Ads & the Demise of Gawker

You may have seen the news that just two days after the auction sale of Gawker Media in bankruptcy, the company’s flagship site itself announced it will cease operations next week. That’s jarring news on many fronts. I discussed some of them here in Tuesday’s post about the importance of independent media. But there’s another aspect of this that’s worth addressing.

First, let me say I don’t know really anything about Gawker’s internal revenue data. So as it applies to Gawker, what I’m about to write is just an educated hunch. But in general terms what I’m going to describe is definitely true. I know it from long experience in the industry. And it’s worth knowing as a reader as you think about media, why publications you read do what they do and so forth.

Many people think that the more popular a publication gets the more ads it will sell. The bigger the audience, the more eyeballs, the more ads wanting contact with those eyeballs. That’s not how it works.

There are a million dimensions to the advertising economy, just as many ways of describing it. But you can understand a whole lot about how the whole thing works by thinking in terms of three factors: 1) endemic sales proposition, 2) controversy and 3) influence.

Let’s talk first about endemic sales proposition. Because I think it may have played some role in Gawker’s demise (on-going legal liability may have played more of a factor or have been the entirety of the issue). A site about clothes has an endemic sales proposition: selling clothes. A site about books: books. You may say well, I only read sites about news and sports but I still buy a lot of clothes so … Not how it works.

For a variety of reasons, some good and evidence based, others silly, advertisers want to sell you their product when you are thinking about it and in the mindset to buy. This doesn’t just mean impulse purchases, but buying in general. In many cases that makes a lot of sense.

For instance, aside from people being really into tech, why do you think there are so many tech sites? Right, because there’s a ton of money in video games, devices, computers, everything under the sun. People also tend to buy those things online. Again, we’re not just talking about impulse buying. It can be more nuanced and less direct. But if you stand up a site about tech, gaming, computers, etc. and it does well, you have a ready made channel for ad sales. And in the case of tech an extremely lucrative one.

Sometimes it’s a little more amorphous but no less ad driven. Why so many ‘lifestyle’ publications? Well, we all need a lifestyle, of course. And general interest magazines cover many interesting topics. But by and large that’s because you’re aiming for an audience of people who are affluent and want to read about cool things affluent people do: travel, toys, aspirational personal development. Not that there’s anything wrong with that, as they used to say on Seinfeld. But that’s what it’s about.

Next, controversy. This largely speaks for itself. Advertisers don’t want to be around things that upset people or divide people. They want to be everyone’s friend. They don’t want negative ideas or stories to rub off on them. This isn’t an absolute of course. Plenty of sites which court controversy sell tons of ads. Gawker’s a prime example. But controversy is always a constraint on ad sales. You just may have other factors that overcome it.

Next, influence. This is an inherently small and nebulous part of the equation. But it’s key for many publications. Many ads aren’t trying to sell you anything directly. They’re trying to tell you stories, shape your thinking, advocate positions. Political ads are like this. But they’re mass market since obviously everyone can vote – at least in states without Republican governors and Secretaries of State. But where the money is is with people who are considered influential in various communities, so-called “opinion-leaders”.

Here’s an example. Go to the subways in New York you’ll see ads for storage rentals, lawyers, grocery deliveries, breast augmentations, ESL courses. Go to Washington DC and you’ll see ads for … Kazakhstan or Northrup Grumman or PhRMA or well … you get the idea. There are lots of people who care a lot about what people in the nation’s capital think. And yes, TPM very much plays in that ad space. TPM and similar sites lose big on #1 and #2. But #3 is where there’s a business that can drive ad sales.

So back to Gawker. Needless to say, Gawker courted a huge amount of controversy. And the decision to shutter it may, for all I know, be tied entirely to legal liability. But I have no doubt Gawker’s controversial rep put a permanent dent in ads sales – think of it as an inverse premium. The other thing though is that Gawker had no endemic ad proposition. Fun, news scoops and schadenfreude have no allied consumer products. But if you look at the other Gawker Media sites they were each carefully and wisely aligned with strong endemic ad propositions.

So given all that’s happened, even over and above whatever legal complexities are involved, it makes sense that a big corporate media giant would see the other Gawker Media sites as the drivers of value, not Gawker itself.

Like I said a couple days ago, independent media is important.

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