This was a very cool, fascinating panel as the two participants –Daring Fireball’s John Gruber and Jim Coudal who runs TheDeck ad network– work together, and chose to interview each other about each of their blog businesses.
Coudal kicked it off: “This talk is about the current state of advertising for good or for ill. We’ll talk about it on a site basis. (I’ll ask John some questions.) And then on a network basis (he can ask me some questions).”
John Gruber then described his humble beginnings as a blogger, starting in 2002 as a part time effort. He went full time with his blog in 2006 when he felt that with his online column about “stuff from Apple…in the design world” would be fulfilling for him. “As soon as I got a couple of weeks into it never run out of material…!”
He set it up initially experimenting with Google AdWords. “That It was probably the only thing I did as a lark…plugged in the javascript. It’s pay per click, people bid – and I didn’t make money. Except for one thing. I had a long essay on design where clients ask you to do something that you can’t say no to and it results in bad design. And I referenced men’s hair pieces…they turn out ridiculous because the request is always for ‘more hair.’ I wrote about how if they wanted a really well designed natural looking hair piece it would be sparse, like you were just beginning to lose some hair, and it would look natural. You bill a lot for a good hairpiece and the client says ‘for that much moeny I want a lot of hair!’ I was using that as an example of how following a client’s wishes can lead to really bad design. But [since Google Adwords are based on the content of my site,] I started getting men’s hair replacement ads [served by Google]. Apparently in the summer of 2004 that was a $700 on that day for a story! I thought ‘I’m rich!’ Of course my post was completely irrelevant to those ads, and I was making money from ads that had nothing to do with the audience I was writing for. So I realized quickly that that was something that was unsustainable and borderline dishonest.”
Coudal asked him to narrate the rest of his experiments in monetizing his blog.
Gruber said, “Next I started selling T-shirts and what I called ‘memberships‘ – NPR style. I decided to see if readers would pay. I thought, ‘If this works out you get great stuff to read and a T-shirt ($30)! And there must be enough people out there based on all of those who would email me and say kinds things and say ‘I hate the weeks when you’re too busy to write more.’ And I thought [I would probably have to start offering] exclusive content that you can’t get anywhere else…something that only goes to members.”
“But then I realized that defeats the purpose of the web – I want everyone to read what I write. So I was only running excerpts on the blog… and seeing if maybe that’s something I could make some money on it: members get access to the full RSS feed. My audience was asking me every day ‘can I have the full content feed.”
Coudal interjected, “But then Google Reader shows up.”
Gruber said, “Right. The problem was implementing it. But because there wasn’t any kind of password it was just a URL. [And when I looked at my visitor stats] there were way more people subscribing to the feed than who were HTTP authenticated – but Google Reader only works with content that’s not password protected. Which makes sense the way Google Reader is set up and designed.”
“How many people use Google Reader?” Coudal polled the audience. “Wow. That’s a lot of hands.”
Gruber continued, “So in 2006, when I started the membership, I received email from people that were writing to me telling me they couldn’t get their feeds to work. And it was crushing to me those are the most devoted to me, subscribing, and I was punishing them by not letting them read it.”
He then went into a description of how he was attempting Google hacks, and some other work arounds. “I realized it was just easier thing to put the full content in the feed…”
Coudal noted that the issue of excerpt content as “a bridge not full feeds” was a dated issue “but it’s back again!”
Gruber wrapped up, and brought the audience up to date with his monetization experiments. “I looked at FeedBurner and it was like a pittance, just nickles – people were having trouble with ads in RSS feeds. What about something more like TheDeck – a weekly sponsorship? So I called my friend who runs a Mac company and said ‘Would you be interested in an experiment for 6 weeks? If I gave you the exclusive sponsorship on my blog, and asked you for a couple hundred dollars, would you do it?’ He agreed. So I announced it with a sponsor. Everyone gets the full feed, 100 words go to the sponsor – there’s only one each week. That was 3 years ago. And it’s been sold out every week since.”
Coudal said, “That’s interesting. Backing up to the issue of RSS. Because if people are reading your posts in an RSS reader, there’s no display ads, no money. So the obvious question is [when you made your full posts available through RSS], did it effect your web traffic?”
Gruber answered, “There’s a common sense argument that says it should have, but traffic did not drop.”
Coudal said, “Maybe that speaks to the ascendence of Twitter or something that’s taking the RSS place?”
Gruber said, “I do think Twitter helped.”
Coudal said, “And not too long after that John joined my company, The Deck. You’re the guy writing the site. I guess the obvious question is if someone [like a software company] takes an ad and sponsors the RSS feeds and their next release blows, how do you write about that?”
Gruber said, “That was why I tried memberships. I thought ‘If this works out, I’ll never have to worry about a conflict [with the sponsors].’ But that didn’t work out: that’s the bottom line. Sponsorships were way more lucrative than the memberships. The way that I try to deal with it is not over think it at all. Instead of thinking ‘So and so is a sponsor…should I not say their new logo is ugly?’ Or if I write ‘I love it!’ then everybody’s going to think I’m selling out to them because they’re a sponsor. But I just push that out of my mind and really focus on writing about what I want to write about.”
Coudal asked, “Have you turned down ads?”
Gruber replied, “Yes, Not as many as you have. But sometimes there’s a few products that [when I think about it I realize] I don’t want to do the Friday ‘Thank You’ message to them, so that’s a sponsor where I shouldn’t take their money.”
Coudal asked, “You ‘Thank You’ messages are great. Do you think that your first one you wrote it that way – do you think that’s effecting the valuation of your ads? That your sponsors and your readers think this sponsor is in some ways Gruber-DaringFireball Endorsement?”
Gruber: “I think it keeps me honest, though. The times when I rejected [an advertiser, it was because] I didn’t want to put my voice thanking them at the end of the week. If people err on the side of thinking that I’m endorsing these things, than so what if they’re all good products?”
Coudal: “This issue of the Chinese wall between editorial and sales is hard to resolve when it’s all one wall.”
Gruber: “You could have a whole conversation about newspapers and whether or not they are ever polluted because they’re completely different staffers [pursuing ads and overseeing editorial.] But with The Deck ads I don’t even know who next month’s sponsors are going to be because you sell the ads.”
Coudal: “It’s pretty much Viagra and Home Refinancing.”
And then they hit the half-way mark of the event. The two men switched seats, so that John could interview Jim.
Gruber began, “So I got into this b/c I wanted to write for a site that was supported by ads. You started your own ad network but I think its probably for very different reasons. Why did you start The Deck?”
Coudal: “I don’t want to be disingenuous: of course I wanted to build a company and make a lot of money. But there was another reason too.” He described the products they were trying to market and said how he found it “infuriatingly difficult to find places to advertise.”
Gruber: “So you began as an advertiser, looking for a better solution?”
Coudal: “Yes. We could reach wedding photographers by buying ads on forums. But if we wanted to reach creative professionals it was impossible to make a buy. Like with most of our sponsors it was hard to do, there was no one place you could go to get volume…”
Gruber: “So you really did it because you wanted a venue to actually put your ads in it.”
Coudal: “I never really thought of the advertising aspect of it. But we share an office with [the software company] 37 Signals…we had a blog and both our companies had sites that were doing a lot of traffic. We came up with the idea of a different type of ad network.”
Gruber: “What struck me right away was the format. It was utterly unlike any other kind of web advertising, or ad network.”
Coudal: “We looked at what a current ad network is, and we just threw out what wasn’t essential. So we only have one size – a 120 x 90 static image. The format is what it is. We only show a single ad on any page. You can only buy for a monthly slot. And our community has to be using or interested in using your product or service. By imposing these restraints and rules in some way this thing started to blossom a little bit.”
Gruber: “So the rules are key.”
Coudal: “If your rules are that you’re going to sell by cost per thousand – what are you going to do to your site? Break your articles into 3 pages. Run a slideshow every day. We weren’t interested in this at all. What passes for online innovation in advertising ignores two out of the 3 people – the READER, the PUBLISHER, and the ADVERTISER. [In our network] the publisher gets a nice looking classy ad that they’re comfortable being associated with. The writer gets to do what they do, and get supported for it. The advertiser gets an impression among a smart, saavy intelligent reader …in an uncluttered environment.”
Coudal: “There are 45 sites in the service…plus a few services. We now have Twitterific and Newswire, Newsgators, Instapaper both on the web and on the iphone and iPad.”
Gruber: “Did you ever think about in-app advertising?”
Coudal: “We were just lucky that our format works for the new platforms. But the type of people who are reading our sites are using these devices consume a lot of design and technical information.”
Gruber: “With the RSS ads I run, they are not like web ads at all. The Deck ads are not like web ads either. What’s an impression in Twitterific?”
Coudal: “Yes. To talk a little about cost per thousand, it is the method that all advertising is bought and sold. But it wasn’t that important to us. Being a media buyer is a very hard job if I can buy 1 ad for 100 million impressions in one place most people are going to do that. But once we got to the American Apparel, P&G…they didn’t care about cost per thousand…We don’t pay and we don’t charge based on impressions and clicks. Certainly if there’s not good results, then it doesn’t work at all.”
Gruber: “So it’s not that traffic doesn’t count – but it’s not a number that you multiply another number by to figure out the value.”
Coudal: “Correct. Because we throw out all the non-essential stuff that other ad networks do, [we can focus on the stuff that matters to us.] We would rather leave a little money on the table and be sold out every month. Because of that we’re not at the mercy of the metrics of CPM or CTR or conversion or anything else.”
Gruber: “Who do you say ‘no’ to frequently?”
Coudal: “Yes, we turn down ads. Every month somebody wants to run an ad for some shady product or service and we don’t think it makes any sense for our audience…we’re selective about the ads we take. Because we’re efficient, we’re also pretty cheap by a pure eyeballs measurement. And they’re a lot of people out there who just want to buy eyeballs. So sometimes it’s a hard call. Sometimes we don’t know if we should turn down an ad. It’s like what Justice Stewart said about pornography, ‘I don’t know what it is but I know it when I see it.’ If we’re uncertain [if we should take an ad] we have an interesting policy. We pick 3 publishers out of our networks and ask them what they think. And if they say ‘OK’ we run it, and if they don’t, we don’t.”
Gruber: “And how do you determine whether or not to let a blog join The Deck?”
Coudal: “We’ve seen a lot of sites ask us to be part of it. I’m the father of 3 kids as well, so I spend a lot of time saying ‘We’ll see.’ But what we are trying to do is letting the ad sales and pricing drive the expansion of the site, not the other way around.”
Gruber: “So…I know that Microsoft Expressions was an advertiser on The Deck. Do you use it?”
Coudal: “Every day. [laughs] No. We won’t take an ad if we don’t use the product or service…Microsoft is a big company and Expression is a viable product that is used by a bunch of people. And they advertise other things as well – Silverlight, MIX, I can’t imagine turning down a company that has as much of a presence and diversity of technology products as Microsoft does.”
Gruber and Coudal then chatted about competitors’ to Coudal’s companies and if he would allow them to advertise on The Deck (he would), as well as any problems they ever had with advertisers (just one), as well as as discussion of Coudal’s Layer Tennis property.
Gruber: “It’s not sold like any other kind of sponsorship.”
Coudal: “It’s like if The Deck is buying an ad in The New Yorker. Than Layer Tennis is like buying a Superbowl Halftime Ad.”
Gruber: “So how big are you now?”
Coudal: “The Deck itself serves up 100 million impressions. But the member sites like me are very small sites.”
Gruber: “Do you think there’s a lesson that The New York Times or CNN could learn from this?”
Coudal: “I’m sure there is. The problem with it is that you’d have to tear down conventional wisdom about online advertising…and that came from print and television.”
Gruber: “What conventional wisdom are you tearing down?”
Coudal: “Limitless inventory creates a commodity…pricing goes down. We’ve seen this in the online ad industry. If you judge the value of advertising by cost per thousand than the price will always go down. Increase inventory, decrease pricing…you have to sell more, constantly, and always post ads, more ads. So I think this is a way to limit the inventory. You could take a part of The New York Times site and design the page around a really beautiful ad size.”
Gruber: “To introduce some scarcity. Rather than the instinct of printing more cash to deal with revenue shortfall.”
Coudal: “This thing works for us in what is essentially a niche, although it’s a growing niche.”
Gruber: “So it’s not that CPM is bad. It’s that if you’re trying to do something that CPM isn’t a good fit, than you should find something else.”
Coudal: “Right. People think advertising is hard. It’s not hard. Advertisers are looking to find a way to reach interesting consumers. If you can do it in a way that the ads you’re running are a benefit to the users, that’s a win for everyone.”
AUDIENCE QUESTIONS
The first question was a two-part question. AUDIENCE Member #1: “I’d like to know about how you do reporting… and how do you compensate your bloggers?”
Coudal: We negotiate a guaranteed monthly fee and pay them at the end of the month. And when things change, we renegotiate for the next month. As to the reporting, we don’t do any – basically none. We do do a lot of 3rd party serving. But we’ve bought ads before and I’ve never trusted a third party report. And it’s trivial to do it yourself, so we have yet to make a powerpoint to anybody about anything.”
AUDIENCE Member #2: “I’m from Comscore. We could help you with that reporting! No, seriously: I’m curious how you’re measuring effectiveness.”
Coudal: “7 out of 10 sponsors renew for the next month so I assume these are smart, intelligent people who know if it’s working. I have a lot of stories from advertisers…like there were a wave of universities, design schools, that were advertising with us. And they’ve been completely filled up on applications.”
AUDIENCE Member #3: “I run a blog, erika.biz…My question is for Daring Fireball. I notice you post several times a day. My blog tends to do 1-2 posts a week but it’s a long post. I was wondering how you would tweak your advertising if you were only doing 1-2 posts a week?”
Coudal: “Go to monthly model.”
Gruber: “I couldn’t let a sponsor be on every post because that would turn off my readers. But if you’re only blogging a few times a week you could do that. ‘Articles this month are brought to you by…’ you could put a sponsored message on each post and you’re not touching that threshold.”
AUDIENCE Member #3: “Thanks!”
AUDIENCE Member #4: “I work in journalism where the CPM isn’t working…”
Coudal: “It’s not working for anyone.”
AUDIENCE Member #4: “I’d like to know what are the criteria that factor how you value the price for the ads?”
Coudal: “At first I was looking at what others were getting for CPM. But as it progresses, we are looking at what we want the market to be. We can increase the traffic, or because we’re increasing the traffic all the time, we can increase the number of slots.”
Gruber: “CPM online is what rating points or circulation is – butts on a couch. And in that world, how do you increase circulation? You produce better content, more content, higher relevancy, etc. You make it a better product. But when pageviews are your metric you can do all sorts of things to make pageviews go up but that don’t make your audience experience better, you make it worse.”
Audience Member #5: “My question is about scalability.”
Coudal: “We grew 40 % bigger this year. Staying broadly focused on design and the creative professional.”
AUDIENCE Member #5: “But doesn’t this only work –allowing you to do what ever you want to do– because your content is reaching affluent people who want to buy expensive computers and luxury things?”
Coudal: “Yep. It’s awesome, isn’t it? The whole thing works because the audience is curious and intelligent.”
Audience Member #6: “Have you ever thought about geographic targeting?”
Coudal: “No.”
Audience Member #6: “Is it because you’re afraid of all the technology?
Coudal: “No, it’s because I’m afraid of all the meetings.”
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