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Is the online advertising model broken?

Fark shifts away from online ads thanks to ad blockers, and problems with Google

Financial trends and news by Steven Loeb
January 10, 2017 | Comments
Short URL: http://vator.tv/n/48bf

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Updated with comment from Google

Something definitely seems to be shifting in the online advertising space, as sites that have traditionally relied on ads for revenue are now starting to shift away from it, and toward different models.

First, it was Medium, which, last week, announced it was going to be laying off a third of its staff, while also shifting away from its ad-based model. And now alternative news site Fark.com has made a similar decision, revealing on Tuesday that it's going back to the subscription-based model it employed years ago.

There will be two plans available going forward:

  • TotalFark, which is $5 per month, and consists of Fark’s special content section. 
  • BareFark, which is $2.50 per month for no ads.

"We’d rather everyone sign up for this than serve any ads at all," Drew Curtis, the company's founder, wrote in a blog post.

So why is Curtis so down on ads now? It has a lot to do with Google, which shut off Fark's ads in October, without telling them. When they realized what happened, Fark couldn't even find out why Google had done this. 

"We don't have an ad representative to contact the Google policy team, and we found out it was impossible. You can't reach them. I know people at Google, and I hit all of them up and nobody was able to reach them," Curtis told me in an interview.

When they finally got in touch with an ad rep, through someone Curtis randomly reached out to they found out why their ads had been shut off: the site was accused of promoting child pornography.

"We are community board, and we have moderators would have taken it off, but it's not impossible for it to have gone under the radar. So we said, 'Where is it?' Three days later they responded. You would think that Google would have a crack team, but they can wipe out entire companies and they don't care," said Curtis.

They finally found the image and it turns out was from a post in 2010, about a man who had been acquitted of charges of possession of Child Pornography in Puerto Rico. The guy had purchased a pirated DVD in Venezuela and was arrested by US Customs due to a picture on the cover of a porn star who looked like she was underage. At the trial a child psychologist had even testified that there was no way the actress could be an adult.

As it turned out, the actress was 19 years old at the time and the man was cleared of all charges.  

This is the image that appeared on Fark, and which caused all of the trouble:

"The flagged image was a fully clothed, adult woman. Our ads were shut off for two and a half weeks, but there was no violation of policy. Nobody looked at the damned thing," said Curtis.

Google eventually told the company that the problem was the result o a small pedo bear logo in the lower left corner of the image. And the company accused Fark of having 200 more instances of child pornography, all of which Curtis said were "false positives," such as a woman in a bikini. 

Fark was eventually able to get its ads turned back on when it turned ads off for all posts more than two weeks old, but by then the damage had been done.

"This was the fourth quarter, which are our best revenue months, across the election, which were the highest trafficed months in a long time. That's possibly a fatal blow to us financially," Curtis told me. "It turned out to the most lackluster quarter we ever had. Our regular revenue stream was not good enough and were were upside down financially."

A Google spokesperson would not comment on specific sites and if they are in violation of our policies, but did give VatorNews the following statement:

"We have an existing set of publisher policies that govern where Google ads may be placed in order to protect users from harmful, misleading or inappropriate content.  We enforce these policies vigorously, and taking action may include suspending ads on their site. Publishers can appeal these actions."

The broken ad space

The issue with Google may have precipitated the move away from Fark relying on ad revenue, but it doesn't tell the whole story, of course. Even without that issue, Fark had other issues to contend with, Curtis admitted, including a declining userbase over the past few years. 

"Most of Fark’s initial audience was made up of people who were trying to kill time at work. When we asked people why they left, the number one reason given was they got a promotion at work," he said, giving them less time to surf the Web. He also admitted that Facebook had probably taken a chunk of the audience. 

But, according to Curtis, the real culprit is the ad model itself, which he said is "broken."

"Everything changes every 18 months to two years, but we go from one bad model to another," said Curtis, putting the blame on ad brokers. 

"I've been to ad conferences, and it's hard to believe but, at one point, people thought the pop-up ad was an effective method of advertising. Some mobile news sites, I have to X out of four different things, and there's an ad between every two sentences. I can't believe they said this would work perfectly. The example I used to give is that advertisers would buy a product that turned the TV on and jack the volume all the up and would think that's a good way to sell their product," he told me. 

"They are basically trying to sell to manufacturers the idea that the only thing between your product's total success is that it's not in front of enough people. The concept of there's no bad publicity is bullshit."

As a result, people hate ads, leading to a large number of people using ad blockers, thereby decreasing revenue for sites that they rely on them. 

Medium CEO Ev Williams made a similar argument about the way ads are shown to users when he announced a shift away from ad-supported revenue as well.

"We had started scaling up the teams to sell and support products that were, at best, incremental improvements on the ad-driven publishing model, not the transformative model we were aiming for. To continue on this trajectory put us at risk — even if we were successful, business-wise — of becoming an extension of a broken system," Williams wrote in a blog post.

"Upon further reflection, it’s clear that the broken system is ad-driven media on the internet. It simply doesn’t serve people. In fact, it’s not designed to. The vast majority of articles, videos, and other “content” we all consume on a daily basis is paid for — directly or indirectly — by corporations who are funding it in order to advance their goals. And it is measured, amplified, and rewarded based on its ability to do that. Period. As a result, we get…well, what we get. And it’s getting worse."

The ad revenue model does, of course, work for some. In its most recent quarter, Facebook made a whopping $6.8 billion in revenue from advertising. Digital ad spending in the United States has grown from $26.29 billion in 2010 to $59.61 billion in 2015, more than doubling in that time. So there are certain signs that things are still healthy. 

But, as both Medium and Fark have made it clear, for smaller sites the future of online revenue may rest outside that model. 

"Ad income is still higher than subscription income but I'd like to flip that if possible because ad income is a pain in the butt," said Curtis. 

(Image source: marketingland.com)


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