Ad dollars have been on the decline for years, and while they continue to shrink even now, media companies continue to believe in the strategy of belt-tightening, rather than rethinking the rules of the game.
But first, why are ad dollars shrinking? The main reason isn't what most folks think (programmatic advertising), but rather it's because more big fish have moved into the pond.
Five tech companies now control 68% of all online ad revenue. And it ain't gettin' better. By 2015, Facebook alone is expected to account for 20% of all online ads sold.
And that's why the media business, in our current landscape, is a Kobayashi Maru (a no-win situation). The only way to win is to redefine the game: the media industry's new generation of successful companies are not pure-play media companies; they're redefining the game as media/tech hybrids.
They're led by strong product and technology teams, and they're paving a new path for the industry by inventing innovative systems for data collection and completely unique products. This is a critical strategy for success in the current world where media companies don't simply battle each other, but battle the tech giants themselves.
For years, media companies outsourced their product development by using a slew of technology service companies and startups for this feature or that. Each of these "partners" takes a couple of nickels off each dollar, and adds code that slows down the page. In essence, they take revenue away while also chipping away at the user experience.
However, that's not the worst of it. If this "outsourced product development" strategy is employed for long enough, the technology departments at media companies atrophy into "service organizations" that are simply clearing houses for everyone else's services and pet projects.
If this happens, you're dead. And, the sad fact is, most media companies are in this position.
How many media companies are actually product-driven? We don't need a toolbox with everyone else's tools in it, we need something unique. Ring the alarms and call all the CEOs! We need product-driven media leaders.
This "technology atrophy" in media companies is the reason brilliant engineers rarely consider working for media companies, and that's a trend that we need to stop. Some organizations are actually turning this trend on its head. With the rise of new media/tech hybrids, we're seeing a reinvigoration in product development.
The media space isn't just about articles anymore, it's about the entire experience, on- and off-site. It's about developing proprietary analytics, crawlers and other technology advantages you don't share with every other media company (because you don't simply lease a service from a technology service provider). The media companies in this new wave are, in some ways, old-fashioned.
At Mashable, we live to create unique products, and we do it with our own two hands. We build them, and then we integrate them throughout the entire platform and build a consistent experience and strategy.
For instance, our new Velocity algorithm tells us what’s about to go viral. Velocity measures the virality of content, and predicts which content is about to go viral through predictive modeling. We promote that content in our “The Next Big Thing” column on the homepage (and each channel page), and alongside each article.
In other words, the stories our algorithm selects to promote have the most "social opportunity" and, hence, then have the highest chance of being shared by readers. But most importantly, they're the best stuff to read on the site, and we're telling you about it at exactly the right time.
And, we didn't outsource our mobile website. In fact, we don't even have a mobile website, or a straight desktop website. We invested the time and brainpower to build a single, responsive website that works across all of the various screen resolutions we see now in the age where we see a thousand flowers blooming across smartphones, mini-tablets, full-size tablets, laptops and cinema displays.
The new world of media is all about smart engineering. Hire a killer product team — from designers to product managers to engineers — and build innovative products. Otherwise, do the rest of the Internet a favor, and turn off the lights on your way out.
Flite's Guest Blogger series features the industry's top thought-leaders to share insights on display advertising, agile marketing, and innovation.