John Battelle has grown interesting recently – thanks, I think, to his experiences running Federated Media. First, at February’s IAB conference he strongly identified with Wenda Harris Millard’s ‘pork bellies’ quote – which I thought was curious, since I thought FM was an ad network. Later, he published a very long piece questioning the current fascination with ad networks – which again, I thought was curious, since I thought FM was an ad network. And then this morning, I read this great Q&A at CNET, where John described vertical ad network Glam Media – and vertical ad networks in general – as the ‘flavor of the month.’ Which again, I thought was curious, since the last time I checked FM was still an ad network. Mix that all together with the rumor that FM’s raising money, and you have to figure that Battelle’s got a future business model in mind – one that’ll differentiate his business from a typical ad network, and one that requires some cash up front.
So what could this new business be? Reading John’s Q&A and chat about ad networks, it’s obvious that he favors two parties – online publishers who have built a strong personal brand for and community around their sites, and top-tier brand-name advertisers who are looking to both move product and enhance the value of their brand. Federated Media already represents a fair number of these publishers. I therefore predict Battelle is going to try, in cooperation with the publishers, to do a trust transfer. The goodwill the readership has for the publishers is going to get passed to a select group of hand-picked advertisers, who will pay for that privilege through the nose.
Transferring trust is a tricky task, and it backfired badly before when Federated Media incorporated quotes from its publishers in a the Microsoft campaign which ran on the very publishers it quoted. But this was because the Microsoft campaign ran in a vacuum. Without any announced changes in the publishers’ advertising policy, the audience was left with its usual assumptions about ad space – that with very few restrictions, it’s available to the highest bidder. The Microsoft campaign therefore reeked of payola. But imagine an ad platform that looked more like Penny Arcade‘s – where the only ads that run are for products the publishers have tried and explicitly approve of. As I’ve said before, I trust the ads on Penny Arcade, because I trust the publishers. This, I think, is the platform that Battelle’s trying to create.
This platform isn’t without risk. It destroys any sort of journalistic separation between advertising and editorial – but, if it works, it ensures advertising reflects the editorial rather than the other way around. That’s if it works. If the publishers’ choices aren’t credible to the audience, and they begin to believe advertising dictates editorial rather than the other way around, the trust transfer gets replaces with a distrust transfer, and the publisher picks up the taint of the distrusted advertiser. This can happen by accident, even when the publishers are completely sincere. I remember Penny Arcade taking some heat when they ran some Assassin’s Creed ads while the game got bad reviews elsewhere – Penny Arcade had to publicly defend their decision. (And they were right to do so, the game was awesome.) But I imagine publishers worried about the risks will be swayed by the warchest Battelle’s raising. Money talks.
This model could work for publishers – it works for Penny Arcade. But I wonder if it’ll work for Federated Media. It’s not particularly defensible – any ad network could transform themselves in this fashion, and a publisher that knows its niche could make a go of it on its own and keep Battelle’s cut. It makes it a lot harder to put together supply and demand. What happens when a fast food chain comes knocking on FM’s door with bags of cash, but no one in the network wants to promote them? And the model won’t work at all for sites where the voice is subordinate to the content (news, for instance) or the content doesn’t lend itself to product recommendations (like political editorial.) The model won’t even work for conversational sites where there’s not a clear ‘leader’ – like Digg. I suppose we shall see. It is an interesting experiment – if this is what Battelle is really up to, I give him props for trying something counter to online advertising industry trends, which takes a lot more cojones than a yet another ‘me too’ targeting startup.
