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[upbeat music] Diversification of revenue streams is still really important because advertising is a shrinking pie.

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But as long as you have advertising, you might as well get smarter about it, stay lean if you can, and take the revenue where it comes in, and watch these people drive demand into your auctions to compete against Google and compete against other sources.

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And I think the curators will also perform really well in cookie-less environments like Safari, and that's big money for a publisher. Yeah. That alone, this is, this is how they claw out.

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This-- You need these people to help publishers because we can't organize ourselves. If you want the villagers in Game of Thrones, like, can they organize themselves to fight a dragon? Like, no. But can they get...

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I didn't watch Game of Thrones. It's crazy, I know. But can they get whoever to help them, like, fight a dragon? Yes. No. The only way you fight a dragon is you get another dragon.

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Or where you find some kind of hack, you know, the dragon has some kind of weird flaw that you can exploit. Mm-hmm. And then, and then you make it a racket. It kind of fits with this ecosystem.

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[laughs] One of the greatest Brian Morrissey quotes and posts is, "Everything's a racket." [laughs] [upbeat music] Welcome to the Rebooting show. I am Brian Morrissey.

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Before we get started, just a quick programming note. I will be taking the next couple weeks off from the podcast and the newsletter, in fact, for a little summer break. It is the end of the summer.

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It's finally coming to a conclusion, and it's needed before the start of what's shaping up to be a very busy fall.

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We have a bunch of new research projects we'll be working on in fall, as well as a new edition of the New Growth Agenda event in November.

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It's gonna bring together about 40 C-level publishing executives to talk about the path ahead and how to reignite growth, because I think that's really important.

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We have a bunch of other really cool initiatives that I'll be announcing soon. So it has been a great year so far and... but I have to admit, I'm pretty eager to take a couple weeks off.

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So in this week's episode, I am speaking with Scott Messer.

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Scott is a veteran publishing executive who is steeped in the ins and outs of the digital ad ecosystem in particular, and that's under profound change right now.

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And I got to know Scott when he was a top executive at The Leaf Group, and he was a regular at industry events, and I always found him very smart about the mechanics of the business.

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I've had Scott on this podcast before.

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I wanted to have him back on to talk about the state of, of the, the publishing business, but in particular, the ad market at this time of extreme flux with new entrants in retail media and also uncertainty surrounding how ads will be targeted and measured with the eventual loss of our friend, the third-party cookie.

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It's going away, I promise you. Anyway, Scott explains to me why this trend of curation is one to pay attention to, even if to my ears it sounds just like an updated version of ad networks.

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And I think for all the complications that people love to heap onto digital advertising, the answer usually comes back to, well, ad networks. Here's my conversation with Scott.

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[upbeat music] Scott, thank you for rejoining the Rebooting show. I'm in an echoey rework, so apologies if there's some echoes. Brian, always a pleasure to be here.

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I'm in a nice, quiet Hollywood bungalow. Ooh, Hollywood bungalow. Well, well, well. [laughs] All right, let's get into it. Threats and opportunities, Scott.

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You were always-- I said this on our, on our last podcast, you were always...

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I always appreciated you for many reasons, and one of them was that you were always mouthy in those, you know, Digiday Publishing Summit town halls when the rest of the attendees were too hungover to talk.

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You were, like, ready to mix it up. We used to do that challenge board there. I don't know if they still do.

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If you were to put, if you were to put, uh, a few stickers up on the challenge board, what we did was we asked people to write down, like, their biggest challenge as publishers and put it up on the board.

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What, what do you think-- I mean, you're not, like, you're talking with a lot of publishers. What, what are a couple stickers you would put up on the, uh, challenge board?

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Number one is always gonna be traffic, especially right now. I think we talked about that a little bit before, and I'll talk about it again.

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Number two would be sort of this, like, consolidation of spend that's happening across the internet and the effects of fragmentation of spend from the buy side.

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I think I saw a statistic from Tom Trescari that, like, seven percent of a advertiser's budget goes to the digital web at all.

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So, like, it's a small slice to begin with, and then the fact that publishers are sort of getting...

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the open auction publishers are getting squeezed out of it and direct sales are getting harder and are sort of whimsical to, you know, the, how the economy's going at that time, that's a, a really hard part.

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But the traffic piece is substantially the biggest changes that are happening to publishers. The Google algorithm changes, the effects of AI. The social platforms just aren't sending traffic out like they used to.

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I think it was in the Facebook's earning report, they said they were gonna try to increase time on site for Meta because really it's one of the greatest ad systems in the world, and the only way you can get more yield out of it is to get more time on site.

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And that means- Yeah... less time on publisher sites.

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So they've already killed a bunch of traffic-driving mechanisms within the platforms, and they just don't refer as much traffic as they used to, and their replacements, TikTok, don't really send traffic out either.

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So it's a hard time to be a publisher and run an on-site advertising business. Yeah.

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I mean, just to put it like a data point on that, I saw this, that, you know, Meta ends up getting twenty-one point three percent of digital ad spending while only accounting for seven point five percent of time spent, right?

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So they outperform that. I mean, it used to always be this, this crazy notion that those two numbers should match, [chuckles]

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but clearly it's like, okay, if we can increase the amount of time spent and we're already getting triple that in ad dollars, could do better. So what do you do as, like, a publisher?

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What are you hearing from publishers how this changes their strategies?

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Because, you know, I think-Look, I hear a lot on the top line of people saying, "Okay, well, we've gotta prioritize loyalty, you know, we've gotta prioritize, you know, repeat visits."

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But y-you know, it seems like for a lot of these publishers, they gotta completely restructure their businesses, because the amount of traffic that's been taken out of the system, if you will, to, to publishers in the open internet has been, you know, really striking over the last several years.

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Indeed. And it's, it's a pendulum effect, right? You know, days were super heady of traffic, and they kinda go back and forth.

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And you remember 2015 when social was coming on really big, and there was a pivot to social, then a pivot to video. Now there's a pivot to everything else. I think what we're seeing...

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We've already heard the- Wait, talk about that-... like you said Google-... 'cause that sounds like a good title for this, pivot to everything else. You know how I like to overuse the pivot thing.

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I was about- I just thought we'd tell people... to tell you about it. I like it. Let's keep that as the opening, the pivot to everything else. Go ahead.

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It's no longer enough to just have a subscription, to just have an email and supplement it with some social. All of the, the previous things you understood about the way that consumers access information has changed.

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Technology has changed. The friction that was established by traditional media companies, going all the way back to Hollywood and, and film studios in the, in the '20s, that's all gone.

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And so the consumer can freely access information.

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Information wants to be free, but content does not wanna be free, which means you need to figure out how to monetize your content, and you need to figure out how to distribute your content.

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So you have to take your content across more platforms. So we used to think of social as a way to post an article, get a person back to your site. But that mechanism is broken now.

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So how do you monetize that audience externally? Is it a brand-building exercise? Are you broadening your footprint so that you can pull them through the gift shop of live events, through subscriptions?

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It's really about spreading out the footprint of your media business. Your website is no longer your only front door. It might just be all side doors. How do you connect with your consumers? Yeah.

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And how do you pull them through the gift shop? Yeah, but do you need to get them into the, uh, uh, to the site as much anymore? Because, I mean, it's almost like...

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I feel like the distributed era obviously didn't last, right? And it was always this, you gotta fish where the fish are and, and, and that. To me, like, publishing brands need to be almost, like, liquid now.

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They have to fill in crevices in all kinds of different spaces. I don't know. I haven't come up with- Yes... a good analogy for it. I think that's a good one.

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It was like "The Terminator," the T-1000 could fit into any shape or space and take that form, and that's what it is.

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The, the more macro look you take at the, the changes that have happened in the publishing ecosystem, the more you realize that content is not dead, and entertainment is not dead, and the people seeking news is not dead.

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But the way that consumers are accessing those things has changed. So as a publisher, you need to adapt to figure out, how are people wanting to access information?

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And then go get in that stream and in that river and play in it. That's going to where the, the traffic is. So if people... Like, I don't know if I'm gonna agree with this statement, but I'm gonna say it.

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So if people wanna use AI or a chatbot to access information on the internet, that cat's already out of the bag, and you need to, as a publisher, need to figure out how your business model is gonna get in front of those users who are going to adopt that platform and become a part of that traffic and monetize on that angle.

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So let's talk about search, right? 'Cause I think search is the nerve center of the internet. I mean, you... I mean, I got to know you at a very search-heavy, s-search-driven publisher, I guess I would say. Both.

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I know search was a big part of that model. But search has been a big part of every publishing model.

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I mean, Google has been the front door to the internet, and there was always this uneasy bargain where Google is basically saying, "All right.

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We're gonna take snippets and scrape your content and increasingly scrape more of it. But we're gonna send traffic to you, and then you're gonna monetize it using our ad tech, and we'll get a taste.

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And nobody's gonna be completely happy with this bargain, but, yeah, whatever. It's okay. It's good." It was symbiotic. Yeah. It was symbiotic.

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Sometimes it felt like the symbiosis of the mob guy on the corner collecting at the end of the month. But, you know, whatever. But now I, I feel like that's crumbling or ending.

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And, you know, Nilay Patel talks about, like, Google Zero, and I think that's a... Obviously that's an extreme. Like, the idea that no search traffic is going to go to, to websites is, is not, it's not practical, right?

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But how do you... I guess, how do you see publishers dealing with these changes in search? Because it's so fundamental to their models. This isn't, you know, something that's ancillary. It's core.

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It's ex- This is truly existential. And I don't mean to like... Oh, 'cause again, it's not going to zero. But I'm not sure. Well- Like, how do you even, like... How do you manage that?

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Sadly, we saw it get managed over the last year, and it was not pretty. 'Cause it is a...

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Search traffic is a high margin, long-term investment, and most of the investments have already been made, and they are reaping the benefits of these high margin returns.

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So it's not like you're killing a, a break-even division or a break-even revenue line. That search traffic goes straight to the bottom line. So 30% reduction in traffic is easily 30% in revenue and 30% in profit.

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And I promise you, a lot of these people didn't have that much profit to begin with. And you're seeing businesses consolidate and shift and change and doing whatever they can to keep the doors open, unfortunately.

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I think the, the Axios layoff, uh, recently was very telling of that in the way that they expressed it.

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And they called out some of their threats that-News is being aggregated faster than ever on the internet, that AI plays a big toll in it, and so their pivot is going to be into depth of information and quality of their journalism, the things that you don't get out of AI and you don't get out of fast aggregation.

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But in order to make that pivot, you have to lighten up a little bit. Now, they might be able to rehire and grow, and that's for everybody.

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Once you figure out- You don't mean lighten up like tell, tell jokes, but- No, not like- Get, get leaner. [laughs] I meant like people- Bullet points, now with more jokes. [chuckles] Right. There's some...

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Every now and then there's a, a humorous line in there. Not as- Yeah, every now and again... Morning Brew goes, but it's a, it's a struggle.

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I think publishers have to figure out how they are going to connect with audiences.

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Audiences are enabled to access information by technology, and technology is what is changing the relationship between publishers and consumers. So you have to try to anticipate technology.

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You gotta figure out your own things. I think this is gonna be a big period of innovation for publishers 'cause we have nothing else to do. Yeah.

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It's funny when you talk about that with, with Axios, it, it strikes me that, you know, they're... Like, everyone has to come out with a format innovation, right?

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To, you know, it's, like, good for PR, and it's also good for the branding, right? And they came out with the, the innovation of, like, basically smart summarization, you know?

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I joke it's about bullet points, but, you know, that was, like, an important calling card for them. And I think the, the flip side to that, 'cause they executed it really well, and it's really cons...

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I, I believe in consistency, right? But the flip side of that is that they commoditized their, their journalists, right?

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And now they're in a position where they need to de-commoditize the people that they commoditized through their product in some ways, if I'm thinking this through correctly, you know?

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It's very profound, and it's meta, but, you know, it's like publishers have always been guilty of abusing the commons in a tragedy of commons, whether it's their own or the total resource.

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I mean, we ruined the internet kind of. The, the influx- Oh, this is another good title for this episode. We might have to r- A/B test this. Let's do it.

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Let's get Taboola or, or Tead's Brain out here to help us with A/B title testing. Tead's Brain. The- It's out. Teads. But we did ruin the internet.

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It was, you know, the, the enshittification of the internet and the, the tsunami of crap, and AI made it really bad during COVID.

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Like, the spike in content that happened then made Google react, and then there was the AI thing on it. So it was a, you know, sort of one-two punch that hurt them. Yeah. But then let's talk about the monetization piece.

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So you're getting... Most publishers are getting less traffic, right? And so- Yep... the traffic that they're getting, they have to... I always say this is a more with less era.

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You got [chuckles] you gotta do more with less traffic. You gotta do more with fewer people. I guess more with less is tough with the fewer and less.

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But, you know, you gotta do more w- with fewer people, and, you know, then we get to advertising, right? And as you say, there is a kind of linear correlation.

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I mean, at the, ultimately at the end of the day, traffic, you have to get eyeballs on ads, or you have to get at least the eyeballs on an ad to, to get a click. Maybe not if you hire, if you get some bots going.

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But let's assume, let's leave that to a side.

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But you need that, and, like, when we look at the advertising landscape right now, it is also going through a pretty profound change in that it is going to be operating in a different paradigm than it has really from, from almost the beginning.

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Like, everything up until now, it seems I'm like a catash- catastro- catastrophist right now. Everything is, is changing about how you make money off advertising. Go on. You're doing great.

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No, I mean, like, so what, what is, what are the profound... 'Cause I mean, let's... L- uh, actually, let's tick through the list about how things are changing with advertising.

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One is, like you mentioned in, in your, your second challenge board thing, where ad spending is going is, is becoming concentrated, it's becoming different.

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The open web, in quotes, is I think you could argue in terminal decline. If you look at the health indicators of open web, it's, they, they're, they're all going in one direction, and it's not up. And let's start there.

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What do you see going on with, with that? Because I think where money is going is not to content publishers in the open web for the most part. There, there's a bit of a V-shaped curve in the quality of the internet.

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It used to sort of be flat, and everybody was viewed at the same level of quality. An impression was an impression, whether it was on a big newspaper or an MFA site or a recipe site.

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That was kind of the mantra through the rise of the DSPs. But now we're seeing a collapse, and certain sites are not able to maintain the definition of quality in the modern era, and so those are going downhill.

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But at the same time, publishers who can maintain quality and differentiation are on the upswing. So at a macro view, it's, it's kind of even, I guess. But really there's starting to be a separation of quality.

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Buyers are paying more attention to it. There's more issues in the, that are arising and sort of scandals that are going around it.

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Publishers are starting to really believe, and I think many have, that if you are quality, you will get more money.

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Whether it's the quality of your journalism or the quality of your user experience, you will get more money.

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And we're seeing them be rewarded through The Trade Desk's S&P 500, through allow lists on other buyers, through some buyers that only transact with 50 publishers, and the rest of them are going to get left behindAnd so if you can't- So this is a classic hollowing out of the, of, of the middle.

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Like, the, the middle always gets crunched. You can al- Yeah Look, you can-- I think MFAs are fairly efficient business models. I don't know, I've never- Yeah. Yeah, the garbage will stay.

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The garbage will always figure out how to live, and the middle- Go long garbage... will have a problem. Yeah. But yeah, you mentioned, like, uh, Trade Desk, that S&P 500.

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This is-- I mean, the Trade Desk is always-- I feel like they've always been, like, the champion of the open internet, but now they've sort of tweaked that to be, like, the quality internet, I guess as, as defined by, by Trade Desk.

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Yeah. The emperor in their clothes over there is always an interesting parable. Okay. But I think on top of that, so you're, we're talking within this particular s-really sliver of the advertising world.

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I mean, when we look at where publishers are competing, not just with other publishers, and, and they're not just competing with, quote-unquote, "platforms," and we've seen over the last generation that they really can't compete on that level.

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They're competing with the grocery store chain. They're competing with Uber. They're comp-competing with, like, airlines. They're competing with people who advertising is pure margin.

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I mean, United's just flying planes, you know? And they often have unique data sets that publishers don't necessarily have.

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I mean, content is a signal, but I don't know, I think retail data, I think the market is clearly valuing retail data far more than content as a signal.

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And obviously being able to tie things either directly back to a sale or plausibly back to a sale, you're gonna be in a better position.

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I think retailers are prioritizing performance, not data, and some of these retail media networks and platforms have a really good performance story, and they're able to drive sales sometimes through their own stores and sometimes offsite, and there is measurement there.

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So there's a good ecosystem going on. I don't think that's all of the same budgets that were allocated to traditional publishers. It's coming from other sectors of their budget, so it's not a perfect threat to them.

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There is a world where because retailers are running out of inventory on their own sites, and they have to go off network to, to run the extension and finish out some of the performance buys, some of that money will end up back in publishers' pockets.

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So there's a world where retail media is going to spend money around the internet, and that would generally be good.

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Okay, so they're, like, almost gonna be doing reach extinc-extension on publishers because they've got- They are doing it now...

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they've got the data, they have the attribution systems, but they don't have-- they're, they're gonna need to go and find people beyond just, you know, their own, I was gonna say- Yeah.

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How many people do you think are on, like, dollargeneral.com? I don't know. Not enough to support a retail business.

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So I think they s- I think I rem- saw a stat, Dollar General's, like, ten percent on network, ninety percent off network. I didn't... Do-Dollar General has a, uh, a retail media network? I do believe so. Does 7-Eleven?

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I think so. I mean, look, they- [chuckles]... a lot of them do. God. It's an interesting, it's an interesting thing and, you know, I don't think it's a total threat to publishers just yet.

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If anything, it's, it's an ally in the wings for publishers. I'm under the firm belief that retailers, when running media on their sites, are publishers, and they have to deliver- Yes...

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an audience, an ad, a measurement, all the things that publishers are used to doing. They're gonna be judged under the same lens by advertisers. Can they deliver a KPI? Did you deliver me into a safe environment?

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And, you know, did we sell something? Publishers have the same thing.

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There's a lot of consumer tech-focused publishers that have great affiliate businesses, and there's a lot of third-party listing tech sites that don't have good ad businesses.

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So question is, is when are retailers gonna acquire content? 'Cause we've already seen publishers move into retail in some effects. Yeah.

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Well, I mean, we kind of saw, I don't know if this is the first step in that, but I mean, Best Buy and, and CNET, right? Because they were- Well, Best Buy did a deal with CNET.

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I mean, I think, you know, basically you're going to see retail get far closer to content, maybe at the point where they end up buying one of these publishers.

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It'll probably be a disaster, but, you know, it looks [chuckles] I'm sure, like, someone from McKinsey will make a great case. But yeah, I mean, Best Buy did a, did a big deal with, with CNET, and I, I think- Yeah...

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those worlds coming together should be something that, that's kind of interesting. We've seen it before.

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Target and Walmart were doing really big content integrations with publishers in two thousand and seventeen, eighteen, nineteen, twenty.

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They need traffic too, and if, if they're getting disintermediated from search, they're gonna ha- struggle as well. Everybody's gonna go searching for traffic like it's dry land in a Kevin Costner movie.

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Okay, that is a Waterworld reference. [chuckles] It is definitely a Waterworld reference. Scott, you and I are the only people who are gonna understand that reference.

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[chuckles] Although, you know, re-referencing Waterworld in a discussion of the current state of publishing is very apt, and that's a very deep cut that I can really appreciate.

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One of the other deep cuts, or maybe not a deep cut, is the third-party cookie. I mean, we're moving into, it's become a generation. The elimination of the third-party cookie has become a generational thing.

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I n-didn't think I would, like, grow old with this deprecation, but that's, that's how it's gone. This has been going on for years.

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And then Google basically pulled a punches pilot and, you know, brought, brought over the water bowl, washed its hands of it, and was like, asked the crowd, you know, what they wanted to do.

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And, and basically, the way I see it is like Google, because it is under such regulatory scrutiny, and this is all part of technology moving into becoming a regulated industry like every other key industry is regulated, no matter what these VC goons bray about, it's going to happen.

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And

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i-it's, it's got its hands tied with the ICO in the UK, and it's got the DOJOn it and they never were able to come up with a, a workable replacement that satisfied all the different constituencies and so it seems like in this, in this industry when in doubt, it's like let's just do another pop-up.

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Like why overthink it? Let's just do another pop-up.

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It was a brilliant move by them when the, when their exit got blocked, nobody had this on their bingo card, and it was a, it was a brilliant business move, I think, on their part. So cookies are going away.

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Tracking will change forever. You should not stop your plans to diversify your tracking and targeting capabilities.

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I think that there is a tsunami of change ahead, and it's -- and I call it that because I think it's bigger than anybody realizes it will be, and it's gonna hit harder and faster.

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We think that there's been a, a reprieve for cookies for a little while, but what's happening on the federal and state regulation side and the country regulation side, as well as browser pushes with Google and their consent, Safari's already way down there, and then you have California already talking about universal opt-out mechanisms, UOUMs, I think they're pronounced.

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The lights are gonna turn off really fast, faster than we think. So like, don't take your foot off of the gas pedal in moving into alternate solutions. Okay.

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But there are no alternate sol-- There are like we say, alternate solutions because there is no alternate solution. There's nothing to replace what did the, the, the job of the third-party cookie.

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Most of these things seem to me just to be some version of email, and even that, it seems like there's, there's regulatory issues about that, and you're just gonna... I don't know, am I wrong?

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You're gonna collect- There are, there are-... emails in a different model. But like, go, go bigger and, like, change the recipe entirely. Like the ecosystem, the way ads are transacted will change.

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Measurement will change. Buying ads will change. Everything will. We've-- It's, it's just the way it works. Unless you believe that advertising is going away, something will happen to make it work.

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And it will be a piecemeal of solutions, just like we had in two thousand and eight and two thousand and ten and 'twelve, and then, you know, conglomerates will form, and solutions will be rolled into each other, and new monopolies will emerge.

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Okay. I skipped a step there, but... So, um, [chuckles] hey, meet the new monopoly. What, what does this mean for, you know, long term for, you know, building a sustainable media ecosystem?

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What, what, what is a, what is a...

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Give me an optimistic scenario where all these different changes and all the different power dynamics at play because I think ultimately publishers have always felt, I always compare them to the villagers in Game of Thrones, where there are these giant houses battling these different battles and they just get, you know, torched.

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Mm-hmm. Just not sometimes, just mostly just accidentally. Some dragon sneezes or something. But what is an optimistic case that all of these changes can end up benefiting publishers?

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And how do publishers position themselves best to actually get on the other side- Yeah... in good shape? Take one step back.

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The thing that really hurt publishers the most over the last ten years was the rise of the DSP, and it was enabled by third-party data.

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DSPs were able to seek and destroy inventory at a race to the bottom CPM that left publishers not in control of their own futures of monetization, and third-party cookies were the underpinning of that. Mm.

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Now, as third-party cookies go away- Okay. But just, just take a s- Yeah. Let me, let me just stop. Let me just pause on that for a little bit.

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But basically, DSPs enable, I mean, this is always an issue I feel like with publishers, where other people knew more about their audiences than they did, at least knew more about their audiences in a way that was monetizable than they did, right?

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I mean, DSPs en-enabled, it was described to me as see a cookie, hit a cookie. We talk about premium audiences, not premium content, et cetera, et cetera. It commoditized the, the, the content to some degree.

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Is that right? It's not that they knew, it's not necessarily that they knew more about a publisher's inventory. It's that they were able to tie performance outcomes to the inventory that was selected and chosen.

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So they could say, "I'm gonna buy this inventory, and I will drive an outcome for you, and you're gonna give me a measurement pixel to prove it."

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Publishers never got really a fair chance at showing the conversion or being able to curate the media for themselves and show that their plans really work.

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So DSPs and agencies to that effect were packaging performance, and they used middlemen to drive insights, and it was all supported by the third cookie to help them drive the outcomes.

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But now that the cookie's crumbling, the signal fidelity that they used is getting weaker, and you need to go back to some more of these middlemen who are closer to the supply side of the relationship to help connect buyers to the inventory and prove performance.

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I'm optimistic that that shift puts a little bit more control into the publisher side of the arena where, one, publishers will make more revenue, and they'll be paid a fair share for data licensing as well, and two, it encourages publishers to behave better.

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If you're getting steady checks from people who say, "I like your inventory. Can you please make sure that it stays quality so I can continue including it in my campaigns?" You will adhere to the refresh rules.

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You will adhere to the sticky video rules. You will not try to gamify the system because you are getting fed steadily good money, and that's better for the internet. Okay. So this could- And that's good...

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this could create better incentives because it seems- Yes... like up until now, you know, peopleThis isn't a morality play. I always write this like, there's, this is not a morality play.

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People just respond to, to incentives in a marketplace. That's what we do. Yeah. You know, we're economic animals Yeah.

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And when the incentives are to push the envelope to put as much mayonnaise on the hot dog or as much ketchup on the, on the hot dog as you can, you're gonna put a lot of ketchup on the, the hot dog. Yeah.

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And that's just how it goes. That's how we act.

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But this could create- NFA was a direct response to the inability of DSPs to decipher good from bad, and their addiction to high KPIs regardless of the nutritional value of them driving business outcomes. Yeah.

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So why not? Why not take advantage of them? Okay. So, so tell me about this. You, you wrote this, you had some really great graphics with it too. I highly recommend this LinkedIn post.

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Talk, talk to me about, about this whole... 'Cause I hear, I hear curation all the time, and you know I can be a little jaded on these things. So I hear- Mm-hmm... I hear this stuff all the time.

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It's like, "Oh, we're gonna curate, you know, high-quality inventory, and we're gonna have, you know, unique ad units." And I'm like, "Have we just reinvented the ad network again?" Yes.

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The ad networks are- Tell me about curation. What, what am I missing here? Curation as a service, would you call it like D- Deal curation as a service... DCAS? Also pronounced as DCAS. Yeah. Yeah.

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It feels like ad networks of old, but there's some fancy technology underlying it that makes it easier than before. In an old ad network, you had to run tags, and there were pass backs and waterfalls.

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In this new one, you're using SSPs as they exist, o- that have what are called curation seats inside these curation platforms, where a data vendor can come in, add their data into the SSP, and in essence resell inventory or repackage inventory from a bunch of publishers into deal IDs that they hand over to DSPs to purchase.

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And so they're moving the decision engine down into that curation layer, as opposed to the DSP picking out what inventory it wants to buy. So is this just another set of intermediaries?

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Have we've got [chuckles] we've got more people coming to the party? I thought we wanted to have fewer people. These, I think, are the good intermediaries, because they're- Okay. These, these are the good guys...

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they re- they require publisher cooperation.

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In the truest form, the cur- the curation house, the one doing the curator, curation, has code on a publisher's page to help them identify and track audiences, and then is also selling their media out in the market for them.

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So that cooperation leads to a relationship and steady money. It's not the curation that you would see happening outside of the walls, and a publisher doesn't know where this money's coming from.

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You can't support- Yeah... and invest in a partner that you don't know of. And there's a lot of, quote-unquote, curation happening where the publisher's not involved at all. The DSPs were kinda doing the same thing.

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They were picking the inventory- Yeah... and they were doing that. Okay. I get it. But they weren't selling... They were selling that as a- Right... just-let-the-algorithms-do-the-work model. Yeah.

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And what we're saying is let the curation houses do the work here. Somebody's gotta package it up. Okay. Are these- Somebody's gotta sell performance. Yeah, it's more transparent.

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'Cause it w- the curat- the, the curation was already, it has, has been happening. They've been curating audiences really. Yeah. And, and that's when like you mix in NFA- I think I called it collating...

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and you mix in some other things. Okay. There we go. They're collating audiences. Are these like the Raptives and like FreeSarts that we're talking about? Are they the curators who are curating this?

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No, those are publishers, and they own the media. So a curator typically doesn't own the media. Now, if you wanna split hairs, yes, a publisher curates media and gives it to a buyer so that they can drive something.

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But specifically, curators don't own the inventory, which makes them a friend of the publisher- Okay. So who are the curators?... because somebody's... Who are the curators? Audigent, OpenX, Cargo, Loademe, Multilocal.

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I got a whole list of them that I'm making. Swim.ai, and many others. TripleLift. They're coming out with these services because they have access to data. They have access to a curation platform.

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They have a sales team that can go and sell and get insertion orders. Some of them work on a managed service basis, like Nativo- Mm-hmm... and they will just run the whole campaign for the buyer.

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Or you can send the deal ID to the DSP- Okay... and the DSP is really just there for a transaction and billing purposes. Got it. Got it.

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And at least theoretically in this s- scenario, more of the value is going to the publisher than if the DSP is basically doing a version of this, because they're on the buy side and they're just looking to snipe high-value audiences.

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That's correct. Where the margin extraction is happening is now shifting closer to the publisher, so the publisher can share in some of it, and data licensing. Okay. Data licensing is really hard for publishers.

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Why is that? Advertisers didn't really want publisher data. They said they did. We spent a lot of money on DMPs. We tried every single way, you know, sideways from Sunday, to sell data to DSP buyers.

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But the truth was it was fragmented and inconsistent, and it was very difficult for them to include at scale across their campaigns. Some people were definitely successful at it. There were some great uses for it.

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But the majority of the market wasn't able to do that.

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And now you have curators who are helping package up that data, and sharing a slice of the data revenue is a meaningful outlet where publishers can now monetize their data beyond their own sites.

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So to clarify, a curator uses the data they collect about your audience from your site, and then may go, will set up a deal for that audience and may transact on a different property, and you won't get the media revenue from that deal, but you will get a slice of the data licensing, and that shows up as a check, not through, not paid through your SSPs, not paid through anything.

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That's a check or a wire. Yeah. Publishers like checks. They like checks- We love checks... that arrive and they don't have to do anything. [chuckles] I like those too, to be honest with you. If anyone- Yeah...

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wants to send, send one to me. So if, if you're a mid-market publisher, you may not need a DMP. If you don't have a sales team, you're gonna be looking at curation houses to do a bunch of lifting for youYeah.

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What do you, why, why do you need sa-sales? Do you need just fewer sellers? Is that, like, the future? I mean, everything to me, like, publishers have to get more efficient, and that's, that's just a reality.

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And look, there's a lot of different types of publishers, right? You're-- This is, this is just the pendulum. You're shifting the burden. So- Yeah...

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if, you know, if you can afford to have a bunch of sellers and you have a really good direct sales program, great. Keep them. You probably don't need less of them. You probably still want more of them.

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And you're still gonna run some curation unless you're entirely sold out.

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But if you're a small publisher wondering how you're gonna increase yield and you're looking at hiring your first seller, that's a really expensive and risky proposition.

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So you might lean a little bit harder on curation to get your name out there, get the things out there, or just float your business for a little bit longer. Yeah.

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I feel like for the last several years, I've just been hearing publishers talk about diversifying their revenue, and I always translate it into running away from advertising.

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Like, when they were talking about that, they were looking for anything, whether it was subscriptions, commerce, to basically make it less of an ads business. I mean, events.

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[chuckles] I mean, like Conde Nast is almost like a quasi events company at this point.

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So I, I wonder, and obviously the advertising has to work harder, but a-at the same time, if you look at the ad spending trends, you can make this more effective and efficient, but at the same time, it's gon- It's, it's a shrinking percentage of where ad spending is going.

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Very little of ad spending goes to, say, display ads on, on content publishers, right? Depends which publisher it is, but generally, I think that- I just mean from an overall, the weight of the ad system.

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Yeah, but when, when you look at it from a really macro view, yes, that's correct. But when you talk to individual publishers, display revenue still might be- Yeah...

224
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seventy, eighty, ninety, a hundred percent of their revenue in video. So yeah, like, diversification of revenue streams is still really important because advertising is a shrinking pie.

225
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But as long as you have advertising, you might as well get smarter about it, stay lean if you can, and take the revenue where it comes in and watch these people drive demand into your auctions to compete against Google and compete against other sources.

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And I think the curators will also perform really well in cookieless environments like Safari because they're, they are less reliant on the presence of a cookie to signal that it's a quality impression that qualifies for the deal.

227
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And that's big money for a publisher. Yeah. That alone, this is, this is how they claw out. This, you need these people to help publishers because we can't organize ourselves.

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If you want the villagers in Game of Thrones, like, can they organize themselves to fight a dragon? Like, no. But can they get... I didn't watch Game of Thrones. It's crazy, I know.

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But can they get whoever to help them, like, fight a dragon? Yes. No, the only way you fight a dragon is you get another dragon. Well, or you find some sort of, there's always a growth hack.

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You know, you al- or, or you find some kinda hack. You know, the dragon has some kinda weird flaw that you can exploit. Mm-hmm. And then, and then you make it a racket. Kinda fits with this ecosystem.

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[chuckles] One of the greatest Brian Morrissey quotes and posts is, "Everything's a racket." [laughs] You know, a lot of... Um, every- anything that can be optimized will be optimized.

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I mean, I s- I've already seen the, you know, there's already a cottage industry in optimizing to show up in AI engines. You know? [chuckles] Like, it's like SEO never dies. Like, give me a break.

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There's always, anytime there's any kinda algorithm or anything, there's gonna be opportunity. And, uh, and, and particularly in times of volatility, there's going to be opportunity.

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But let's talk about AI for a little bit to end things. Obviously, massive topic. I think there's, there's, there's the search en- uh, side of things.

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Obviously, there's been an increase of zero-click searches, and so we, we talked about there's a lot of different changes going on with the traffic patterns, and just less traffic is going out.

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I don't think that's going to end anytime soon, but it doesn't mean that there's no traffic going out.

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I mean, Google comes out with the statistics, but they're never gonna come out and be like, "Yeah, yeah, we're just, you know, we find that people don't click on the citations and we're not, you know, we're just gonna keep most of the stuff here with these AI overviews and monetize it."

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So w-we'll see, like, how it goes. But I mean, how, how existential do you think, like, AI is, or do you think that it's more opportunity than threat? It's a great question.

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I have a, a talk about this on Tuesday, I don't know when this pod's coming out, with Progress Partners about the replacement debate in AI. Oh yeah, Tuesday. August 20th. Yeah, this is coming out on Tuesday.

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[chuckles] Well, tune in that morning from the future.

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We know how traffic has shifted, and we can talk about search gen AI and the impacts of that and what I call the apocalyptic internet, where skip forward a few steps and journalists are hired by AI subscription companies to just enter facts directly into the engines, and you don't need newspapers.

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That's a terrible version of the internet, and we hope that doesn't come. The other thing with AI is it's taking some jobs, and it's creating other new jobs, and it's allowing for new things to happen.

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You know, the calculator got rid of a lot of people. The telephone, you know, the automated telephone got rid of a lot of switchboard operators. So these, these changes always shift.

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The speed of change is what's accelerating in this AI revolution, and it's gonna be a lot of disruption. But in disruption is opportunity.

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So how are you going to use AI to defend your business, reinvent your business, improve your business, create efficiency for your business, to fortify your position as an employee?

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You know, if you're a creative designer, stock photography is kinda out the window, and you might be making your own stock photography coming up. Yeah.

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And that might just be a requirementAnd so there's, uh, new skills that everyone needs to learn and new games that are gonna be played. Yeah. I don't, I don't know.

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I mean, obviously it's like a massive topic, and I think there's so many, like, unknowns. I think it's being used as an excuse sometimes for a lot of things.

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Like, maybe, maybe the changes at Axios had, had something to do with what's coming down the pike for AI. But I don't see AI really having a major immediate impact on most businesses. I look at, like, Dotdash Meredith.

250
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They're back to growth, and if anyone should be exposed to, you know, AI, it's, it's, it's them. And so you can wave AI at a lot of- You gotta, you gotta let that growth story play out a little bit longer for them.

251
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You know, they're not immune to this. No. Nobody's immune. And yes, they've had growth. A lot of it was CPM growth.

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And what they've been doing, they've been using AI and machine learning to really help on monetization with their Decipher tool. Mm-hmm. And it's-- That drove a lot of their growth. So there are ways that you can help.

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It will help your business in certain parts, but the existential threat of it still looms to your business. You know, when Google backed off of SGE, that was probably a big relief to them and to many publishers.

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It's on seven percent or 12% of searches now, but- Yeah... you know that Google probably wants to ramp that number up again.

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And if they go through a monopoly and they get broken up, now maybe a Safari search engine comes out or other search engines become more popular, or other browsers become more popular.

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We don't know what happens when Google's not a 90% dominant player. And I think that's a great point because, you know, there's always the assumption that the new boss is gonna be better than the old boss.

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Sometimes [chuckles] the new boss sucks worse. And, you know, there's always the threat that... Look, I think it's, in theory, I think, hey, this is kinda interesting that there'll be, like, a more vibrant search market.

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I mean, we're seeing evidence of people using AI. You can now theoretically compete in, like, more what I consider verticalized areas with search. And we're gonna see, I think we're gonna see different flavors of search.

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You already see it, you know, search boxes on all these meta products and whatnot.

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And when you think about the antitrust, and I don't know what remedy obviously this judge is gonna impose, but, and, and these things play out, but those kind of deals, the lockup deal where [chuckles] Apple is just taking.

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You guys are getting a $30 billion check. Was it 30 billion or 20 billion? I don't even know. 20. 30 billion? Like, just check. It goes straight to the bottom line. Do you think they, like, have a party when it shows up?

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Ask for it in small denominations? Like, you know how long it takes them to put that many zeros into the wire form? You don't have to even build the search engine. I mean, yes, take that deal. Take the deal.

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And that's, that's when I talk to pub- publishers, take the money right now. The prisoner's dilemma of taking the money from AI companies has already been jumped.

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The first move has already been made, and the money taken. Your only choice now is to take the money. You can fight it, but take the money in the meanwhile. It's not gonna be good forever. Yeah, exactly.

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I mean, s- to me, I remember talking with Australian publishers, at least one Australian publisher, when, you know, Facebook had to cut those checks. Was it Facebook? Yeah.

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And, you know, they were like, "Yeah, we're just putting this in, like, you know, a rainy day fund.

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We know this is [chuckles] not gonna last, so let's, let's get, let's get it while we can and then, then prepare for a down line." That's just how this- Take the money... goes. Cool. Scott, this was fun.

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We gotta do this more often. I had a really nice time. Thank you, Brian, for having me on, and thank you to your listeners for sticking around this long. Yeah. And go to, and go to Scott's webinar.

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We'll put a, put a link to it in my newsletter notes. Ah, I appreciate that, Brian. Thanks so much, Scott. Thank you. [outro music]