27 January 2022 |

The good, the bad, and the ugly of advertising — and how to do it right

By Adam Ryan

The good, the bad, and the ugly of advertising — and how to do it right

I’ve worked in a business where advertising is the main line of revenue for nearly a decade. 

In the last 24 months, I’ve never heard such hate for a business model. 

Yesterday I met with a prominent VC to introduce him to Workweek. Before I could even sit down, he said, “I want you to know, I’m against investing in any media company again. Ever.”

Why’d he have such distaste for media? Advertising. 

Today’s piece is about advertising in media. The good, the bad, the ugly — and my formula for how I think advertising should be used in the future of media businesses.

The Good

Monetizing attention through advertising has allowed content to stay free for most of the history of the internet. It’s supplemented the work of writers, journalists, athletes, and creatives for hundreds of years. 

In 2017, advertising revenue represented 2.2% of the GDP of the United States. In 2019, newspapers (yes, those things no one under the age of 40 reads) made $11.5B in advertising dollars.

Safe to say, advertising has kept many media companies alive — but the ad campaigns distributed through media companies have kept others alive, too.

  • Under Armour was saved in 1999 by a $25,000 half-page ad in ESPN magazine. It drove $800,000 in revenue in 3 weeks, almost matching their annual revenue from the previous year. 
  • The Got Milk campaign, which was primarily distributed in local papers, ended a 20-year decline in milk consumption. 
  • The Most Interesting Man in the World campaign, which dominated television airwaves for a decade, enabled Dos Equis to grow 34% market share despite the rise of craft beer. (FYI if any of us ever grab a drink, my preferred drink is a Dos dressed) 

Beyond saving the day for others, advertising enables many media businesses to maintain healthy margins — the average media business has 23% profit margins. 

Take Under Armour as an example: In 2016, the Connected Fitness division at UA (the suite of consumer apps) represented about 10% of all of UA’s gross profit margin in 2016. Considering UA was a $5B business at the time and more than 20 years old, their new ad business was quite the profit lift. 

Simply put, advertising is a straightforward way to make a profit. If you have decent content and attention of any kind, you’ll be able to monetize your media. 

This is why advertising, at its best, is the centerpiece of the commerce flywheel.

The Bad

Advertising at a media company should be described as a service business. 

Anyone who’s ever sold advertising knows it’s both an art and a science. It requires a certain level of performance — and a certain amount of storytelling — to entice a media buyer. 

For now, robots can’t tell those stories, so there’s a key human element to selling ads.

And this human element? It’s the crux of why advertising businesses are not the preferred model of most investors or public markets — it’s impossible to scale revenue without scaling a team.

Take Morning Brew as an example: MB’s sales/revenue team is ~60 people today, compared to a handful of folks a few years ago. My guess is that this team has enabled them to grow from $5M to $60M. That growth is impressive and the business is without a doubt profitable, but the question remains…

How big can Morning Brew get and will there be any point where they can scale without the need to hire? 

On the flip side, Morning Brew may be one of the most successful ad-based media businesses of the last 5-6 years. They’ve set a benchmark for media businesses to drive $60M+ in 6 years with a staff that has also 10X’d. 

Knowing benchmarks are rarely exceeded, I’d say this means most media companies won’t come close to this performance. 

Is this really that great? For media, of course. But when you compare it to a SaaS business, not so much. 

The Ugly

Any time you can associate the word “arbitrage” with a business model, it’s ugly.  

The Head of Growth at Workweek started his career at a clickbait site. This was the business model: Pay celebs to post clickbait articles to their Facebook page and pay them $X per click. Those sites had ads all over the page, so when you landed they immediately made $X + profit. That was it. 

No thought about the audience, performance, impact… just arbitrage. 

The first TV ad was in 1941. The carrier paused a game between the Brooklyn Dodgers and Philadelphia Phillies to air a 10-second ad for Bulova watches (FWIW, it cost Bulova $6). 80 years later and the tactics are nearly identical for media publishers today. 

Media execs have scaled prices, eyeballs, and created fancy awards to show off their cool ideas — but they’ve never really changed advertising formats.

The internet us an opportunity to finally, and fundamentally, change advertising formats — and we wasted it.

In 1994, AT&T bought the first-ever online ad for $30,000 from the site that would later become Wired.com. It was built to resemble a “half-page magazine ad” which they renamed a “banner ad”.  Today, 91% of consumers say they dislike advertising — and I believe that’s driven in large part by this type of laziness and lack of innovation. 

Media companies’ ultimate goal should be earning the trust and affinity of their audience. Tough to pull off when 9/10 of people hate the way you make money. 

So how does advertising exist in the world of a media business?

Rethink your ad formats. Forget the IAB, make your own standard for your own publication. You have to make sure your ads match your content, voice and vibe by having a team own and operate ad creation. You have to invest in your ad business. 

You may be thinking, is this really worth it?


Investing in “good” ads is a great business strategy. 

LiveIntent is a platform used to automate newsletter ads — essentially it lets customers insert dynamic banner ads into newsletters. They’re annoying and lack any connection to the content in the newsletter. The CPMs for those ads are on average ~$6. Let’s call them bad ads. 

I believe there are quite a few media upstarts that are doing advertising really well, like Every, Morning Brew, and Industry Dive, among others. The CPMs these publishers are capturing are between 10X and 40X higher than what LiveIntent captures. Let’s call those good ads. 

On top of the higher CPM, the brand affinity for those media companies is much higher because they’re taking the time to make something their audience may…  actually enjoy. 

We ran a survey once at The Hustle about our ads — 80% of the audience said they appreciated the ads because they matched the voice of our newsletter. It’s impossible for me not to consider that this investment in our advertising actually helped our brand stand out among a crowded field. 

Imagine that, ads that are additive to the brand. 

This additive experience leads to the second aspect of successful advertising in a modern media company: 

Embrace advertising as a means to a bigger end, not the end.

As Jarrod Dicker wrote, your business model is your product strategy. If you’re totally dependent on advertising, then you’ll sooner or later create a product built only for that model. It’ll be difficult to make the hard, but right, decision to prioritize your audience if advertising is your only line of revenue.

If you embrace new business models, like incorporating events, services, education, venture capital — or other products that require your audience to have an affinity for your brand — then you’re almost forced NOT to take the shortcuts that have caused advertising to be the most hated business model on the planet. 

The media companies who win in the future won’t be 100% reliant on ads, but the ads they do sell will be good for their audience, their brand, and their balance sheet.