As the quantity of online content continues to proliferate—from cute cat videos to policy experts blogging on the Middle East—the consumer's expectation that online content should be free becomes more entrenched. To make money, websites increasingly rely on paid advertising.
Now recent research suggests that at least some online content creators, namely bloggers, respond to the arrival of advertising revenue by changing what they cover, drifting toward subjects of broad interest—money, sex, and celebrities—to the detriment of more narrowly-focused material.
“Many companies are looking for variety and quality, not a lot of duplicate mainstream content”
The good news: Advertising encourages bloggers to produce more and longer content, leavened with more photos and video, which prompts more bookmarking among readers. This practice perhaps points the way toward business models in the future that could also make niche content more profitable, according to researchers Feng Zhu and Monic Sun.
"Many media scholars think this revenue model is detrimental to society because it provides incentive for the content provider to produce only popular content that can attract lots of eyeballs," says Zhu, an assistant professor at Harvard Business School. "Content providers are serving advertisers rather than the audience, and consumers with niche preferences will be out of luck because the content they're seeking only caters to a small group of people."
This seems to have occurred with ad-supported television, according to critics, where much airtime is devoted to cheap-to-produce but widely popular pulp fiction, or reality programs like Dancing with the Stars to Duck Dynasty. Zhu wondered whether this trend would play out in online channels.
In Ad Revenue and Content Commercialization: Evidence from Blogs, published last year in Management Science, Zhu and coauthor Sun, of Boston University, bring an empirical approach to a question that has had many anecdotal responses but no firm results: How does the monetary promise of ad-revenue sharing in exchange for eyeballs affect the quality and subject matter of online content?
For their study, the pair drew on a data set from a leading Chinese media website that offers a range of services, including blogging. In September 2007, the site launched an ad-revenue-sharing program. Participating writers who allowed the site to run ads on their blog pages received 50 percent of the revenue generated. The researchers analyzed blog posts by 4,200 participants in the program both before and after the program took effect (between May 2007 and January 2009), comparing the content of those posts to that of 26,974 nonparticipants.
After evaluating 4.4 million blog posts for content and quality—measured by a blog post's length, the number of pictures and videos it contained, and the percentage of visitors who bookmarked a particular post—Sun and Zhu found that popular content increased by about 13 percent after the revenue-sharing program took effect, with 50 percent of the increase attributed to three specific topic shifts: the stock market, salacious content, and celebrities. Popularity was measured by whether or not a post had a "popular" tag, which in turn was determined by the total number of page views of blog posts containing that tag in each month.
The results seemed to back up the prevalent criticism by media scholars, Zhu says. "There was a significant shift towards popular content among participants of the ad-sharing program that would help them attract eyeballs and draw a bigger paycheck from the website."
On the other hand, bloggers were incentivized to write longer posts, publish more frequently, and include more photos and video clips. Their posts were 5.9 times more likely to be bookmarked by readers after they joined the ad-sharing program.
In that sense, Zhu contends, there was a positive aspect to the ad-revenue-sharing program.
An essential difference between the online and offline worlds is capacity. In television, there are only so many prime-time hours available to maximize ad revenue—the shift to popular content crowds out niche shows. (The researchers did not study the effects on viewing habits created by digital video recorders and on-demand programming.) Online, there are no capacity constraints, so there is still room for niche content to be displayed.
Making Niche Profitable
Zhu's interest in how different revenue models affect content, consumers, and companies generates a number of interesting "what ifs."
For example, what if a company, as a means of encouraging diversity of content, designed a payment scheme to reward the production of high-quality niche content? "The number of eyeballs might not be as many, but advertisers obviously care about the match between content and an upper-end consumer," Zhu says. "If you are a very specialized company, you may want to think about how to design a payment scheme that will encourage that sort of variety."
This becomes increasingly important for companies running businesses dependent on user-generated content, adds Zhu. "What many companies are looking for is variety and quality, not a lot of duplicate mainstream content."
One possible tactic to encourage that diversity would be a revenue-sharing program that partitions content into different categories, with different benchmarks for success.
"If your target audience is scientists, I'm not going to compare the number of hits you get with what a blog post on Lady Gaga might receive," Zhu explains. "I could also find advertisers interested in reaching scientists, and these advertisers may have a high willingness to pay once you bring them a targeted group of potential customers."
Changing the advertising model so that content providers—the bloggers—are rewarded for reader click-throughs to ads, not just ad "impressions," could also have an effect, he continues. Such a model might not promote the same significant shift toward popular content that was seen in the blog study, since convincing a reader to click through to an ad would require a closer match between content and audience interest.
Zhu has other research in the works related to ad-sponsored business models, including one with Robert Seamans at New York University that considers how ad-sponsored free newspapers affect pricing and content delivery strategies of incumbent newspapers that charge subscription fees.
"It's likely that the free newspapers will cover popular content in order to attract more eyeballs," Zhu says. How the incumbent papers will respond to their entry is an interesting question.
"Ad revenue programs and their effect on online content is a relatively new phenomenon to study, with implications for all sides—the advertisers, the content providers, and the consumers," says Zhu. As more and more consumers turn from offline to online content channels—many of them with free, ad-sponsored content—those implications will only continue to grow.