Is the Ten Percent Problem getting worse?
Two years ago – September 2009 – UK businesses for the first time spent more on online advertising than TV advertising, or any other advertising media. And many TV adverts today are simply directing people to visit online services; where, in many cases, they get to view more adverts!
Online advertising was worth £4bn last year in the UK. In perspective, that’s around £65 for every single person – adult, child or baby – living in the UK.
We all know where the money is coming from… The everyday products we buy, from food to electricity; £65 per person, per year, is creamed-off by online advertisers (£260/year, if considering all forms of advertising).
But where is the money going to? Who’s making money online? This question has massive implications for anyone attempting to fund any form of online culture from advertising.
We’re continuing to see strong growth amongst online retailers, despite the weak economy; but when it comes to tracing the £4bn online advertising spend I’m interested in the websites and services benefiting from the sale and trade in display advertising, not just businesses who happen to be making money online.
Professional content providers; from newspapers to bloggers, film makers, poets, photographers, novelists, comedians, musicians and internet radio stations; are still struggling to fund online-only services from advertising revenue alone.
A professional digital marketing specialist told me I could expect around £200/year from my own blog, slighltyrightofcentre.com, if I was smart regarding my advertising. That would give me a return from advertising of approximately 80p/hour for the amount of time I spend blogging on digital rights issues!
That’s all my hacky little blog is worth, right?! Looking at a complex array of statistics puts my blog in the top 150,000 of websites visited by UK internet users (hey, Mum, look what I did!). Taking into account page views, unique visitors and total content (number of articles) gives me an estimated 0.00006% audience share for UK-generated content.
Whilst the figures are minuscule – by one measure I have an estimated share of 0.6 millionth of the UK web audience – my share of the annual UK online advertising spend of £4bn should be around £2,400/year. A £10/hour return puts blogging into the [lower end of the] category of a living wage.
But is this just a problem of scale? Do large national newspapers fair any better?
Seemingly not. UK national newspaper websites have a healthy global share of audience, yet many are struggling to turn a profit. The UK’s second-largest newspaper website by ABC (Audit Bureau of Circulation), The Guardian, posted a £59m loss in 2010.
Associated Newspapers, the national newspaper publisher of The Daily Mail (currently number 1 UK newspaper website by ABC) reported in May this year that only 1.8% – £8m from its 6-month revenues of £438m – came from “digital”.
According to website traffic monitoring company Alexa, dailymail.co.uk is the world’s 129th most popular website by traffic. DoubleClick puts the Daily Mail website 22nd most-visited in the UK.
If the UK’s number 1 newspaper website and 22nd most-visited website overall can only muster £16m/year – 0.4% of the £4bn annual UK online advertising spend: (i) where does all the money go; and, (ii) what hope is there for online content creators generally?
Four years ago this was described as the Ten Percent Problem: only 10% of readers came through print publication, yet only 10% of revenues came from online. At 1.8% for Associated Newspapers, is the problem getting worse?
Looking the scale of the problem another way, more money is spent on online advertising than TV advertising; yet TV advertising funds the entire output of ITV, Channel 4, Channel 5 and the host of digital-only free-to-air TV stations.
Or, consider the sheer number of free print publications and newspapers funded entirely through advertising. From regional rags like Metro and Evening Standard to local “advertisers” and hyper-local “directories”.
Show me the websites funding free-to-view culture of any description purely from advertising revenues? And no, I don’t mean user-generated content; but content that the creators and artists actually got a living wage from producing.
Sep 05, 2011 @ 12:22:57
You didn’t answer the question. I need to know alternatives.
Where does it all go? If I make £50 advertising a month from adsense, how much does Google take?
I am coming to the conclusion that paid subscription is the only way to go for some sites or services.
Is there a web advertising provider with lower commission rates?
May be we should set one up?
Sep 06, 2011 @ 20:29:21
Unfortunately I can’t answer the question – it might be middle-men, it might be some types of web publishers taking far more in ad revenue than their audience share dictates (ie search engines making very thin margins on extremely high traffic volumes)… However I think it’s something to watch – a readjustment in the sector could be a real boost to publishers.
Sep 05, 2011 @ 13:37:18
Interesting. Is it possible that the majority of spending on advertising goes to advertising services – the middle men? Like the “Ads by pulse 360″ on your page or “Ads by Google”? I have no idea the disparity between the cost per click to the advertiser and the amount paid to the website owner with Google Ads. But it could be huge. And Google as a company certainly seems to be winning…
Sep 05, 2011 @ 13:49:03
The percentage cut Google take for advertising: http://goo.gl/3w72I
Sep 06, 2011 @ 20:27:13
Probably – essentially at this stage in the growth cycle there is an abundance of content, lack of clarity amongst advertisers as to the real value of various types of advertising, and a wealth of people taking their cut. There are also, possibly, some types of web content commanding more in ad revenue than their audience share warrants. All I know is the sums don’t seem to stack up, and it should – given the widely-asserted size of the segment – be possible to fund a lot more than we currently do through advertising.
Sep 06, 2011 @ 14:25:31
We’ve stopped paying for online ads – even in the most focussed, targetted of sites, we have no control over who clicks, so no real way of telling how effective they are. Perhaps because we don’t sell online, or even have a real metric to measure online exposure, but reducing our adwords budget to 0 has not affected our website visitor habits in any way at ll!
Sep 06, 2011 @ 20:30:33
Hi Matthew – I added a bit more on my own blog here:
http://www.slightlyrightofcentre.com/2011/09/online-ad-funding-correction-is-due.html
Sep 12, 2011 @ 07:42:26
This post has a few wrong assumptions:
1) That the cost with online advertising is spent in ads. It includes sites, design. the needed infrastructure, SEO optimization, affiliate programs, the works.
2) The audiences value is not average, it is a longtail. TV advertising is about massmarket products and services. Online advertising depends on the audience of your site. Is your audience valuable? How much do they buy when coming from your site? What margins are there in those products? High margin products will always be able to pay more for advertising, but if your audience doesn’t buy, then it will dry up. Ads for a car or for a house of for a 0.35p capsule of coffee can’t return the same.
Yes, it’s painful to realize that getting returns on advertising depends which market you put yourself in and that you can’t just assume you’ll be making money of you labour of love, but that’s what works.
Best regards,
João Miguel Neves
Oct 24, 2011 @ 12:54:54
Very interesting.
João – the figures quoted are from the IAB which only takes into account advertising spend, not web build, SEO etc. So that would be on top of these numbers.
Without looking at the report, I think c.55% of all online spend is actually search, of which 80%+ will be going to Google. So a rough £2bn a year is going straight to Google thanks to the success of Adwords.
Social media display (ie pretty much Facebook ads) takes up nearly another £1bn.
We then end up with £1bn on display, email, and affiliate marketing. Still a large number, but if roughly 75% of all online spend is going to two media owners, it explains why other media companies and bloggers have a hard time making the figures stack up
Chris
Dec 27, 2011 @ 01:39:57
Maybe it convert into revenue comp., csr, taxes etc, still can’t get the grasp of these cycle from begin to an end.