How Sponsored Content Could Kill the Media

When I started out in the B2B publishing business almost 20 years ago (working at business-to-business media company Penton Media), sponsored content creation for our B2B advertisers felt like a second-class citizenship: Sure, my company liked the revenue, but sponsored content was not viewed as critical to our business; rather, it was seen as ancillary. Actually, that was even the name of our group: “ancillary media.”

When Penton Media was sold in 2006, its buyers barely even looked at the revenues coming from content marketing projects and sponsored content. They believed it was just “one-off” revenue and not important enough to value in the deal.

Today, a very different story is being painted. In 2016, nearly every media company on the planet is selling sponsored content or incorporating native advertising into its offerings. In fact, Huffington Post, which started their partner studio with around 10 people in 2014, has hired more than 100 people just to work on clients' content projects; at The Atlantic, three quarters of its digital revenue is now generated from sponsored content. And for some businesses (like BuzzFeed, for example), sponsored content accounts for nearly all its revenue.

As the traditional media model of advertising continues to break down, publishers are increasingly turning to sponsored content as their savior. And why not? It has led to some amazing turnarounds – including those at The Washington Post and The New York Times. According to research from the Native Advertising Institute (in cooperation with FIPP), publishers price sponsored content significantly higher than banner advertising, and, on average, sponsored content comprises 19% of total advertising revenues. In 2018, this number is expected to jump to 33%.

Simply put, brands are buying this stuff…a lot of it. According to Business Insider, native advertising and sponsored content spending in 2013 was under $5 billion in total spend. That number is expected to grow to over $20 billion by 2018.

So now, media companies that used to shy away from sponsored content opportunities are going all-in. 

Sponsored content has become the  en vogue business model for media.

But while this shift is certainly exciting, what it's actually doing is keeping media companies from seeking out a real business model – one that will help them achieve success over the long term.

And that's what has me worried.

Right now, it’s probably fair to say that the content being produced at most media companies is far superior to what's coming from agencies and brands. And it’s probably fair to say that these media companies have superior distribution capabilities, as well. These are two top reasons why brands are investing billions of dollars in media companies, providing brands with ways to reach their audiences leveraging valuable and compelling content.

However, brands are getting better at content every day. And so are agencies. These businesses are now actively hiring journalists, skilled writers, broadcasters and expert content creators. Heck, Cisco Systems just hired over 200 content-related roles by itself. They are also bringing on specialists to help with audience development. It only takes a few internal moves like this to turn disparate corporate databases into powerful content distribution machines.

In the corporate world, it seems like all the right pieces are being gathered – they just need to be put into the proper place. And did I mention corporate coffers? Brands have so much more money to invest in this, it’s not even funny. Apple, for example, can buy The New York Times 100 times over and still have $30 billion dollars left over.

In five, 10 or 15 years, when these brands finally get their acts together, I'll be genuinely concerned for the future of media companies. Just as they did with traditional advertising, these content-empowered brands will likely start to pull back on their sponsored content investments. When they do (and they will), what business model will media companies fall back on? Without other revenue sources to depend on, and with advertising all but dried up, this pull-back could represent a final, fatal blow to the digital media industry.

Look, I don’t want to be right about this; but I'm sure as sure can be that it will eventually happen. Just as we have seen the rise of content marketing, we will someday see the demise of media if they continue to solely focus on a revenue source that is, at best, fleeting.

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