The pivot to performance

In today’s newsletter, I wrote about how much of publishing is undergoing a pivot to performance. Also, a conversation with Dotdash Meredith CEO Neil Vogel on why search is changing but won’t go away anytime soon.

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"Premium is last"

Dotdash Meredith CEO Neil Vogel had a blunt piece of advice for publishers in a wide-ranging conversation we had, along with my Troy Young and Alex Schliefer, on this week’s episode of People vs Algorithms: “If you cannot show performance, you are dead.”

Dotdash Meredith last week reported a good quarter, showing its traffic rising to what it considers the 20 “core brands” of its portfolio of 40 and digital revenue up 9%. The standout performer: performance marketing, which rose 31% year over year. Meanwhile, print revenue was down 12%.

That stands in stark contrast to the fate of BuzzFeed, which offloaded most of Complex in a deal with live shopping platform NTWRK in a bid to shore up its finances. BuzzFeed also cut 16% more of the company and reduced, blaming a weak ComplexCon and “the challenges of delivering against our bundled go-to-market strategy in a tighter digital advertising market.” The new plan is to scrap the network approach in favor of pushing down decisions to the brand level. You know the former upstarts are now grownups when they’re in the throes of endless reorgs. 

This is a familiar story for many publishers. But the “tighter digital advertising market” is not tight everywhere. The ad businesses at tech companies and in retail media are booming. The difference is BuzzFeed, and most of the media business really, is built around top-of-the-funnel brand advertising. That’s no mistake. The big names of the last generation – BuzzFeed, Group Nine, Vice, Vox, Mashable, et al – were built around brand advertising, which has long been the larger, sexier end of the ad market vs the backwater of direct response, historically filled with sketchy characters who are often coincidentally domiciled in places like Boca Raton.

The ad market, under the guise of DR’s rebranding to performance marketing, has inverted. And the successful publishers – there are many out there – tend to cater to that shift by focusing on producing receipts, often by driving direct sales via affiliate marketing, which itself was a backwater of the DR backwater until it got rebranded as commerce.

“You have to understand the industry from the bottom up, not the top down,” Neil said.”You have to understand the ad stack from the open [programmatic] all through [private marketplaces], all the way up through premium – and premium is last.”

Premium coming last is an adjustment. These days, the flashier the media business, the more challenged it is. Boring businesses that do the grimy work battling it out in the SEO fighting pits over ranking highly for air fryer searches are far better positioned. 

This isn’t some secret. The pivot to video got too much air time, but an under-the-radar pivot of sorts is happening with the pivot to performance. Big name media companies are increasingly muscling their way into the affiliate business by coming “down” from their strength as marquee brands to master the intricacies of being a sales engine – and “winning” distribution, often through search traffic. (Neil is quick to point out to me that while I may dismiss DDM and its like as “Google jockeys” – I said SEO jockeys, Neil – about half of traffic comes from search engines, with the rest from a variety of sources.)

Detailed’s Glen Allsop has literally charted this pivot by big-name publishers like Forbes, Hearst, Penske, Future, Ziff Davis, Red Ventures and more. 

The scruffy SEO world is in many ways the open web ideal, filled with mom-and-pop operations and operating in a parallel universe from the legacy media industry. I mean it as a compliment when I say it’s always been filled with hustlers, eager to jump on a trending keyword and obsessed with cracking the black box of the Google algorithm. Their Super Bowl are major algo updates like Google’s Helpful Content update of last September. Major publishers have long relied on SEO – the rich legacy of The Huffington Post includes pioneering "What time does the Super Bowl start" articles – but affiliate "comtent" makes the dark arts very profitable.

That leads to some friction and accusations of unfairness, as Google has always been in an impossible position of choosing “winners” in the SERP that by definition will result in many “losers.” The big publisher pivot to performance means that in the Information Space a New York City-headquartered publishing conglomerate is battling it out with an air-quality blog in England. In a fascinating post, HouseFresh deconstructs their beef with big publishers using their brand reputation to flood the SERP with run-of-the-mill review content produced at industrial scale. 

They document in detail an example of something that’s been plain to see for some time: Many media companies are harvested their brand equity in SERPs in what I consider a form of brand arbitrage. From HouseFresh’s perspective, how can these conglomerates have expertise in all of these areas? To be fair, the Dotdash business was built around experts – About.com called them guides – while many magazine companies have, well, discovered their air fryer expertise as the ad market’s gotten rockier. In a storm, any port.

Quality, of course, is in the eye of the beholder – or more importantly, in the judgment of the algorithm. The story of SI’s use of AI is really an SEO story, because like many publishers The Arena Group outsources its commerce content to a third party rather than rely on staff. SEO content requires specialization that doesn’t naturally exist in newsrooms. Google may say the best approach is to write the best content, but the reality is there are always levers to pull to gain an edge. Anything that can be optimized on the internet will be optimized to the point of extinction. 

In some ways, this is hate the game, not the player. Neil notes that the company has big test labs. At its best, like the stock market, Google’s algorithm is a voting machine in the short term and weighing machine in the long run.

“Dotdash Meredith has hundreds of people working on product reviews, with ‘50 or 60 test kitchens,’ and you don't go all-in on that unless it's a huge revenue driver and you plan for it to be for the foreseeable future,” Glen told me. “Then you have brands like The Arena Group with Sports Illustrated, where they team up with other companies to handle their reviews for them, which seems like a safer approach if you're at the whim of Google's algorithm updates. You can't really blame them (and similar Goliaths) for wanting to capitalize on how their legacy brands are being rewarded, but we can question the quality of Google's search results when they're far from living up to their own guidelines.”

As Bill Ackman said on a Lex Fridman podcast, incentives drive human behavior. There is no perfect economic model for publishing, probably never will be. Neil has long held an aversion to the news part of the media business. He views that as a “bad business.” That is a cold financial reality that needs to set in. News loses its value fairly quickly after it is published, but an 10 best air purifier review can be updated and produce value for a very long time. News needs that kind of subsidy system, as Jay Rosen has pointed out.

Of course, whether this is actually sustainable is another story. The SERP is widely viewed as filled with low-quality affiliate nonsense. I would prefer to get basic information from Perplexity than wade through a meandering story about a cook’s grandmother’s childhood in Romania. My experience with the internet is that anything that works for publishers will be piled on until whatever tech company sets the rules cracks down. If browsers didn’t block pop-up ads, you can be sure every publisher would be still turning up the crank on them at the end of the quarter. Maybe the X10 spy camera would still be around.

Listen to the full conversation with Neil on this week’s People vs Algorithms. Some highlights:

• The uncertain future of the open web: “The internet's not growing. It's probably 45% [of Google searches] go out to publishers,  even 40% now. Google didn't grow from Q3 to Q4, year over year. The open web probably even shrank, depending on who you talk to. And we still grew. It just goes back to, if you make things people want, you will find out where to meet them. TikTok didn't exist materially for us three years ago. Now it's a major, major deal. Apple News, over the last four or five years, has become a major partner for us.. It was a really long time ago, 80% Google traffic across everything. But now we're probably 50% or 55%.”
• Search is forever: “As of right now, AI is nowhere. Bing has less market share than before they put chat GPT in there. We all know nothing of where this is headed, but I'm very convinced that for now, the search bar is going to be the front door of this. And it could be the search bar on Amazon, it could be the search bar on Google, but that is how people have been conditioned to look for these things. The prompt writing summit is a big change. The conversation is a big change. And we'll see how quickly that migrates, and we'll see if the search providers can provide answers as well as the prompt providers without having humans to change behavior because humans are really lazy.”
• Publishers aren’t really tech companies: “We've tried to build technology. It's not our jam. We've built amazing things on top of technology. That's our sweet spot.Any publisher that tells you they're a technology company, run away screaming and sell all your shares. The product expertise, the engineering expertise, it's just super different. But understanding and using these technologies is critical.”
• Navigating change in media: “I'm convinced your job as a leader of these organizations is to beat the sentimentality out of them. Because people who are creatives fall in love with what they’re  doing, particularly when it's successful. But you have to be really, really willing to not do something that worked because you need to do something different that might work.”

Listen to People vs Algorithms on Apple | Spotify | other podcast services 

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