Category: Affiliate Marketing Tips

“At the heart of the line of questions we’ve heard across numerous calls is how automation can replace people, and what that ultimately means for revenue… and cash flow,” said Daniel Kurnos, an internet, broadcasting and media analyst at investment banking firm The Benchmark Company. Executives discussed automating content production and reducing content production and operating costs, he said. But media executives were vague on the details on how much money AI would save and make at their respective companies.

“We’ve heard several executives discuss cautious testing phases, but I think everyone is waiting to see how the tech evolves before fully committing one way or the other,” Kurnos added.

Using generative AI for cost efficiencies

Though media companies have outlined their strategies for cutting costs since last summer’s economic downturn – facing macroeconomic pressures and a soft ad market – the recent bout of earnings calls was the first time a number of CEOs pointed to AI as a way to achieve some of these goals. 

Of course, they also happen to be the first earnings calls since the debut of OpenAI’s ChatGPT. Generative AI has become the latest buzzword balloon – following web3/metaverse and blockchain/cryptocurrency – for executives to latch onto in order to lift their companies’ outlooks.

“I’ve mentioned that I do think on the cost side and some of the earlier stages of content development, [AI] can help drive efficiency,” said Joey Levin, CEO of IAC, during the company’s earnings call on Feb. 14. “Like with anything, the technology will evolve and we’ll evolve with it. But it’s certainly front and center in our mind and we view real opportunities for innovation there.” 

Publishing executives remained eager to find ways to cut costs at their companies, especially as advertising revenue fell last year. Nearly every publisher included in this Digiday report had a drop in ad revenue in Q4, ranging from 3% to 27% year over year. IAC’s Dotdash Meredith reported programmatic CPMs on average were down by 10% to 15% year over year in Q4. Gannett’s digital advertising revenue fell by 20.5% year over year in Q4. The company has let go of staff and outsourced certain business functions for months now in an effort to cut costs. 

Doug Horne, CFO at Gannett, said during the company’s earnings call on Feb. 23 that the company plans to have annual savings of “at least $220 million” this year. Part of that plan is to use AI to “create efficiencies.”

Gannett has made “recent investments” in AI and machine learning tools to simplify routine tasks, such as selecting and cropping images quickly, personalizing content and gathering datasets to inform readers on where to watch various sporting events, he said. 

The Arena Group recently announced partnerships with AI firms like Jasper and OpenAI “to give our reporters and editors the ability to quickly and efficiently search and pull content from our rich archives for news stories,” said Ross Levinsohn, CEO of The Arena Group.

Levinsohn, who said profitability and operating cash flow were the company’s focus this year, noted “productivity improvements” since testing the use of generative AI. When The Wall Street Journal reported in February that The Arena Group was using AI to produce articles, shares jumped 18%.

“We do not intend for this to replace our talented writers and editors. But we do believe this initiative will make our great teams even more productive. These are just a few of the examples of how we are proactively adjusting our cost structure to ensure that we hit our 2023 adjusted EBITDA target,” Levinsohn said.

The Arena Group cut its total operating expenses by 30% year over year to $35.6 million in the fourth quarter. The company’s advertising revenue grew 46.9% year over year in Q4. The company acquired a number of titles last year, including Parade, Men’s Journal, Men’s Fitness and other enthusiast brands.

Using AI for revenue opportunities

Jonah Peretti, CEO at BuzzFeed Inc., said AI-powered content will move “from an R&D stage to part of our core business” in the company’s earnings call on March 13. He teased more announcements to come during BuzzFeed’s virtual Investor Day on May 11 last year. BuzzFeed’s advertising revenue fell by 27% in Q4.

BuzzFeed president Marcela Martin outlined how BuzzFeed’s AI-powered Infinity Quizzes, which launched last month, are the beginning of the company’s adoption of AI “to enhance the audience experience and open up new avenues for monetization.” A custom quiz matching a reader with a house plant was sponsored by Scotts Miracle-Gro. 

“We look forward to leveraging AI to bring more innovative, brand safe partnership opportunities like these to our clients,” she added. BuzzFeed’s shares surged to a seven-month high in January when the Journal first reported the company was using generative AI to produce quizzes. However, Martin adjusted investors’ expectations on how soon monetization of these content formats would grow, saying it was part of the company’s long-term business growth plans.

But on the content creation side, AI tools were recently integrated into BuzzFeed’s content management system, meaning more writers now have access to produce AI-generated content, Peretti explained to a media analyst in the earnings call. “The scalability is really just starting now,” Peretti said. 

When Jason Kreyer, an analyst at Craig-Hallum Capital Group, asked about BuzzFeed’s plans to monetize short-form video, Peretti said AI technology can help automate, improve and streamline the process of making animated content.

Impact on SEO traffic

Ross Sandler, an analyst at Barclays, asked IAC’s Levin about the impact generative AI will have on Dotdash Meredith, suggesting the technology could produce content “much more efficiently in the future” but “SEO traffic might be negatively impacted.”

Levin’s response in the company’s earnings call echoed what Digiday has previously reported on lifestyle publishers like Bustle Digital Group and Leaf Group planning to move resources away from SEO-driven content to prepare for the potential of AI chatbots like ChatGPT taking over the role of a typical search engine.

“Every new technology is a threat and an opportunity,” Levin said, adding: “You can ask the bot questions, and it is amazing at answering those questions. But it doesn’t have a voice, it doesn’t have experience. And it doesn’t have a brand that stands behind those results.”

And like BDG, Levin said the lessening reliance on SEO-driven content for traffic is not necessarily a new move.

“Something like greater than 50% of traffic doesn’t leave Google anymore,” he said. “We’ve been dealing with that, preparing for that and kind of past that as it relates to the search engines. The format of that may change on the search engine itself but we’re not counting on that kind of traffic and haven’t relied on that kind of traffic from the search engines for a long time.”

Digiday’s survey found that nearly three-quarters of publisher pros (74%) make some money from video advertising, with the largest percentage of publisher pros (33%) currently getting a small or very small portion of their revenue from video ads. But that percentage has been falling steadily over the last two years, from 39% in Q1 2021 to one-third in Q1 2023.

Meanwhile, more than a quarter of publishers (26%) said they get none of their revenue from video ads. This particular percentage has fluctuated over the last two years, but as of Q1 2023, it’s up significantly from 15% in Q1 2021. In other words, 74% make at least a very small amount of money from video ads this year, compared with 85% two years ago — which is a big difference.

On the other hand, publishers have historically said growing their video ads business is a large focus for them. In fact, publisher pros who told Digiday they plan to have a large or very large focus on growing this part of their business in the next six months have accounted for the largest percentage in every Digiday survey since Q1 2021, when 42% of respondents said video ads would be a large or very large focus. In Q1 2023, that percentage came in at 39%.

However, the percentage of publisher pros who told Digiday that growing their video ads business would be a small or very small focus shot up this quarter. Thirty-two percent said video ads would be a small or very small focus for their companies in Q1 2023, compared with 21% six months ago and 26% two years ago.

The very interesting thing to note here is the difference between the number of publishers who said they get any amount of revenue from video ads and the number of publishers who said they will put any focus at all on building their video ads business in the next six months. As of Q1 2023, 74% of publisher pros told Digiday they get at least a very small portion of their revenue from video ads. Meanwhile, 81% said they will put at least a very small focus on building this part of their business in the coming months.

The difference between these two data points indicates that, overall, publishers see video ads as a potential area for revenue growth in 2023.

Video advertising’s potential rings most true among small publishers, Digiday’s survey found.

Currently, nearly half of small publishers (or those who made less than $10 million in revenue last year) get none of their revenue from video ads. The 47% of publisher pros working at small publishers who told Digiday they don’t make money from video ads made up the largest group by far, with those who said they make a very small portion of their revenue from video ads coming in second at 17%.

However, the picture looks very different when small publishers consider the potential of video ads as a source of revenue. Only 28% of publisher pros who work for small publishers told Digiday that they won’t focus at all on building their video ads business in the next six months. Meanwhile, 22% said building their video ads business will be a moderate focus, and 19% said video ads will be a large focus.

In other words, slightly more than half of small publishers (53%) currently get some revenue from video ads, but nearly three-quarters (72%) will put at least some focus on building this part of their business in the coming months — which adds up to a lot of potential.

Interestingly, among large publishers, the data points to video advertising already reaching its peak potential — but also that large publishers see potential in growing their video ads business even further at the same time.

Digiday’s survey found that almost all large publishers (or those who made more than $50 million in revenue last year) are already making money from video ads. Only 5% of publisher pros who work for large publishers said they don’t get any revenue from video ads — or, on the flip side, 95% make at least some revenue from video ads. The largest percentage of large publishers make a moderate portion of their revenue from video ads (24% said this), followed by those who make a small or very small portion of their revenue from this part of their business (each category accounted for 20% of publisher pros who work for large publishers).

Meanwhile, just 7% of large publishers told Digiday that they won’t put any focus on building their video ads business in the next six months — or 93% said they will put at least some focus on building this part of their business. The interesting thing to note here is that the 93% who said they’ll focus at least a little on video ads is slightly smaller than the 95% who said they get at least a little revenue from video ads. The difference here could indicate that the potential of video ads for large publishers has already peaked.

However, even more interestingly, the largest percentage of large publishers said building their video ads business will be a very large focus for them in the next six months. In fact, more than one-third of publisher pros (34%) told Digiday this. This group was followed by those who said they’ll put a moderate focus on building their video ads business (27%) and those who said they’ll put a large focus on building this part of their business (22%).

Suffice it to say, publishers of all sizes see video advertising as a growing part of their business.