Arbitrage media

Glamour and profits often don't come together

When the history of digital media is written, the opening sequence should be set in Phoenix in 2008, at the annual Interactive Advertising Bureau confab. It was dawning on the industry that the original promises of the shift from analog to digital media – high quality content, freely available, supported by high quality advertising to reach high quality audiences – was unraveling, and it was about to get worse nine months later, when Lehman Brothers collapsed and set off the Financial Crisis.

The digital publishing industry was unraveling because over the course of its existence, online advertising had never truly figured out brand advertising. Homepage takeovers weren’t TV commercials, even the people claiming that had to know. The internet commoditizes everything it touches, and media people often like to tell themselves lies, including that what they do is different, special even. The openness of the web destroyed the scarcity that allowed for premium pricing; the web flattened publishing brands with a canvas of boxes that moved around; the collection and application of data was the main selling point for digital media vs analog; and finally the click was seized on as the marker of success.

If that wasn’t enough, the IAB event was coming at the start of the march of programmatic ad systems to take over digital publishing – while the cocktail party chatter at the IAB was about Microsoft’s bid to buy Yahoo a month earlier, the more consequential acquisition had taken place nearly a year earlier, when Google bought DoubleClick – and rendered media brands into empty vessels for one-to-one audience targeting, where efficiency was the name of the game. Longtime digital media exec and then-president of Martha Stewart Living Omnimedia Wenda Harris Millard warned the audience, “We must not trade our advertising like pork bellies.”

It was a great turn of phrase that resonated, but it was too late. Digital advertising had become financialized, as companies like Right Media sought to make the archaic world of advertising more like electronic stock trading platforms. One impact of this changed environment was the enduring strength of arbitrage publishing models. Arbitrage is a key facet of markets, in much the same way as vultures serve an important role in ecosystems. Arbitrageurs get a bad rap, but they play an essential role in ferreting out inefficiencies.

Publishers realized that attention could be arbitraged thanks to algorithms and programmatic ad systems. You can capture attention through an algorithm, sometimes through ads and sometimes through search optimization, and then resell that attention at a higher price.

Demand Media was onto something. It showed that you could exploit the search algorithm by publishing content specifically tailored to the algorithm, not to people. Demand went through its ups and down, but has lived on in a modern form at Leaf Group. These SEO-driven publishers used to be looked at as something of a backwater of publishing. No longer. The morphing of digital advertising into performance marketing meant that lucrative businesses could be build on the back of mastering algorithmic publishing. Companies like Red Ventures, Ziff Davis, Recurrent and Dotdash are some of the most profitable publishers around. That the successor to now owns iconic magazine brands like People and even Entertainment Weekly – OK, iconic is a stretch – is a testament to upside-down world of modern publishing.

One of the weirdest parts of modern media is that brands don’t ever seem to die. Instead, they live on in arb land. Consider Money magazine. In 2012, it had a circulation of nearly 2 million, owned by by Time. was one of the top finance sites around. It is now owned by Ad Practitioners and devoted to affiliate ad content.

Don’t ever doubt that business models drive publishing, considering that arbitrage media sites are far more usable and load far faster than so-called premium publishers with their autoplay video, pushdown ads and all manner of touts to subscribe, turn on notifications and sign up for yet another newsletter. It used to be the more premium the brand, the more premium the experience. The opposite holds true now. The interests of arbitrage publishers are to have sites load fast to stay on Google’s good side. Premium publishers, on the other hand, are trying to serve so many masters that they have inferior product experiences.

It used to be that the most glamorous brands were also among the most profitable. Nowadays the opposite is true. All the costly signals that were used to justify premium pricing have disappeared. Your legacy doesn’t help much when jousting in the search results. Your legacy won’t win against search authority. The years of goodwill built up does help – people are more likely to click a link from a familiar name – but Dotdash’s unbundling into new brands like Verywell, The Spruce and Lifewire shows that brand building in the arbitrage world is a different exercise, more technical than craft.

The arbitrage model figures heavily in many publishing businesses. Affiliate commerce in recent years has moved from a sidelight to a major part of publishing businesses. Publishers PR their commerce businesses down to the deep trust they have with their loyal audiences. Sure, I guess. An alternative explanation is that these publishers are arbitraging their search authority accrued by publishing high-quality, original content by adding in gift guides to rank highly in product searches. Nice business, but also at risk. What happens when Amazon decides to only give commissions on specific items instead of the entire purchase made by customers sent by publishers? Of course, the downside is arbitrage never lasts.

The streaming revolution is breaking down the operational walls and cost barriers that traditionally kept content publishers from extending into TV. Now, publishers can find new audiences, higher CPMs, and new distribution channels for branded content by distributing across multiple streaming platforms. Applicaster is on a mission to disrupt the streaming economy, putting the ability to quickly and efficiently create custom streaming applications in the hands of publishers that typically do not have the technical or operational capacity. These apps are then distributed across major platforms, including Apple, Roku, Android, Fire, Samsung, and LG. With Applicaster’s Zapp platform, publishers can develop a data-driven streaming experience without the legacy, traditional headaches, and expenses that can come with forays into OTT.  They can focus their time on growing their content business, not building the distribution technology.


If you’re in London, consider coming to the PPA Festival on Thursday, May 19. I’ll be presenting in a session about what the rebundling of media will look like, as well as doing some moderating, including a discussion about revenue diversity. Check it out.

Job alert: Newsletter ad network Swapstack is looking to hire a head of sales. The Swapstack platform enables advertisers to run high value sponsorships across hundreds of independent newsletter publications. Contact Jake (great name) for more info.

The fate of many publishing brands is to become a front for all manner of strange businesses. Consider how Inc is shaking down investors for $1,500 application fees to be considered “founder-friendly.” This is right out of the Red Herring playbook, which was right out of the Who’s Who playbook.

The user-needs framework is a useful way to think about editorial strategy. Too often content is created without a job to do. Dmitry Shishkin has more analysis on why “update me” stories are too frequent..

Final request: Please take a few minutes to fill out The Rebooting Audience Survey. This will help me expand The Rebooting and build a sustainable media business of my own. Thanks in advance.

Please send me feedback and ideas at Thanks to Applicaster for being a new sponsor. Thanks, Lisa, for giving it a shot. I appreciate their support and all the companies who have sponsored so far. Find out more about sponsorships here.