pkarnig’s posthaven

One advertising agency in particular, Publicis, is pushing a ton of advertising dollars through Google in return for what two industry insiders independently refer to as “kickbacks” or “rebates.” Kurt Unkel, an SVP at Vivaki (the digital arm of Publicis) flatly denies there are any payments of this kind. “There isn’t a rebate in play. We have a strategic partnership,” says Unkel. Any suggestion that Publicis is accepting payments from Google in return for driving online ad spending through Google is “an utter crock of shit,” he says. He adds, “That is illegal in the U.S.”

Me thinks he doth protest too much!

Let’s pause and look at trends that have emerged over the last few years: How will they affect the digital newsmedia industry? First, we’ll try and list a few undisputed facts. Then we’ll drift towards conclusions bordering the uncharted territory of predictions. It’s worth the risk.

The web fuel problem. The internet economic engine isn’t firing on all cylinders. For online news, that’s an understatement. The primary source of income, advertising, has proven itself unable to sustain ambitious journalism. There might be exceptions here and there, a few news organizations have found their way to profitability, but they flourish in niche beats. For example, Politico, which covers Washington DC’s arcana — but it relies on hybrid model (web and print).

Others benefits from a powerful mothership such as New York Times Digital’s DealBook on finance: with a 2.5 to 3m unique visitors a month, this eight journalists operation could break even if it were granted a separate P&L. (DealBook also brings intangible but highly valuable status to the NYT in its fight against the Wall Street Journal.) But these are specialized products.

Observers mention the Huffington Post, with its presumed 10m UV/month, as the prototype for a popular internet news success. To me, the HuffPo is not a journalistic product per se. Taking third party content, the HuffPo builds a clever participatory mash-up, with a focus on juicy stuff. The whole thing is staged it in such a way (splashy editing, pictures, headlines) that it triggers loads of prattling — and page views. Fine. But this is not hardcore journalism.

As we speak, a 50-100 people newsroom stands no chance of living by advertising alone.
This state of affairs won’t change anytime soon. Last year, US ad spending fell by 9% and we know the recovery will take a while. As the CEO of Zenith Optimedia (Publicis Group) said last week in Paris: “In terms of revenue, 2012 will be like 2006″. This even though he predicts the money invested on the internet will keep progressing and will end up coinciding with the time people spend online.

That’s fact #1: don’t count on advertising. At least not in full ad-supported mode, not for a while.