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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.