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Media Briefing: The pros, cons of three pricing models for publisher, sportbook content deals

This week’s Media Briefing compares and contrasts the different payment models that sportsbooks and publishers are using for content partnerships aimed at sports betting customer acquisition.

  • Weighing the odds
  • 3 questions with Grist’s new CEO
  • Daily Mail and Mail Online cease their rivalry, Axios employees are encouraged to use company funds to buy and expense founders’ book, and more

Weighing the odds

The key hits:

  • Both sportsbooks and publishers are looking for challengers to the cost-per-acquisition model that’s been the standard payment model for content partnerships.
  • Publishers want more guarantees from their deals with sportsbooks that they’ll be compensated, even if audiences don’t convert.
  • Sportsbooks want to find ways to flip a newly acquired bettor into a profitable consumer faster.

For publishers, cashing in on the sports-betting boom can be a bit of a gamble. The same can be said for sportsbooks wagering ad dollars to win the deposits of first-time bettors. Now both sides are seeking out ways to hedge their respective bets by exploring alternate payment models.

Historically, sportsbooks have paid publishers on a cost-per-acquisition model, which awards the publisher a certain dollar amount every time one of their readers deposits money into a new account with the sportsbook.

But this model is getting a bit worn out and doesn’t work for every content partnership, according to some sportsbooks and sports publishers. For one thing, smaller sportsbooks might not be able to sustain those high CPA costs, especially since those fees have to get paid out before the sportsbook earns any revenue off of the new user. And for another thing, smaller media companies with audiences that aren’t necessarily familiar with online betting might feel uneasy about waiting and seeing if their audiences take the bait to get a payout. 

Online and mobile sports betting has only been legal in the U.S. since May 2018 when the Supreme Court struck down a 1992 federal law that made sports betting illegal in most states. Now, more than 20 states allow online betting and that number keeps growing. So, there is still opportunity for sportsbooks to get new customers and publishers to profit off of the growing industry.

It’s now a matter of determining how both parties can continue to get a cut of this previously non-existent market in a way that’s mutually beneficial to their bottom lines. And by the sound of it, a lot of the deals struck between sportsbooks and publishers are a hybrid structure of two or three payment models based on audience demographics, content production and the overall goal of the campaign.

Below are three pricing models and the pros and cons for each.

Cost-per-acquisition (CPA) model

Typically the most popular payment model, CPAs are famously priced high and based on a set rate versus a percentage of a consumer’s spend. CPA price points can range from $250 to $500 per acquisition, as Patrick Keane, CEO of sports media company The Action Network, previously told Digiday.

Casino partners that facilitate online betting tend to be on the higher end of that range compared to sportsbooks, according to a publishing executive who provided pricing context on the condition of anonymity.

CPAs are typically paid out once after the initial deposit by a customer is made, so in theory, the customer never has to place a bet for the publisher to be paid.

Pros: 

  • CPAs offer guaranteed, higher priced payouts for publishers that can convert their audience into a bettor.
  • They are not dependent on how much a customer deposits in their account on the sportsbook. 
  • Sportsbooks pay once for the newly acquired customer. 

Cons: 

  • It can take, on average, two years for the sportsbook to earn back the money it spent on acquiring a customer. 
  • Publishers run the risk of producing content or designating ad space to a sportsbook and not converting any of its audience into bettors, thus earning nothing through the CPA model.

Revenue share / Lifetime value (LTV) model

Revenue share, or a lifetime value model, is based on how active the converted audience member is in placing bets through the sportsbook. Rather than being paid a single CPA rate at the time of the deposit, the publisher gets paid over the course of the bettor’s career and an average revenue split is about 50-50 between the media company and the sportsbook, according to the media exec.

Customers are still typically acquired using a CPA model, but depending on the deal, those CPA rates can be negotiated lower by the sportsbook.

Under this model, the money that people lose on their bets becomes the revenue shared by the sportsbook and the publisher, according to Keane. He added, “Think of loss as revenue. The book is generating profit from a user, and we share in that because we generated a user for them.” 

Pros: 

  • This model has a longer term payout potential. The more that the publisher’s referred bettor places bets (and loses), the more money gets earned. 
  • Because it’s a revenue share, sportsbooks already have money in their account from the user, versus having to pay a CPA fee before they’ve earned anything from the bettor. 

Cons: 

  • If a publisher doesn’t convert its audience to an active sports bettor, it runs the risk of not earning money from the partnership, especially if there isn’t a standard media buy or a flat fee associated with the deal.
  • Sportsbooks are therefore earning less on a customer for the entirety of that user’s betting life, unlike a CPA or a flat fee model. 

Flat-fee / the traditional media buying model 

A sportsbook pays a publisher for ad space or branded content regardless of whether anyone in the publisher’s audience becomes a customer of the sportsbook. Publishers don’t receive revenue for readers who convert to bettors, and sportsbooks keep all the money lost from their bets.

Pros: 

  • Sportsbooks are likely going after upper-funnel campaigns with this pricing model to introduce the concept of sports betting versus being solely focused on conversions.   
  • For audiences that are not familiar with sports betting, are in a newly legalized area or are not necessarily interested in it, this option guarantees publishers a paycheck for the content created on behalf of the sportsbook.

Cons: 

  • Publishers won’t be paid for any conversions. 
  • Flat fees can run expensive — over $1 million in some cases, according to a couple publishers.

What we’ve heard

“The attribution models that are used behind the scenes to work out if [an ad campaign] was a good use of the money [or an affiliate commerce deal was] a good return on investment are very different. So when you’re running a display and affiliate campaign, getting that measure of success agreed upfront is critical because otherwise you’d spend a lot of time trying to work out afterwards, was it successful at all?”

Zack Sullivan, CRO of Future on why commerce and advertising deals have not yet integrated into hybrid models, despite brands looking for more direct-response campaigns ahead of Q4

3 questions with Grist’s CEO Nikhil Swaminathan

Nikhil Swaminathan, who has served as editor-in-chief of Grist since 2021, became the new CEO of the non-profit news site focused on environmental issues last week. Swaminathan’s main priority as CEO is developing Grist’s relationship with funders. He’ll embed Grist journalists at local NPR stations as part of a formal partnership with the national radio organization to cover environment stories in the area and syndicate Grist’s reporting to reach donors and foundations in new regions.

The majority of Grist’s funding comes from donations by foundations or individuals — only 5% of revenue is generated from advertising — which will cover the financial lift of placing a reporter in local NPR newsrooms. The goal is to have four reporters out of the company’s 60 total employees stationed in those studios by early next year.  — Sara Guaglione

This conversation has been lightly edited and condensed.

You want to expand Grist’s audience by combining open syndication and embedding reporters at local outlets. How will this work?

We have a pilot project that we started last year that has become a template for what we want to do moving forward. I live in Atlanta and I was having beers on the porch with the local NPR environment reporter. She mentioned to me, “I have so many stories throughout the state, I will never be able to write them all.” I said, “What if we place another reporter at your station?” So we did that with [reporter Emily Jones] and she’s covering climate solutions and adaptation throughout the state, edited [and overseen by an NPR] newsroom. 

Emily will produce a two- or three-minute radio feature, [then] it’ll get translated into a 800- to 1,200-word story that will be posted on [NPR’s Atlanta member station] WABE’s website. Then we syndicate those stories to smaller papers throughout the state — The Macon Telegraph, the Savannah Morning News, The Albany Herald. So we’re able to get high-quality climate news into the hands of people who are reading legacy publications. Emily can produce a piece that goes on the radio, [it] gets syndicated regionally, but also gets picked up by national NPR, like in “Here & Now.” We can then bring them back to Grist and syndicate them to our partners like Mother Jones and Slate. We can take one reporting effort and one story and turn it into dozens of stories at dozens of outlets. We are trying to take that model and expand it to the Midwest and the Plains, and really start to fill in the audience gaps that Grist traditionally has.

So is this like a wire service?

We don’t tend to syndicate the type of stories that you might see necessarily on a wire, like breaking news. It’s usually stories that have a bit of a shelf life because there’s a delay in all of this. Sometimes Emily will produce a story that airs in April, and the Savannah Morning News might not run it until June. There’s an evergreen-ness to a lot of this climate content. We’re able to build out these syndication networks and allow local publishers to supplement their content where they need to. Rather than using the tools of digital media to try to attract everybody to Grist.org, we are trying to meet them where they are. It also extends our audience reach.

As a nonprofit, is there money exchanging hands between Grist and NPR?

We obviously pay the reporters and provide a travel stipend. We also provide some funding [to the NPR station] because there’s usually an editor or a journalist at the station that now has to add in this reporter’s work. So we want to be mindful of the fact that it’s an added job for somebody in that newsroom. Each situation is different, but it’s a few thousand dollars.

From a funding standpoint, it allows us to really build out our regional funding. That’s a big benefit for us because the more we can diversify our funding stream, the healthier our organization. We have national funders who have supported us for years, but there are smaller regional funders focused on the South, the Midwest [and] the Plains. It’s a part of the funding map that is probably less tapped than the Northeast or the West Coast.

Numbers to know

$12 billion: The amount of revenue Hearst expects to earn this year, up from $11.9 billion in 2021.

56%: The percentage of publisher respondents to a Digiday+ Research survey who cited direct-sold ads as a top priority for their business in Q3 2022 – the most popular area of focus amongst the 58 respondents.

+8%: The percentage increase of a raise that The New York Times Guild members want per year over the course of the next four years.

68%: The amount that Remezcla’s Gen Z audience has grown by in the past year, 48% of which came to the site from Google.

What we’ve covered

Publishers test personalizing newsletters with varying degrees of success:

  • Publishers like The Telegraph and Reach plc are personalizing newsletters to improve open rates, click-through rates and page visits.
  • But other publishers are finding their newsletter personalization efforts aren’t resonating with readers and that many simply want a newsletter to highlight the most important or best stories from that publication.

Read more about newsletter personalization here.

Publishers feel the crunch of cookieless browsers like Apple’s Safari:

  • Google may have yet to deprecate the third-party cookie in its Chrome browser, but publishers have been dealing with the online tracking mechanism’s absence in browsers like Apple’s Safari and Mozilla’s Firefox for years.
  • They’re growing more and more impatient about addressing this issue, which was a focal point during the Digiday Publishing Summit in Key Biscayne, Fla., last week.

Learn more about publishers’ preparations for the third-party cookie deprecation here.

Why Hearst is building a commerce marketplace:

  • Hearst is in the process of launching a new marketplace in the fourth quarter, according to Sheel Shah, svp of consumer products and partnerships, on the latest episode of the Digiday Podcast. 
  • The marketplace is meant to be the new hub for the company’s DTC products and licensed products, but it will also be a new sales channel for the brands and products that readers of Hearst’s media brands regularly shop for as well.

Hear from Shah about why Hearst is investing in a proprietary marketplace here.

‘Death by a thousand paper cuts’: Publishers fret over alternative ID overload hurting site performance:

  • Publishers are increasingly concerned with how overloading their sites with IDs will impact page-load speeds and search rankings, according to publishing executives who attended the Digiday Publishing Summit in Key Biscayne, Fla.
  • A further frustration, publishers have yet to see adopting alternative IDs significantly impact their ad revenue.

Learn more about publishers’ frustrations with alternative ID options here

How The Independent is getting brands on board to advertise against breaking news:

  • As tumultuous as the news cycle has been, The Independent’s svp of the U.S., Blair Tapper, said that brands are getting too strict with how they’re avoiding advertising against news altogether. 
  • During her session at the Digiday Publishing Summit in Key Biscayne, Fla., last week, Tapper talked about how her team is trying to solve advertisers’ aversion to spending against news content.

Learn more about Tapper’s approach to brand safety here.

What we’re reading

Axios employees encouraged to buy founders’ book with company funds:

Axios staffers received a memo this week suggesting they could help promote the Axios founders’ new book, Smart Brevity, by buying and expensing up to six copies each, according to Defector. 

The competition is over between Daily Mail and Mail Online:

Previously operated separately, the DMG Media brands would produce rival versions of stories, but now, the publications are aimed at ending duplicate coverage, according to PressGazette. More print-native Daily Mail journalists will write for the online Mail Online, and only one journalist from both brands will be sent on assignments. 

CNN won’t sideline Jan. 6 coverage under new leadership:

After changes were made to CNN’s programming and staff following the merger of Discovery and WarnerMedia, questions were raised about whether or not the news network will continue to cover the attempted coup as diligently as it had been. According to Vanity Fair, CNN anchor Jake Tapper is still committed to covering Jan. 6 despite the new CEO Chris Licht’s political alignments. 

The complications of Jeff Bezos’ ownership of The Washington Post: 

Amazon founder Jeff Bezos bought The Washington Post in 2013 when the paper was in a downward spiral. His money changed everything, but the conflicts of interest are plentiful, according to Columbia Journalism Review.

Fast Company’s Apple News access gets hacked:

Someone sent an Apple News notification from Fast Company this week that included a racial slur and invitation for a sexual act, reported The Verge. Both Apple and Fast Company addressed the hijacking of the account and disabled the publication’s access after the incident occurred.

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