Is social media “lift” converting to a commensurate level of new revenue? Most likely not.

Folio – A few weeks ago, I was talking to the publisher of a community/local media company about the state of the business. I suggested that his primary competition seemed like legacy newspapers on the one hand, and social media on the other. Social media has become a de facto community information source. Facebook, in particular, allows extended conversations in which people share and comment on community happenings — even when the initial source of the information is a content-creation company like a local publisher.

The publisher disagreed on both counts. Legacy papers are not really a competitor, he said, and he views social media is an ally. Using social platforms for distribution is essential nowadays, he said. Social sharing generates significant “lift” for his organization’s content.

I didn’t push the question, but I wondered if he’d ever done any real analysis about whether that social “lift” was actually producing revenue. It’s a question too few publishers ask.

But they should. It’s less than a year ago since Bloomberg Media CEO Justin Smith argued that media companies were merely feeding on the “scraps” leftover from Facebook’s enormous advertising business, even while playing a decisive role in ensuring that the Facebook ecosystem has content that keeps users happy.

A slew of reports in the last several months serve as red flags for media companies that rely on digital advertising. The Facebook and Google duopoly doesn’t just command more than 60 percent of the total digital ad spend in the country, but nearly all of the growth — 99 percent.

And now, a new report indicates that just 14 percent of publishers’ ad revenue comes from social media — the majority of it from Google-owned YouTube, not Facebook. That’s a shockingly small percentage, especially considering that social media is often the main driver of referrals, averaging as much as a third of any media company’s total traffic.

So, in essence, publishers are ceding their audiences to social platforms with the expectation that they’ll get “lift,” except that they’re not converting that “lift” to revenue.

And the digital advertising industry is declining except for two companies. And even if it weren’t declining, publishers in the digital-advertising ecosystem end up with less than 50 percent of any marketer’s spend because of ad-tech middlemen and fraud.

It’s no wonder there’s increasing sentiment in media-company offices that social media might not be the answer it was cracked up to be after all. “If you’re a content company and you’re not Facebook, Google or Snapchat, you’re in the niche ads business,” Meredith Kopit Levien, CRO of The New York Times, said at a conference a couple of weeks ago.

So where does that leave publishers? Feeding on scraps as a “niche” ad player? Marketing services? Programmatic? Can the small publisher with whom I had that conversation develop a programmatic business that throws off significant revenue by leveraging his “lift” without spending millions on a tech stack? Can social-referral traffic enhance programmatic revenue because it increases inventory?

I posed these questions to Todd Krizelman, CEO of ad-intelligence firm MediaRadar.

“Not setting up [programmatic] thresholds and minimums will yield very little benefit,” Krizelman says. “Without thoughtful setup, or the addition of partners like a DMP, programmatic will not lift sales strongly. As a percent of revenue, the amount will stay less than 5 percent.”

What’s more, Krizelman said, the investment in technology is not the real cost in building a programmatic ad program. The cost is really in supporting your effort with one or two people to run your trading desk. “Someone needs to have responsibility for running the sales/yield optimization.”

It’s true, though, that programmatic does allow a more favorable model.

“Programmatic has a big opportunity to be all of your revenue if you’re a smaller publisher, and you don’t need a sales team,” Scott Bender, global head of publisher strategy at Prohaska Consulting, told me in a recent conversation. And that observation ties back to my conversation with the local publisher at the top. Maybe that’s his strategy. 

Meanwhile, marketing services, including content marketing, is another big area of focus for media companies as they look to grow in an increasingly difficult environment. Many companies have set up content studios to drive business. These kinds of initiatives — creating and distributing content for advertiser partners — can be lucrative, but they’re labor intensive, time consuming, and unpredictable.

Watch this space in the weeks to come for a comprehensive report on content studios.

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