By Toby Murdock published September 16, 2011

Why Marketing Will Fund the Future of Content

The media publishing industry is undergoing tremendous transformation in its transition to digital. One of the more powerful forces in this change are economics, and the oft-repeated phrase is that media is trading “print dollars for digital dimes.” In other words, as media moves more online, publishers are receiving only a fraction of the revenue they used to receive in print for the equivalent amount of content produced.

These changing economics raise many concerns and high among them is the question: Who or what will fund the production of content?  The demand for content is as high as it has ever been, and despite the onset of user-generated content, demand for quality, professionally-produced content remains strong. If the economics of online are going to fundamentally reshape the revenue potential of media publishers, where will the money come from to pay for professionally-produced content?

The answer could come from the segment where content production is really booming: content marketing. Marketers are finding that the old tactics do not apply into today’s world. Instead of focusing on the sales process on how marketers convince prospects to buy, they are finding they need to think about the buying process and how customers decide on what to buy. And to insert themselves into that buying process, marketers are finding that creating authentic content that solves customers’ problems and answers customer questions (and does not necessarily promote the marketer’s offering) is a most effective approach.

As a result, marketers are moving budgets into content marketing and building entire content marketing operations by staffing them with experienced editorial professionals. In fact, in this tough economic period, marketers are actually increasing their content production budgets. These content marketing dollars could represent the future of how content gets funded. The reason for this is that content marketers are able to extract a much larger financial return for content than publishers can.

Let’s compare some media publishers with some of these new content marketers and dig into the different economics for each. Specifically, we’ll compare the average revenue per unique visitor, or ARPU, that each can generate. Media publishers typically do so through running ads. Content marketers, on the other hand, generate revenue by converting visitors to paying customers.

Case studies: Media publisher versus content marketer

Weight Watchers has a tremendous content marketing operation. It produces high volumes of content about dieting and exercise, most of which avoids any mention of Weight Watchers itself. Let’s compare it with a site like Fitness Magazine, which has similar content for a similar audience.

Fitness likely generates around a $6.50 effective CPM for the ads that it runs, a blended rate for its direct-sold and remnant inventory that is consistent with industry averages. Assuming that three ads are run on each page and that the average visitor visits five pages, Fitness would have an ARPU of about $0.10.

Weight Watchers, on the other hand, does not run ads, but tries to convert visitors into becoming paying customers. Given its $194 price point and a conservative 2 percent conversion assumption, the ARPU for Weight Watchers is $4. What we see here is a 40X ARPU difference between the media publisher and the content marketer.

Other comparisons yield similar results. Linux Magazine is a tech site providing content to programmers and system administrators. Given the higher CPMs in the tech industry, its ARPU likely is around $0.15. Rackspace is a major provider of web hosting, and it has a content marketing operation serving programmer and administrator audiences. At a $100/ month price point and 2 percent conversion, its ARPU is $24, an over 100X difference.

Curbed is a highly successful site providing real estate content with a likely ARPU around $0.15. Redfin provides discounted real estate services and blogs regularly about content relevant to home buyers. On a $300,000 house, Redfin would earn its 1.5 percent, or $4500, putting its ARPU at hundreds of times of Curbed’s even at the most conservative conversion rates.

Why content marketers can spend more

The specifics, of course, vary by industry, publication, and business. But overwhelmingly, the analysis indicates that content marketers have much larger incentives to spend on content, as the economic value they receive per site visitor is much larger than that of a media publisher. If an article attracts 2,500 readers, the marketer would be willing to pay many times more than the publisher for the result. Consequently, as content marketing continues to grow, marketers could provide the funding needed to produce the content to meet the audience’s demand.

Content marketers rely on authentic content

Many react to this possibility by becoming alarmed that content now could be produced by marketers (who are motivated by their specific business interests) instead of by publishers (whose objective is to inform their audiences). There are a few reasons, however, that diminish these concerns. First, in the new media world, nobody simply receives distribution, they have to earn it. If Rackspace, for example, produces content that is not informative and helpful or  simply promotes itself, it will not win any links, any retweets, or any Facebook likes, and it will not gain an audience. Content marketers realize that the need to provide authentic, relevant, helpful, and fair content is necessary to attract visitors.

Furthermore, media publishers are not going away. Again, the circumstances vary by segment and by publication, but publishers are adjusting to the economic changes and are finding new ways to generate revenue and structure their costs. Publishers will still produce content, and they will continue with the current trend of aggregating and curating content on their chosen topics. In fact, as more content gets produced by marketers, publishers will play the critical role of curating and spotlighting the great content as well as criticizing the unfair and partial content that marketers may produce.

The great changes that the publishing industry is wrestling with bring into question how quality content will be paid for, and signs point to the fact that marketers will increasingly foot the bill, as they are able to extract better economic returns per site visitor. While in many ways this appears to be a great change, the reality is that marketers have always footed the bill for content through their ad dollars.

What has changed now is distribution. The complexities and costs of print distribution used to mean that only specialized publishers could distribute content. As the Internet has made distribution open to all with simple, inexpensive web publishing, marketers are simply moving up the distribution chain. As these changes continue to evolve, great content will continue to be paid for, published, and consumed.

Image from Sunshinecity via Flickr.

Author: Toby Murdock

Toby Murdock is co-founder and CEO of Kapost, which provides a content marketing platform that enables marketers to become publishers and win at the new game of marketing. Kapost customers include TripAdvisor, Mashable, Intel and Verizon. Toby lives in Boulder, Colorado with his wife and three daughters. Find him on Twitter @tobymurdock / @kapost.

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  • http://twitter.com/aboer Andrew Boer

    Couldn’t agree more with your view of the economics.  Content Marketing is going to supplant publishing (and arguably already has in certain sectors) because the numbers work.  The biggest obstacle will be getting readers to accept that this content is equally or potentially more valid than traditional publishing.   To earn the trust and interest of an audience,  marketers will have to put the readers interest ahead of the brand’s. That is a big change, and may not be possible in all sectors.   Marketers may feel they understand these issues, but they don’t yet have the benefit of actual checks and balances between the editorial goals and the marketing goals.  Smart brands will create them.

  • http://twitter.com/aboer Andrew Boer

    This piece, just published on ADOTAS, is really kind of a companion piece to this article, around the same thesis. http://www.adotas.com/2011/09/branded-jest-david-foster-wallace-and-content-marketings-biggest-obstacle/

  • spidermom1

    This should be mandatory reading for all marketers AND agencies.  thanks for the great content!

  • Bo Peabody

    Great piece but a little deceiving in the examples used. High ticket items like subscriptions to diet/food programs and real estate sales work well with this model. Selling shirts, frying pans, exercise balls and other consumer goods, less so. Ad revenue, particularly done in a quality environment where a case can be made for influencing the way a consumer thinks about a brand, will always be higher margin than selling “stuff”. It’s really hard to create these types of ad-supported businesses. But when you do they flow cash like few other consumer facing internet businesses.  

  • Carl Friesen

    I agree that the current way information gets around is under stress. Many traditional media are being squeezed financially. But we see part of the answer in a longstanding feature of business and professional magazines — the “contributed” or “expert-written” article. It might be an engineer writing about trends in bridge abutment design, or a lawyer writing about what to look for in liability insurance. In any case, it’s content that is separate from the “real” journalism in the magazine. Readers know that it’s not “real” journalism, but they trust the publication’s editor to screen out any inaccuracies or overt sales pitches. I’ve been helping my clients get published in business magazines for over 15 years, and I find that the “branding” of the content, through the credibility established by the magazine, adds weight to what my clients have to say. Plus, they get greater distribution for their content than if they tried to get followers for their own blog. One downside is that in some cases, the magazine puts the online version of the article behind a paywall so it’s not accessible to search engines. They may provide electronic and printed reprints of the article, but at what I think are extortionate rates — particularly for content that they received for free.

  • David Sasson

    Nice article, great insight. I think there’s another way in which these economics play out. In the examples Toby mentions, marketers are using content for lead generation purposes. But there are many marketers who don’t sell directly online (CPGs, for example, with low price point products). And yet these are some of the brands moving most rapidly into content marketing. When a brand like this develops their own content, they can use it to fine tune which audience they want to attract….they develop content that will pull in the type of consumers who buy their products. Then they can surround the site/content with their own advertisements and messaging. The advertising rates a brand would pay for a) 100% share of voice and  b) in a controlled and known environment with c) the exact audience they know they want is much higher than what a publisher, who is less singularly focused, can usually command. So in this way, too, content marketers have an economic edge in terms of investing in content creation.