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.

@JamesFirth

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