Setting The Record Straight: DCN Report Fails To Capture The Value Tech Companies Provide Publishers
The online publishers’ association Digital Content Next “Distributed Content Revenue Benchmark” report paints a skewed image of the value leading tech services provide to publishers by misrepresenting that Google and Facebook pay just 5 percent of revenues to DCN members. Four issues stand out most, including two misleading headline statistics.
First, there is a lot of competition on and offline in the $500 billion advertising market, with a constant stream of new digital entrants, DCN included with its TrustX ad platform.
Second, while publishers are competing with leading tech services to provide ad platforms, publishers choose to use certain companies because they deliver the surest way to make the most money from their content.
Third, the report ignores the fact that publishers receive the lion’s share of revenue generated by ad networks. For example, in 2017, Google paid $12.6 billion to publishers, more than 70 percent of revenues earned from network partners.
Fourth, DCN misrepresents payments made to its members by leading tech services.
DCN members include Hollywood and cable TV heavyweights such as 21st Century Fox, NBCUniversal, Warner Bros, A+E Networks, ABC, and ESPN – who make the vast majority of DCN’s member revenue.
DCN’s “Distributed Content Revenue” statistic ignores the $12.6 billion Google pays to publishers to monetize content on publisher owned-platforms and only includes a few million in revenues from Google-owned properties (Accelerated Mobile Pages and YouTube).
The headline statistic compared this artificially small advertising revenue number to the huge copyright licensing fees that video streaming services like Netflix, Roku, and Apple TV pay companies like 21st Century Fox for the right to show movies and TV shows on their platforms.
DCN is essentially comparing the revenue that Google helps the NYT earn from ads in the NYT’s mobile app to the revenue that Apple TV pays NBCUniversal for the right to show its movies.
Publishers Have Consistently Earned A Significant Majority Of The Revenue From Digital Advertising
Google Has Continuously Increased The Proportion Of Display Ad Revenue It Distributes To Publishers Since 2014. In Google’s financial reports (page 35), the revenue that goes to the publisher is called Traffic Acquisition Costs, or TAC. Overall, Google’s TAC rate was 71.9% in 2017. In other words, almost 72% of the revenue from showing ads on non-Google sites is paid out to publishers and content owners. As a proportion of network revenue, Google’s TAC has increased each year from 2014 (67.8%) to 2015 (68.1%) to 2016 (69.9%) and 2017 (71.9%). This means Google has increased the proportion of its display ad revenues to publishers each year since 2014. (“Form 10-K: Alphabet Inc.,” United States Securities And Exchange Commission, 2017)
Forbes Media’s SVP Of Product And Tech, Salah Zalatimo, On Google’s Outreach And Support To Publishers: ‘I’ve Not Seen It Done This Proactively And Robustly.” “Until AMP, many publishers just had a transactional relationship with Google. AMP was a turning point in that it necessitated close collaboration. It gave Google the ability to show its interest in working with small as well as big publishers, and send the message that it shared their commitment to the open web. When AMP came, there was a lot of anxiety about what it would mean for publishers’ autonomy. Google created a working group of publishers early on to get their buy-in, which impressed Salah Zalatimo, Forbes Media’s SVP of product & tech. ‘I’ve not seen it done this proactively and robustly,’ he said. Google has also won over publishers with the attention it provides in the form of case studies, guidance and outreach. Each week, Zalatimo video conferences with a Google team that help him get the most out of its products like AMP and Progressive Web App.” (Lucia Moses, “From Frenemy To Friend: How Google Won Publishers Over,” Digiday, 3/21/17)
Advertising Market Is Much Larger Than Two Digital Companies And Has Many New Entrants
Advertising Is A Robust, Almost $500 Billion, Global Industry Where Digital Advertising Is One Of Several Components. “Globally, advertising revenues demonstrated their strongest growth since 2010 this year, as advertising sales reached $493 billion. Global ad growth will slow noticeably in 2017, to +3.6%. Social and search captured the bulk of dollar growth in 2016: $23 billion out of $26 billion. TV ad sales resilient due to stronger pricing and cyclical events including sports and US elections. Digital ad sales to surpass TV by 2017. US ad sales grew nearly 7% to $180 billion, achieving its strongest growth in 12 years.” (Global Advertising Forecast, Magna Global, 12/5/16)
Digital Advertising Has Seen Powerful New Entrants, Which Include New And Incumbent Companies Alike, Such As:
News Corp’s new platform, News IQ, a ‘brand safe’ advertising platform boasting an audience of over 140 million. (Ronan Shields, “News Corp Debuts New Ad Platform News Iq Promising Premium First Party Data Insights And Brand Safety Assurances,” The Drum, 12/5/17)
Publishing alliances using their collective power to pool login data and transform ad buying – e.g., News Corp, Axel Springer, The Guardian. (Ally Stuart, “Stronger Together: Why Publishers Are Cooperating To Compete,” Mediatel, 9/14/17)
Ad agencies and holding companies – e.g., WPP, Accenture, PwC, Deloitte. (David Gianatasio, “Global Consultancies Are Buying Up Agencies and Reshaping the Brand Marketing World,” Adweek, 3/12/17)
Telecommunications companies – e.g., Verizon, Charter, AT&T. (Mike Shields, “Verizon Wants To Borrow T-mobile And Vodafone’s Consumer Data To Take On Facebook And Google,” Business Insider, 6/27/2017)
DisCo: Advertisers Are Spending More And Paying Less Because Of, Rather Than In Spite Of, Internet Advertising. “If a company truly did have a monopoly on content distribution (and therefore the eyeballs for advertising), then one would expect advertising to get more expensive and the total advertising inventory to decrease as the monopolist (or, in Mr. Taplin’s case, monopolists?) would raise the cost of advertising inventory space to extract monopoly rents. In fact, the opposite is happening. The cost per click for Internet advertising, at least for Google – one of Taplin’s main villains in the piece, is in a well documented precipitous decline. At the same time, as industry stats illustrate, the total U.S. advertising spend continues to increase every year. So advertisers are spending more, and paying less, which is exactly what you would expect in a highly competitive ecosystem.” (Daniel O’Connor, “No, Every Big Internet Company Is Not A Monopoly,” Disruptive Competition Project, 12/16/16)