Lending 101: Digital Media
The rise of the internet has disrupted a lot of our habits, including how we intake and consume daily news. As digitalized/internet publishers, content-based websites have become an important part of our lives. How do we then evaluate a content-based website and correctly identify its key performance metrics? We need to first start with how it generates revenue.
Most content-based websites generate revenue through selling advertisement space beside their content. It is normally done in two ways: programmatic and direct. Programmatic ads utilize the technology of the platform (e.g. Google) to facilitate the automatic selling of inventory of advertising space available. Meanwhile, direct sales are usually working with specific partners, are normally of higher margin, and comes with exclusivity.
The key performance metrics are:
1) Readership - measured with traffic and time spent on the websites. Common indicators include monthly unique users, annual page views, and average minutes per visitor. The more traffic, the stickier the users, and the higher margin of the command of the website.
2) Effectiveness of monetization - measured by the revenue generated via these user interactions, it can be via:
a) Cost Per Click (CPC),
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b) Effective Cost Per Mille impressions (eCPM), where ads are charged by 1000 impressions shown, and
c) Cost Per Mille or Revenue per Mille (CPM/RPM), which can normally be used interchangeably.
The revenue is directly related to how relevant the website audiences are to the merchants. A certain group of users has a higher likelihood to transact. For example, merchants that produce baby products would find readers of new parenting websites more relevant and hence are more likely to pay higher CPM to reach this group of users.
Going back to credit fundamentals, media has been a traditional industry segment for years. Despite the platform and channel changes, the core stays the same. In addition to the above two KPIs, the following factors from Moody's continue to be key to evaluating digital media/publishers: