The online publishing industry is in a state of major turmoil; the relationships that bind advertisers, publishers and readers are increasingly tense and adversarial. I believe that the ad-supportedbusiness model is the root problem of online publishing, which will destroy online publishing as we know it today.
In most industries, you have two common business models:Business-to-business or business-to-consumer. A third model, the marketplace, involves three parties, one of which (the marketplace) brings together the other two (consumers and producers). In thereal world, stock markets and auction houses are examples of marketplaces. The marketplace model has been successful online, with examples like Etsy, AirBnB, Shutterstock and many more.
Ad-supported publishing is also a three-party model, but different from marketplaces: In this case, readers want content, advertisers want access to readers, and publishers want money to supporttheir operations. But unlike a marketplace, this model creates a misalignment of incentives that is the cause of the problems we are seeing. Let me explain.
The ad-supported modelerodes the quality of online publishing. Publishers are supposed to create content, but in an ad-supported world, their number-one goal is to attract readers. This misalignment ofincentives means that the primary function of content is to serve as bait, which lowers quality. In the print world, many publishers rely at least in part on subscriptions, which means they still haveto generate good content. But when all of your revenues come from advertising, content quality becomes even less important.
The ad-supported model has led to an explosion in thenumber of publishers. When it became apparent that you could make money online by generating traffic, wannabe publishers rushed to the Internet in droves. And because the barrier to entry isvirtually nonexistent, this led to an explosion in the number of publishers, which meant increased competition, which led to increased pressure to generate traffic, which further lowers quality.