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The Pivot to Reality for Digital Media
By: Digiday
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Forget the pivot to video; the pivot to reality is in full swing in digital media.

The culprits are well-known. Google and Facebook have an iron grip on digital ad revenue. Publishers are trying to save themselves by making wholesale shifts in their business models, but they can’t transition fast enough. Last week brought an avalanche of the results: BuzzFeed and Vice reportedly missed revenue goals for the year; Mashable was sold for a fifth of its one-time valuation; and Oath, the Verizon unit containing Yahoo, AOL and HuffPost, laid off more than 500. The list goes on.

There are a number of things going on. At a high level, digital publishing has failed to diversify, having put all its eggs in the advertising basket. Then, the platforms came for advertising. Most digital ad spending today is going to a handful of tech companies, leaving just a few scraps for publishers to fight over. Facebook has hurt in other ways, cutting back the referral traffic it sends publishers, and has only started to help publishers monetize their content there. Publishers that took a distributed approach, thinking the revenue would follow, have found otherwise.

But it’s too simplistic to say this is simply a story of the big, bad platforms. What’s happening now is more of a correction than an upheaval. Just a year ago, Mashable took a round of venture capital at a $250 million valuation. Selling for a fifth of that price a mere 12 months later says more about the expectations venture-funded digital media eagerly embraced when capital was cheap and plentiful.

“It’s a story about runaway valuations for content startups,” said Todd Sawicki, CEO of Zemanta, a programmatic native ad platform. “If a startup had been valued based on more traditional methods and multiples, many of these valuations would never have happened.”

When it came time to build a sustainable business, many of the publishers that were adroit at spinning rosy growth scenarios on paper were less successful. The now-lampooned pivot to video is a case in point. It’s easy to talk about audiences moving to mobile, expertise in “snackable” content and distributed media strategies built around millennials. It’s quite another to execute those strategies profitably.

Take video. Too often, publishers create the video but don’t design their sites with it in mind, cramming pages with other ads that compete for attention and bandwidth, said Brian Rifkin, co-founder of digital video player company JW Player. Then, there are all the things to get right on the sales and ad operations side, such as matching the right video format to the right device and making sure the ad meets the advertisers’ specs for viewability. Success in digital media is about nailing the details, not getting the headlines.

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This article was published on Digiday.com.  A full link to the original piece is after the story. www.digiday.com
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