Ziff Davis:
Behind the Scenes at a Digital Media Brand

Michael Krigsman: Digital media is everywhere. It surrounds us, and most of us have no idea of the impact of digital media on our lives; on social media on Facebook, on Twitter; and the amount of money that's being spent. Today, on Episode 263 of CxOTalk, we are exploring the secret life of digital media.

I want to say thank you to Livestream before we go further. Go to Livestream.com/CxOTalk, and they will give you a discount on their plans. Livestream supplies our video streaming infrastructure, and they're great. They're supporters of CxOTalk and, by George, that's a good enough reason to go check it out, Livestream.com/CxOTalk.

I'm Michael Krigsman. I'm an industry analyst and the host of CxOTalk. I'm so thrilled to welcome back a repeat guest, Anurag Harsh, who is a top executive at Ziff Davis. Ziff Davis is one of the very largest media publishers, technical media publishers, in the world, on the face of the planet today. Anurag helped build that business. And so without further ado, Anurag Harsh, how are you doing?

Anurag Harsh: Hi, Michael. Thanks for having me. I really appreciate the opportunity.

Michael Krigsman: Anurag, it's great to see you again. Please tell us about Ziff Davis.

Anurag Harsh: Sure. Ziff Davis is a subsidiary of J2 Global. We're a leading global digital media company operating in four verticals: technology, gaming, healthcare, and shopping. Our brands are PCMag, Speedtest, ExtremeTech, Geek, Toolbox, IGN, Everyday Health, What to Expect, AskMen, Offers.com, TechBargains, emedia, and Salesify. What we do is we produce and distribute premium content across multiple platforms and devices. We deliver advertising, performance marketing, data services, and licensing solutions to thousands of clients worldwide. We publish in 25 languages across 114 countries.

Michael Krigsman: Okay. Well, we are going to explore a lot of these topics, but let's begin, Anurag. Share with us what is the state of digital media, digital publishing today? What are the key trends that you're seeing that we need to know about?

Anurag Harsh: Well, digital media and the advertising landscape is staggeringly complex. Let's start with some of the misnomers that people have about the landscape. Smartphone growth is slowing. Everybody thinks that it's all about mobile and smartphones. Therefore, a lot of the digital media publishers are publishing to smartphones. Of course, they should do that, but what they don't realize is that global smartphone shipments actually just grew 3% this year compared to 10% last year. That's something that's important. In order to build a business, a digital media business, you need to understand the landscape and who your target customer is and where they're actually browsing.

The other thing that is important to understand is the total Internet users in the world have only grown 10% this year. But guess what. That's flat year-over-year. Last year it was also 10%. Although it's promising because it's growing 10%, but it grew about the same as last year. Essentially, year-over-year, it's flat, so it's not increasing that much.

The other thing that's happening, and you can see that in iPhone sales because you're targeting Android and iPhone devices when you're developing your content, smartphones are actually hitting saturation. Smartphone shipment growth has dramatically declined in the last couple years, and it's only 3% this year. What that indicates to me is that almost everyone who really wants or needs a smartphone has one, and so people are not really upgrading as much.

The other thing that's happening when you think about the Internet usage growth is, at least in North America, adults are spending a lot of time every day, as we all know, about five or six hours a day, on the Internet. That's about 3 hours per day on just mobile compared to maybe it was like 45 or 50 minutes a few years ago. What's interesting here is this, because, as your digital media publishers, you're thinking about publishing content. Desktop usage--and this is an important point--has only declined slightly, indicating it's more of an addition of mobile than a shift to mobile. This is the key point. Desktop usage has declined slightly. It's not like it's just going away, and so that's something that people need to think about that it's the addition of mobile than a shift to mobile.

The other thing that's happening is the online total advertising spend because all the digital media business is fundamentally advertising driven, different forms of advertising. It could be commerce, it could be display, it could be affiliate, but it's all bundled under advertising. The total online ad spend, it's growing steadily. Mobile obviously has now overtaken the desktop in ad dollars, just as it has with usage and time. That's an important thing.

But what's going on is people are spending a third of their time--their media time, as I'd like to call it--on mobile. But what's going on is that, for whatever reason, the brands are not spending as much on mobile. It only receives a fifth of the overall ad spend. People are spending, let's say, 30% of the time on mobile device as media time just browsing content.

Michael Krigsman: Right.

Anurag Harsh: But they're only seeing 20% of the ad spend. What that tells me is there's a massive gap, and this gap is about $16 billion of opportunity for essentially brands to have more mobile ads on the Internet.

The other thing that's happening is--and we all know this, but I'm going to say it anyway--over the next several months, and it's probably already happening right now, the dollars that are spent on Internet ads are starting to eclipse dollars that are spent on television. What that tells me is it's indicating a huge opportunity for mobile products to soak up the shift. These are some of the things that are happening.

There are quite a few other things that are happening in the world of digital. This is absolutely true. There's the ad duopoly, which means Google and Facebook control 85% of the growth in online ads, and their share is increasing every year. As more data and impressions keep helping these companies improve their targeting, it really is becoming very, very hard, really impossible. It's an existential problem, I call it, and we're going to talk about this a little more, eventually.

It's becoming harder and harder for other platforms, and really any other publisher, to compete. That's the thing. There's this ad duopoly, and it's not going to go away. It's actually going to get even worse.

The other aspect of that is this whole thing called ad blocking. It's skyrocketing. People don't want to see ads, which is the glue and the oil of the Internet that powers all of digital media. In developing markets where data costs can be high, what users are doing is they're increasingly blocking ads whenever they can. Nearly 400 million people around the world are blocking mobile ads, and that's a problem.

Big platforms like Facebook, Google, Snap, they're responding to advertisers seeking to prove return on investment on their ad spend by improving ad targeting relevance, the ads that people are going to see--hopefully they don't block these ads because the ads are more relevant to what they want to see--and then measuring, the measurement of how these ads work. Targeting has become a huge thing.

The other thing that's going on is this whole aspect of driving purchases, like commerce. Facebook and Google, the big platforms are using increasing willingness, people's willingness to buy online to earn revenue through ads for products. Digital media publishers, when you're thinking about writing content, you've got to think about what the users want to do, which is essentially to purchase, transact, learn about products, and then be able to transact online.

The other thing, the other side of this that's interesting is this shift towards what I call foot traffic, which is, a digital media publisher--Google, Nextdoor, Foursquare, Uber--the location of their ads, they're starting to appear now. That's the trend in the industry. When you're actually publishing ads and content for a brand or for a publisher, think about users near a store. How can you affect the influence of purchasers so that they read something on your website and they actually go to a store and make a purchase? Those kind of things are happening.

In fact, it is even more interesting because what Google is doing is now starting to target by your images. Following Google's success with Adwords, based on what you type--that search, that's Google's business--Snap, for example, is now succeeding with ads based on the images that you share. It's really interesting to see that dynamic that's taking place.

Ads are repurposed from content shared by users on social media. User- or influencer-generated content are making great ads. It's not ads that are produced by agencies and publishers or brands. It's really ads that are repurposed from content that's shared by users or social media influencers. They perform better than content that's created by brands.

The other thing that's going on is image recognition. This is a big thing. Now you have this thing with iPhone X facial recognition. The image recognition and camera apps, what they're doing is they're allowing ad platforms to know what you're doing or what you're looking at, let's say, and they're able to serve more ads. These are ads based on what you're looking at. It's all about trying to figure out what you're doing and what your interests are. That's the game. That's the game of digital media.

The other thing that you may think about is not just vision. It's actually also voice. Voice recognition accuracy has improved. What's interesting or people don't realize is 20% of all mobile searches now are made with voice. Voice devices like, for example, Amazon Echo is exploding in popularity and breadth with--I don't know--10 million or 11 million Echoes are already installed in the United States. Those are some of the dynamics.

The customer service, when you think about it from that perspective, … (indiscernible, 00:10:50) e-commerce player, the customer service is actually shifting to chat. That's a rapid rise in the percentage of customer service conversations that are happening via real-time online chatting instead of phones. As users demand faster response times and wider access, there's a direct-to-consumer effort that's happening.

Michael Krigsman: Right.

Anurag Harsh: People are focusing on community and content marketing or a narrow selection of great products, these new brands, which are disrupting these old industries in technology, pet care, beauty, [and ] shoes. E-commerce is happening, so a lot of the publishers are starting to get into e-commerce.  Ziff Davis, e-commerce is a big play for us, and we're a big affiliate for Amazon, for example.

Think about Amazon. Amazon Prime and other online retailers--I mean it's not just Amazon--Best Buy, for example, they've caused the package and parcel shipping volume to grow 9% this year. That's phenomenal, right? It's not just shipping of products, but when you're developing content as a publisher, think about things like delivery services. Delivery services, like food delivery, that's skyrocketing. They've grown the percentage of revenue from delivery for one restaurant….

Michael Krigsman: Anurag, I hate to interrupt. Given all of this, for people who are trying to publish, whether it's media companies or the CMO inside a corporation, what does this mean? What are the practical implications of this?

Anurag Harsh: Well, when you're trying to publish something, you've got understand what you're publishing and why you are publishing to. What is happening with the consumer that will read your articles or consume your product? Think about it this way: In the milliseconds it takes for a Web page to load, dozens of companies you probably never heard of are bidding in a furious auction to serve you an ad. That's the business of digital media. That's just one area. That's called programmatic advertising.

Digital advertising is doing great, but the fact is that when you try to publish, you have to understand that it's a fragmented ecosystem you're publishing to, and it's a very convoluted supply chain. There are issues that now plague that sector, and I'm going to take you through all of those issues one-by-one.

As you think about publishing, you have to address these issues. I can offer some resolutions as well. Obviously, I'm not Yoda, and I can't offer everything and I don't necessarily have answers to everything, but I could tell you some of the things we've been doing. These issues have implications for pretty much the entire industry, all the way from marketers to agencies, tech intermediaries to publishers and, of course, to us consumers.

What I'm going to do is I'm going to force rank these issues from the standpoint of their impact on the digital ecosystem to you as a publisher, let's say, although digital media is not necessarily just about publishing. It is ad tech, and there's 700, 800 companies in the middle.  I'm going to rank this from [the] importance of, let's say, serious issues, the critical issues, to what I call existential issues.

Michael Krigsman: Existential issues, okay. [Laughter]

Anurag Harsh: Oh, yeah. Oh, yeah. Oh, yeah.

Michael Krigsman: [Laughter]

Anurag Harsh: I mean, look, and I'll talk about them. The Facebook/Google monopoly or duopoly, that's an existential issue. When 85% of advertising is going to just two players, that means that the others don't necessarily matter. The other 15% has maybe 1,000 companies, and we're just feeding it; we're the bottom feeder.

Anyway, let's start with it because that's an existential issue. There's a reason why publishers are falling of the line. The first four issues are either between constituents, I call them transparency, header bidding, and I'll talk about what "these" are, and they're universal problems that will eventually get solved via technology to consolidation, things like measurement or latency.  A big issue is the privacy, you know, tracking.  That's a big one with consumer groups, especially in Europe.

Let's stick to North America. Let's start with transparency. When you're publishing content, think about these things in your head. Think about the issues of transparency, issues of measurement, issues of latency, things like header bidding when you're making money, privacy tracking, viewability, fraud, ad blocking, the issue of walled gardens, which is what Apple has done, the issue of fragmentation. Let's talk about the critical issues.

The first issue is viewability. Viewability is an online advertising metric. Basically, what it is, it's aiming to track only the impressions. These are ad impressions that can actually be seen by users. For example, if an ad is loaded at the bottom of a Web page, but a user doesn't scroll down far enough to see it, that impression would basically be deemed not viewable. Viewability is designed to let advertisers pay only for the ads that users could possibly see.

Michael Krigsman: Sure. In an honest system, that's what you want.

Anurag Harsh: Right. Exactly. I'm actually coming to that now. To assess the impact of viewability with fraud and ad blocking, consider the lifecycle of a media impression, this little ad impression. Every load of a Web page or video creates an ad opportunity. However, the ad blocking, which is now estimated at over 22%, I think, in North America, and is higher in other countries, prevents ads from being served to a person or consumer. Now, of the ads that are served, some are seen by bots. These are the machines that are recording fraudulent impressions. Another portion is delivered to humans, but not seen. Think about the profundity of that. Whether an ad is viewable or not depends on the viewability standards that vary by platform, and there are no common standards.

That's the other problem. When you're actually developing content and you want advertisers on it, and you want basically the content to be seen, everything is different. For example, YouTube counts 30 seconds as a view. Facebook is three seconds. Snapchat is one second. Of the ads actually viewed, a very small portion of these instigates engagement by consumers. An even smaller portion results in a conversion. These two last elements are primarily relevant for direct response advertising, whereas the brand advertising's objective is to help build demand generation or preference, over time, and may benefit from an impression alone. If you analyze these issues from an economic perspective, there is significant value leakage in digital media. That's half the problem.

Marketers, they lost value. It is the sum of fraud and non-viewable impressions. Now, in both instances, they paid for an ad, and that was never seen by a potential consumer. Publishers, on the other hand, lose even more. They lose the value from both fraud and ad blocking. While I don't purport to have solutions, as I said, to all of these issues, I would suggest that whatever solutions are applied be done so with the consideration of the principles of the marketing equation: the marketer and the consumer.

Ad blocking, which is a seminal issue in this industry, ad blocking, in particular, I believe that the best way to prevent further proliferation of such ad blocking software downloads is to create a better consumer experience. I can't stress this enough. While I sympathize with the publishers' predicament and value the economic construct that supports journalism, forcing the consumer's hand with, honestly, draconian measures are not the way to go.

Consumer choice is here to stay. It's not going away. The trend towards performance metrics in advertising serves to mitigate some of these issues. When marketers are paying for business outcomes and not proxies like impressions, it alleviates many ills from measurement to fraud. As a digital media company, think about those things. If the marketer is not paying based on impressions, it's irrelevant that impressions are not seen. This is….

Michael Krigsman: How do we do this? Anurag, yes, of course, but how do we get to the point? What are the kind of relationships, deals, metrics that marketers can use to pay, therefore, for business outcomes rather than just views?

Anurag Harsh: Facebook is actually starting to do this a little bit. Let me lay the landscape out in terms of how Facebook is doing it compared to how Google is doing it compared to how Yahoo does it.  Facebook is doing a very good job of this. It's a CPM model. Companies that are deploying these models are essentially seeing higher rates of growth.

In performance advertising, think about it from this perspective. Think about if you draw a chart. On the left side you have the Y-axis. On the Y-axis you have scale. On the X-axis you have, let's say, automation. I'm almost doing it in my head right now. You have this arrow that's sort of going up. Right at the bottom, which is low automation, low scale, are companies like Yahoo. I'm not kicking Yahoo. I'm just saying it's just how it is. Those are CPM-based. It's cost per thousand. It's just good old advertising, you know, spots and dots.

Then somewhere in the middle is Google. Google is sort of midlevel automation and, I would say, a good amount of scale. It's midlevel scale. That's a CPC. It's cost per click. Hey, you're going to click on something, and then if you go there and it results in a transaction, then that's fantastic.

The problem is that you've got to click on something. If the viewability is low, if it's bots, if it's fraud, or there's ad blocking, then what are you going to click on? The human is not even seeing it. The CPC model is also sort of iffy.

The Facebook model is an interesting model. It just takes away all of this.  Facebook is very high on the automation axis, and it's very high on the scale axis. That's a CPA model. It's all CPA. It's cost per acquisition. Nobody pays Facebook unless it performs.

Think about doing CPA-based advertising, just the way it works. That could become a commerce play as well because now you have content that you're actually writing that will allow somebody to go to the brand's website and maybe convert there because you educated them enough on your website. You brought them … (indiscernible, 00:22:01) little funnel.  You take them to the advertiser's website, they convert over there, and you get a piece of that pie. Those are important things.

There are other issues, like the walled garden, which we talked about. That relates to this Google/Facebook monopoly and the reason that CPC and CPA are the names of digital advertising and digital media now. Pretty much the only guys who are doing it correctly, and even Google is going up the food chain now into the Facebook territory now with the whole CPA model, is the duopoly. It's just those two guys, and that's why they're getting 80% to 90% of the entire revenue and investment.

Think about the walled gardens of content from the '90s. What Facebook and Google have done--and this is learning, this is what the other digital media publishers need to learn--Facebook and Google have put up walled gardens of data. The walled gardens are no surprise because obviously they have tremendous first-party data assets and reach, which enable them to effectively target consumers and deliver high ROI to advertisers.

What they're doing is they're extending this advantage across third-party apps. For publishers, they should consider doing that as well. These are third-party apps and sites to further -- to further their dominance with the additional benefit of not degrading--this is important--their owned and operated properties with more ads. A lot of the publishers like … (indiscernible, 00:23:24) New York Times, or even Ziff Davis are starting to do things like that or should do more of that.

Think about Google. What has Google done? It's not … (indiscernible, 00:23:34). Google has DoubleClick. It also has AdMob, which are the extensions. Facebook has Facebook -- we call it FAN. It's Facebook Audience Network. It extends it to that. That way they keep Facebook clean. It has Atlas by Facebook. A lot of people don't know that. When you place an ad it goes there as well. It has LiveRail, which is another extension.

Obviously, this begs the question; will other companies with significant first-party data, large publishers for example, which are not making a lot of money and are pretty low on the EBITDA margin as well, will these other publishers and other companies join Facebook and Google as a third walled garden? Now, this is interesting. With a sizable subscriber base and recent acquisitions, everybody is saying Verizon, which now owns AOL, Millennial Media, HuffPost, and all of that, Yahoo, may be a likely candidate. To date, I think this strategy has been extremely effective for Facebook and Google, but not necessarily for everybody else. There's a learning lesson there. I frankly think that Amazon is going to be the next third wall, and it's just a matter of when. It's a $5 billion advertising business for them, and it's just a matter of them deciding that they want to do that.

Now, a recent analyst study, as I said, suggests that the combined share of all incremental ad spend has exceeded 85%. Now, it's a frightening figure, honestly, for pretty much everybody else, all the thousands of companies that are vying for the remainder. That's why, Michael, I call this an existential issue.

Finally - finally, when you think about it from a digital media publishing perspective or just a digital media company perspective, there is this issue of fragmentation. This is important. It's a condition that is really unsustainable for both the principals and the intermediaries. Let me explain that. Marketers and publishers--two ends of the spectrum--struggle with the complexity caused by the myriad of point solutions in the industry. There are too many companies in the middle trying to take 10%, 5%, 15%. I mean it is horrible. For these intermediaries, it's a constant challenge to differentiate and grow with so much competition, which has led to what I call a pullback in venture funding. What the industry is begging is consolidation.

Now, these issues are major issues, but obviously some of them (indiscernible, 00:26:07) more attention, such as header bidding, for example, is a big thing. I'll explain what that is. In fact, not just header bidding. I would like to add what I call adverse context into this list. It's a culmination of what I call fake news and brand safety issues into this mix, which is a big story this year, as obviously everybody knows. What one could initially dismiss is a simple hack. Header bidding has turned out to be a lot more. It's really fundamentally changing the economics and relationships across the programmatic ecosystem in digital media, and it's a major disruptive force.

This is what header bidding is. Some people call it advanced bidding or pre-bidding. It's an advanced programmatic technique wherein publishers--these guys who are writing all this content--offer inventory to multiple ad exchanges simultaneously before making a call to the ad servers. The idea is that by letting multiple demand sources bid on the same inventory at the same time, the publishers increase their yield and they make more money.

See, for publishers, true programmatic efficiency is a bit like alien life. It's probably out there, but nobody has actually seen it. Instead, publishers, to manage their programmatic yield thus far, what they do is they daisy chain it. It's a waterfall structure. The publishers offer impressions in one sales channel. The buyers are not buying there. They push them down to another, less valuable channels, until someone makes a bid.

Now, the system works, but it's highly fractured and it's, frankly, inherently inefficient. Publishers say the system leaves money on the table. You don't want money on the table. Net-net, I think header bidding is a good thing. A lot of the publishers in the digital media ecosystem should adopt it. It accelerates the availability of high-quality inventory that will drive higher CPMs. The challenging aspect of header bidding--you know there's always that--is the increased competition and tighter economics, which I believe will hasten consolidation in the sector.

Now, the other thing, when you're thinking about publishing content, is privacy is an issue. It is an issue. Let me highlight that a little bit. There's this thing called General Data Protection Regulation. It's called GDPR, which is essentially European. It's going to enter North America at some point. It's a European data protection regulation that'll go into effect in 2018.

GDPR, mark my words, will have a material impact on how companies manage consumer data. It's predicated to have -- I would say 50% of the companies will be under-prepared for this profound shift. Earlier on, I mean a few minutes ago I talked about this lifecycle of the media impression, which is really to highlight the challenges of fraud, unviewable inventory, and ad blocking. Now marketers are taking a stand and demanding that we see changes to these issues. The marketers are doing it, so it's no surprise because viewability-in standards are very inconsistent across the major platforms, as I said.

Now there's this company in our industry called Media Rating Council (MRC). They have basically said--because video is huge now, because you're a publisher, you're producing video--video viewability standards right now desktop, a good old computer, is 50% in view at two seconds, and mobile is 50% in view at two seconds, so it's consistent. This is MRC, which is the Media Rating Council.

Facebook has its own. Facebook says, "No. Desktop is 100% in view for three seconds, and mobile is 50% in view for three seconds." YouTube has its own. It says 100% in view for at least 30 seconds or to completion, whichever is shorter. Twitter has its own. It says 100% in view for three seconds. Then you have Snapchat, which is 100%--

Michael Krigsman: There's a company--

Anurag Harsh: Yeah, it's a mess.

Michael Krigsman: There's another company that we use that's five seconds fully in view.

Anurag Harsh: What is that?

Michael Krigsman: The video window has to be in view for five seconds, or the user has to click inside it to count as a view.

Anurag Harsh: Well, look at Snapchat. Snapchat is 100% in view upon start. Instagram is the same thing. In feed, in Instagram, they're saying 100% in view for three seconds, and their stories, which are Instagram stories, are 100% in view upon start.

Look. This is an issue. This is an issue. Brand safety, which is important, has become an issue.

Now, it's gotten more attention with obviously the recent struggles surrounding Facebook and YouTube … (indiscernible, 00:30:41) the fake advertising, fake news, extremist content, and all that, but the world's largest advertisers are pulling spend from these platforms while others are boycotting them because all these issues need to be resolved. Now obviously Facebook and YouTube are working quickly. They want to clean up the platforms and obviously win back the trust.

Now, one of the reactions to adverse context (indiscernible, 00:31:04) in the sector has been the rise of premium publisher consortia. Now, this is interesting. Major publishers, traditional and digital, they're banding together, and they're offering advertisers aggregated, premium inventory with large-scale across their properties. If you're a publisher and you're sort of falling through the cracks, this is something they probably want to join.

For example, in the TV world, you have this thing called OpenAP, which is Fox, Turner, and Viacom. Fox, Turner, and Viacom: they've combined together, and they say, "We have this consortium. We call it Open AP.

In the digital world there are two. The first one is called Concert.  Concert is a combo of Conde Nast, NBCUniversal, and Vox Media. They basically said, "We're going to go in as one and as a consortia called Concert."

The other one, which is a much larger one, is called TrustX. TrustX is a whole bunch of large publishers like NBCUniversal. You have The Weather Company. You've got Conde Naste [and] The Guardian. The Washington Post is in there. Purch is in there, Slate, Time, Inc., Daily Caller, Vox Media, [and] Scripps. Financial Times is in there. There's Hearst in there. There's AccuWeather in there. Meredith is in there, Edmunds, Atlantic Media, Business Insider. Fox is in there. Well, Fox News is in there, CBS Corporation and ESPN. This is a big consortium. It's called TrustX.

What the industry needs, what you as a digital media publisher need, is valid third-party measurement where all the major platforms cannot grade their own homework. There are standards that are being set by these independent third parties like the Media Ratings Council that I said, MRC, and its one second, 50% in view standard, while technology vendors have been leaned on to push consistency across the industry. Even with standards in place, like the MRC viewability standard, we should be asking ourselves, "Are we measuring the right thing?  Do you feel you're getting any value from these standards? Should we be focusing on something that has more to do with engagement?"

See, I believe we're on an inevitable march away from proxies and more towards understanding where consumers are spending time, how they are engaging and, ultimately, driving business outcomes. I talked about this duopoly. I keep bringing it back because it's hitting me in the face every single day … (indiscernible, 00:33:22) business because it's true. Eighty percent of the profit in all the publishing businesses is coming from these two guys, Google and Facebook.

Michael Krigsman: All right.

Anurag Harsh: Now it's going to be Amazon.

Michael Krigsman: Right. Okay. Hold on. Hold on. I hate to interrupt, but we have ten minutes left.

Anurag Harsh: Oh, wow!

Michael Krigsman: We have to talk about Facebook and what makes Facebook such a powerful platform, and how can advertisers take advantage of it in the best possible way? That's what everybody cares about, right?

Anurag Harsh: Yeah. I'll you about it, but I think the more important, bigger force is going to be Amazon. It's not going to be Facebook.

Michael Krigsman: Amazon? Yeah, okay.

Anurag Harsh: Yeah, in advertising.

Michael Krigsman: Okay, briefly, but I want to be sure that we get to [the] advice on Facebook because everybody cares about that.

Anurag Harsh: Well, for Facebook, it's just a matter of people boost their ads, and obviously Facebook offers a lot of metrics. There are lots of third-party companies that do that. It's the largest player in the market so, if you're a publisher, a lot of them have what they call Facebook instant articles. Basically, Facebook has invited the publishing community to come and publish within Facebook.

What Facebook is saying is, "I, Facebook, am the Internet. You don't need to be on the Internet. I am the Internet. You come within me because I have all the audiences in the world. The world is on it. Probably the whole world is on it now. And I know who these people are. It's not just these are bots. We kind of know who these people are because they have accounts with us, they're active on us, and they're on us at least once a day. And so you advertise, and we're going to give you the targeting. And we can target hyperlocal, and you could target in Jersey City if you want. You could target in Omaha, Nebraska. I mean anywhere you want against any demographic in any hyperlocal target, and it's easy."

It's self-serve. You can do it on your own. You don't need a brand agency. You don't need a DMP, which is Demand Managed Platform. You don't need any of these technologies. Facebook has done it for you. You, as a user, can actually literally take an ad, create a piece of content, and you can boost it on Facebook. It can reach consumers, and that's what's happening.

Large advertisers are building these huge platforms called Facebook pages on Facebook, and they're inviting their audiences, Facebook audiences, targeting ads, inviting audiences to actually come in there and participate in this whole ecosystem that they've built. Of course, it extends to customer service because these are real people and not bots. If people have a problem, they'll go onto the page, and they'll basically say, "I bought so-and-so, and it broke down," or this and that, "and I called customer service and it sucks," I mean things like that, and you can respond to it.

You've gone and built a presence on Facebook. There are companies who don't even have their own websites, small businesses. Their websites are Facebook pages. That's good enough because that's where the audience is. That's what I'm saying. Facebook, how do you take advantage of it is to actually go in there and start to play around with it. Talk to experts who can help you develop a whole presence on Facebook and be able to capture audience data from it. Then target ads and target content, and hone in on the content.

Make sure that your audience is reading what you are actually peddling to them because that's important. You can put content out there and nobody is reading it, and you'll know that. If you're a traditional publisher, oftentimes you have to use metrics like Omniture and Google Analytics to figure out what to do. On Facebook, they just provide it to you. That's why it's so attractive.

Now -- now this is the important thing, and this is what I want people to understand. Amazon-Amazon, this is it - Amazon. It's all Amazon, man. Amazon is playing a different game. See, Facebook says, "I know who you are." Google says, "I know what you might be looking for." What Amazon says is, "I know what you bought and what you will buy next," and that's where the rubber hits the road.  It's important stuff, and that's the play.

I think Amazon is going to be the next walled garden. Facebook and Google, obviously they have the demographic data. They've got the proxies for intent. Amazon, instead, has true intent. It has purchase history data to understand the full customer journey. Amazon has a unique data position in this ecosystem, and that's who you want. At some point Amazon is going to light up, and it's going to be huge in this whole ecosystem. That's what I'd like to leave you guys with.

Michael Krigsman: Wow! That is pretty extraordinary. You think Amazon eventually will light up an advertising network for content or social network, something that takes advantage of all of this data.

Anurag Harsh: Yeah, absolutely. Absolutely. It's bound to happen. It's bound to happen. That's definitely the case.

There's one other thing I want to leave your audiences with, Michael. You know everybody is getting into programmatic and Internet is all about data and everything else. Here is the thing, though. It's all about building a brand. Building a strong brand like PCMag is a 30-year-old, strong brand. It is the implementer. When PCMag says that this product is great, people believe it. And so building a strong brand is not easy.

The most recognized and iconic media brands were built from a unique voice, history and, frankly, many other intangibles. The New York Times, Vox Media, you've got The Wall Street Journal, Vice, Business Insider, The New Yorker, Buzz Feed, Vogue, Financial Times: these are strong brands, and they're a powerful asset. You know why? Because they are less vulnerable to ecosystem change in monetization and the whims of programmatic, as well as algorithm changes and, frankly, the whims of major distribution platforms like Facebook, Google, and Twitter.

I envision the publisher value matrix, the digital media value matrix with two lenses: the want-to-know and the need-to-know properties. While there are large publishers of general interest or, let's call it, want to know content, there are others with scale and the need to know content that have a material advantage. Even small publishers like niche focused, B2B travel media company, Skift, for example, they can build loyal, lucrative audiences and, by effect, obviously, a strong, defensible position. If small publishers don't deliver quality content, they will face a challenging future. It's very important that that be the case.

I'm witnessing some interesting developments unfold. Like Buzzfeed, for example, is finding success with its new standalone food brand. It's called Tasty. It's building a blueprint to start more vertical properties.

Vox Media has pursued this strategy. It's a vertical strategy. They've built and acquired a family of verticals to address all kinds of content and engage audiences. Vox has what? In B2C, they've got The Verge, Vox, SB Nation. They've got Eater, Curbed, Racked, Re/code, [and] Skift.

Ziff Davis has done the same thing. It's all vertical publishing. We've got a whole bunch. Right at the beginning of this conversation, I named all the brands. We acquired Everyday Health, and we have some fantastic brands in healthcare in Everyday Health.

Ultimately, if publishers can build a loyal following and direct relationships with their audiences, they will have a wide variety of monetization opportunities beyond advertising. This is important. It's beyond advertising.

These are the five things you've got to think about in digital media.

1. Advertising - traditional.
2. Subscription - traditional. Newspapers, now it's online.
3. Events - think about that.
4. Affiliate, which is commerce. How can I educate the audience and then be able to handhold them and take them to, let's say, Best Buy or Amazon or other etailers and have them transact there and then get, let's say, a piece of that pie.
5. Finally, it's lead gen. Lead gen is huge. Lead gen is a huge part of the Internet because the audience is coming to you, Mr. Digital Media Publisher. And so you've got to figure out who these audiences are and how you can qualify these audiences.

In Ziff Davis we call it HQL, which is a High Quality Leads business. Then you can offer these audiences as a high quality lead to the brand, which obviously wants to reach these companies.

I think that's kind of where things are. We can keep talking about mobile and content.

Michael Krigsman: Well, we're just about out of time, but Gus Bekdash from Twitter has an important question. That is, "What is the role these days of influencers? Where is that going, and how do you prevent corruption among those influencers?"

Anurag Harsh: Yeah.

Michael Krigsman: We have only a few minutes, so very quickly, please, share with us your thoughts on influencers.

Anurag Harsh: There are good influencers and bad, just like there's good humans and bad. It's just how it is. It's the nature of us as human beings. We're not robots, and we're not all programmed to be just completely honest. It's just how it works.

There'll always be influencers who will get paid. Indirectly, a lot of the brands are actually starting to approach them and try to convince them that they can pay them. We're going to pay you $500 if you put this tweet out. Now that happens. Don't get me wrong. That happens. In fact, the largest influencers on the Internet, the large gaming influencers with, like, 40 million, 50 million audiences and subscribers, they do this for a living. This is how it works.

There are lots of influencers that don't do this for money. I'm not necessarily an influencer, but I do have a following on LinkedIn. Whatever I put out there, even if it's about a brand, I don't get paid for it, and I don't want to get paid for it. I'm not a shill for somebody. There are a lot of influencers out there who are like that, but economics is an important thing. If at some point the economics becomes so big that they just can't refuse the money, then that's obviously the thing that one has to think about.

There are lots and lots of companies at the end of the day, which companies are influencers, right? Ziff Davis is an influencer because it's influencing audiences. It influences people, helping them make buying decisions. That's the business that Zipp Davis is in, as PCMag is in. But we're not shills for anybody. We are church and state. We are the implementor. We are like the Vatican. We're the last word in quality reviews of content.

You'll always find the entire spectrum of companies and influencers, and they come in all shapes and sizes. It's really up to you. Frankly, here's the thing, the Internet is very transparent now. It takes just a few minutes to figure out if somebody has gotten paid to write something. If you're an influencer and you're thinking about getting paid for peddling products, don't do it because, at some point, people will know that you're doing it, and then nobody is going to listen to you. That's my advice.

Michael Krigsman: Okay. In the final analysis, transparency rules. Transparency comes out.

Anurag Harsh: Absolutely.

Michael Krigsman: Okay. Well, that has been a very fast 45 minutes. It went by in a flash. Anurag Harsh, you are a top exec with Ziff Davis, and thanks so much for joining us and sharing your experience in publishing and digital media.

Anurag Harsh: Thank you, Michael. Thank you, everybody, for listening.

Michael Krigsman: I am Michael Krigsman. You have been watching Episode #263 of CxOTalk. Next Friday, a week from today, we are speaking with the CEO of Century 21. It's the largest real estate brokerage brand in the world. We're thrilled to welcome their CEO, Nick Bailey, and we will be talking about changes in the real estate market driven by data, driven by Zillow and folks like that.

Everybody, thanks so much for watching, and hope you have a great day. Bye-bye.