Monday’s news from Major League Baseball’s online team reminds us how far the digital world has to go to replicate offline revenue streams.
The news, on its face, was good: MLB has made nearly $1 million on its iPhone app since launching it early this month. It actually grossed $1.3 million, which puts it just shy of the seven-figure mark after Apple’s 30 percent cut. Silicon Alley Insider says MLB’s repurposed content makes this a profitable enterprise.
And yet. A million dollars sounds good until one considers that MLB makes tens of millions of dollars per year on its national TV contracts, and hundreds of millions more locally. The YES Network alone brought in $360 million last year.
MLB’s approximate $910,000 net revenue on the MLB app barely buys a decent TV campaign on one of its local affiliates. Heck, it wouldn’t even pay Pedro Feliciano’s salary.
With all the doom and gloom about old media floating around, it’s no surprise that media outlets are looking for good-news stories. But it will take a lot more than a million bucks from the iTunes store to make up for the potential lost revenue as people move from radio and TV to webcasts.
The lead eMarketer story today is How Much Ads Cost. It breaks down offline media CPMs in a handy graph, then makes a separate set of online assessments.
The biggest takeaway? Display advertising doesn’t pay. Online display ads ran at a $2.46 CPM in 2008. That’s less than 10% better than what outdoor advertising charges for billboards and bus stations.
The article goes on to note better returns in video (CPMs anywhere from $7.40 to $35, depending on placement) and search ($75!). But it doesn’t eliminate the big message: online display advertising doesn’t pay. Not well, at least.
Of course, display ads are de rigueur in much website creation, and a buoying component of media sites. But display has become a baseline and not a profit center. This is happening offline as well as online. The New York Times recently reported on evolving revenue channels at magazines, where subscriptions are becoming pricier profit centers–the opposite of the traditional model, where subscriptions covered postage and ad revenue ran the business.
Savvy online publishers are realizing this and similarly evolving their models. Beyond video advertising, sites can offer premium content, exclusive access, tools and other items to entice more value out of individuals. Business-to-business revenue needs to morph into something more profitable as well, whether it’s through partnerships, sponsorships, cobrands, or something else.
Innovation is going to be key in the coming years. Because a simple ad banner unfortunately won’t pay the bills.
The blogosphere has noted at length recently the prevalence of sad stockbrokers in news item photography in recent weeks.
The stock markets finally had a good day today. To support the story, Yahoo News used this accompanying photo:
