PageView's impact persists despite its flaws
Apr 20, 2016
PageView-based digital economy is doomed; Buzzfeed's revenue revision reveals flaws in the system.
Last week, Buzzfeed, arguably the most representative publication of a digital medium, shocked the market with a report that it revised its 2016 revenue forecast by 50%. This margin of revision cannot be mistaken for a calculation error. The digital economy built on top of pageviews is doomed - and it will take down those who do not distance themselves from it.
When digital media appeared, the first reaction of publications was relatively obvious: space was sold in newspapers, space is sold on screens. Because of this inference, the market bets were that the gains of the publications would be increasing and safe, since the marginal cost of digital was low, that is the cost to simply replicate the information already collected for another platform. The first bubble melted much of the Internet, which recovered from the blow, but did not learn the lesson: the pageview is still the basis of the digital economy and as long as it is so, all sides will continue losing.
Let's go back four years. In 2012, Magid Abraham, CEO of ComScore (the most respected audience audit on the Web) published a paper called The Economics of Online Advertising("The principles of digital advertising", in free translation). It is worth reading the document, especially considering that it is already 4 years old. Abraham's argument is quite sensible: page views ("pageviews") contaminate the entire process and the digital economy, because they do not guarantee the advertiser nor give revenue to the publications.
This would happen, according to Abraham, because agencies and advertisers do not have clear signals of where their campaigns work, since the amounts of pageviews are often misleading because many impressions (number of times the ad is displayed) are not seen by anyone - either because they are far below on the page, because they are impressions seen by bots (robots, like search engines) or because they are inflated even by less scrupulous publications. Abraham goes further and says that the infinite amount of inventory (i.e., theoretically a web page can have an unreal amount of ads) is lethal for those who sell these ads, because the curves of demand and supply drive the price to marginal values. Abraham's theory is confirmed (or at least seems to be confirmed) if you check the reality. Only generators of traffic in industrial quantity like Google, Facebook, Yahoo and others can get money from such low values paid by the advertiser.
Back to today: the blow taken by Buzzfeed is not exclusive to it, but it is a symptom of how the system is seeking a model that makes sense. Despite being a traffic generating engine, the current system is unreliable. Explaining: even a site that is a reference in terms of digital business model, like BF cannot, purely and simply by measuring the number of page views, assess all its impact. In a post in February, the publication explained its criteria. The argument is that Buzzfeed has a much larger reach than that measured in pageviews and visitors. It is visible that Buzzfeed has an overestimated evaluation (and this will be the subject of another post), but to a certain extent, the problem also goes through the use of inadequate metrics.
A rereading of Magid Abraham's argument is now pertinent. The inaccuracy of audience measurements and the "infinite" amount of advertising spaces (which are never seen in their majority) have created a situation where digital media cannot create business models - because the product they sell (ad impressions) has a value close to zero due to the 'infinite' supply. Publishers, agencies and advertisers are groping in the dark and none of the three is actually taking advantage of the potential that the industry can offer.
But how to measure this? Today, this is not yet possible - it would require the adoption of an agreement similar to the stock market, where the punishment for 'falsifying' data would be very serious and severely punished by customers and competitors. Following the logic proposed by Abraham, the first thing to do would be to adopt practices that were clear and objective, such as placing ads only in places where they were seen by 100% of 'real' visitors, but it would not stop there. 'Cross-platform' measurements, where the spaces occupied by the publications on social networks are also counted, would be fundamental (thought about Facebook's Instant Articles?). Pageview has no place in this new model - even if we do not know what model it is.
And where does Buzzfeed fit into this equation? If the site that is considered the most "successful" digital only (even without evaluating the quality of the content) began to open its beak because it has a reach that is not based on pageviews, imagine the rest of the industry. As it stands, all publications are penalized by the system. Only two companies capitalize heavily with the current model - Google and Facebook, which generate surreal traffic. If you want to think about how to create sustainable digital models, the first step is in the burial of pageviews.