

Over the past 10 years, online video has grown from being a playful experiment on progressive sites, to becoming a critical component of every media company’s digital strategy. News publishers have invested significant amounts in platforms, content acquisition and ad sales to build their video businesses. And the audience is growing. Not at Youtube pace, but it’s obvious that users today expect video to be an integral part of the editorial content. Newspapers such as Aftonbladet and Expressen serve around 30 million video streams per month. Therefore it might come as a surprise for you that almost no established news publishers have made a single dime profit from video. Ever.

The explanation though is quite simple: the monetization of video has so far been limited to pre-rolls – an ad format that most people find intrusive and consequently is low priced.

Let me illustrate the problem with a simple calculation, from our own home turf:

In Sweden the average CPM for pre-rolls in news media is around 13 EUR.

Let’s assume that the average cost for producing a news video (or acquiring it from a news agency) is 130 EUR. This means that you need on average 10,000 viewers on each video to break even, on a gross margin level. Unfortunately, that doesn’t happen, at least not in Sweden.

If you think those viewing numbers seem low, it’s probably because you mostly hear about the success cases, the viral videos getting millions of viewers. But the harsh reality is that only a fraction of all videos become viral. And since news publishers still need to report on what’s happening in the world – as opposed to just aggregating the cutest cats and hungriest sharks – they’ll have to accept pretty low average video numbers.

If you’re the owner of a news publishing business, you basically have two choices:

1. Stop measuring your video business as separate profit center.
Do your editors ask themselves: “will the photos in this article be profitable”? Of course not! Picking the right photos for a story is in the DNA of any good journalist. Images evoke emotions and help the reader understand complex stories.

But so do good videos too! Maybe even more. So maybe you should forget about monetizing video and start using it as a means of servicing your readers and creating stickiness? Considering the low prices for pre-rolls they might even have an adverse effect on your overall ad revenues, cause pre-rolls is one of the main drivers of ad blocking.

2. Go for Branded Content
Branded Content – or Advertiser Funded Programming as it’s called in broadcasting – is a phenomenon as old as television itself (soap manufacturers producing TV show, becoming soap operas, jada jada jada…). This concept works perfectly well also in online video. Infact, it’s hundred per cent aligned with the content marketing trend sweeping across the world.

For publishers there are two very clear benefits:

  1. Higher eCPM – the willingness to pay for a viewer spending self-selected minutes with branded content is much higher than for 15 seconds of reluctant pre-roll sit-through.
  2. No adblocking issues – all inventory is in play, and you minimize the risk of provoking new users to download adblockers.

There are also benefits for the users. Branded content normally has a much more pleasant tone of voice than traditional commercials. It’s telling rather than selling, and best of all: you decide yourself what to watch.

Over the next few years we’ll see a dramatic increase in Advertiser Funded Online Videos. This will happen with (native) or without (owned channels) news publishers as distribution partners. If I was the owner of a news publisher, I’d make sure to get a piece of that pie.

Dan Willstrand