The next wave of startups that will help publishers make money

A growing number of startups are thinking about how they can help publishers make money outside of advertising. These innovative young companies may not be able to sever the tie between publishers and advertisers, but they could help digital content makers offset their dependence on advertisers through additional revenue streams.

The intervention is much needed.

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Every day, new market data shows the dire state of banner ads. A flurry of condemnations faces these digital ads. For instance, no one clicks on them. If someone does click on one, it was probably an accident. Furthermore, consumers that do click on them may be subjected to malware. Free consumer software exists specifically to block digital ads from ever being seen.

It’s a bad environment for the banner ad, and yet when it comes to replacing it, we’re seeing little innovation.

This is a problem for publishers, who have forever relied on advertising dollars to run their publications. To shore up the damage, a number of media outlets, such as Vice and BuzzFeed, are working on better integrating ads into their content. The purpose of this native content is to have it coexist seamlessly with existing articles and videos on the platform, meaning journalism is hardly distinct from advertising save for a “sponsored content” label.

Sponsored content comes in two flavors: native advertising, and posts paid for by advertisers who may not influence the material itself but pay to have their name associated with it. Though many have ethical questions about posing advertising as journalism, publishers like native ads because they garner a higher price than banner ads. Native video advertising, a blossoming tactic, comes at an even higher price.

Native content may be fine for publishers, but it doesn’t have to represent the only way they monetize their businesses.

Market research

One company is using market research as a way to help fund publishers. The concept is simple: Rather than forcing readers to pay a subscription fee or to slog through ads, HelloToken is helping publishers push market research questions to their audience for a fee. Readers get to read a set number of articles (as determined by the publisher) before they have to answer a market research question to continue reading.

The company, which has raised a $400,000 preseed round, launched earlier this week with clients that include 50 bloggers and the Harvard Political Review.

Founder Brian Truong said a publisher can get $0.03 per question answered from market researchers. By comparison, most digital display ads garner publishers $0.004 per impression or anywhere from $0.10 to $10 per 1,000 impressions depending on the outlet. And the demand for market research is big.

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Companies have lots of questions about the market they’re targeting, but conducting market research can be expensive. Asking one question to a thousand respondents can cost up to $1,000, depending on the firm a company is working with. Even low-cost options like SurveyMonkey charge at least $1 per respondent, and the price goes up as demographic preferences become more detailed.

HelloToken, Truong said, charges $0.06 to ask one person one question. Put another way, it would cost $60 to ask 1,000 people one question. Making surveys cheaper is just the first step, according to Truong. Eventually, he wants to make market research more meaningful.

“At the end of the day, there’s so much technology — everything is programmatic. It’s so predictive,” he said. “But it doesn’t actually know what your preferences are.” Ultimately, he said, HelloToken should be able to better understand its survey candidates and their likes, allowing retailers and advertisers to tailor the ad experience to the consumer.

Tips

Another option percolating among content creators is the pay-what-you-want model. This tactic has been most famously employed by Radiohead for its album In Rainbows.

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Within this scope, Tipjar is enabling independent artists, writers, and musicians to make money off their past and present work by linking to a digital tip jar on YouTube, Vimeo, Flickr, and Soundcloud. Those who want to send a tip can set up what is essentially a digital wallet with Tipjar by typing their credit card info into a popup box. Content creators don’t pay anything to set up the jar; however, they fork over a hefty 20 percent fee when cashing out their donations. That’s likely because of the expense associated with micropayments.

The company is still prelaunch, but the concept isn’t entirely new. Companies in the Bitcoin community have been promoting the idea of tipping for some time. There’s also Patreon, which allows fans to make recurring payments to their favorite content creators.

Another company with a similar offering is Cointent. This company has created a platform for managing both subscriptions and micropayments for content. The company enables publishers to charge small amounts of money for a piece of content, like $0.50 for an article. A survey among its early partners showed that micropayments lead to 3 times as many paying customers as subscriptions do. However, like Tipjar, Cointent charges a heavy transaction fee, though the rate depends on the publisher. Depending on the size of the publisher, Cointent might take $0.40 on a $2.00 article.

Tips and pay-per-article offerings may never fully replace ad dollars, but they could help to loosen the ropes tying publishers and advertisers together.

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The untethering of publishers and advertisers would be a welcome change. For years, publishers have relied on advertisers for their survival, and it has taken a toll on the industry, especially as the value of display ads continues to plummet. If publishers can expand beyond advertising revenue in a meaningful way, it could usher in a whole new era of media.