A previous version of this story combined the monthly mobile unique visitors for Facebook and Google and did not account for overlap.
NEW YORK (TheStreet) -- It is no secret that mobile usage is replacing desktop. As readers change the way they consume their news, some companies are profiting from increased advertising and others still need to catch up to the pack.
United States' digital display advertising revenue totaled $22.2 billion in 2014 and is expected to increase in 2015 to $27.1 billion, according to research firm eMarketer. But two companies, Facebook (FB) and Google (GOOG) (GOOGL), generate the lion's share of that revenue.
So with this much money at stake and two companies taking in approximately 38% of it, what's left for traditional media companies? How can they insure they get to play in the advertising game?
Google and Facebook have a comparative advantage in the mobile arena simply because they are technology-based companies, which enables them to move across platforms more organically, CEO Scott Ferber, whose company, Videology specializes in video advertising, said in an email.
Ferber said media companies need to make their programming more "sticky" in order to keep their target audiences coming back in the same way they would to check their social media or to search on Google.
"The [New York] Times and The [Wall Street] Journal have incredible content," Gerry Graf, chief creative officer of ad agency Barton F. Graf 9000, said in an email. "In order to compete with the likes of Facebook and Google, it's imperative that they make their sites truly the only place where you can receive world class journalism."
Graf said that "advertisers go where the people go" so media companies have to figure out how to capture audiences on their mobile sites and applications and the advertisers will follow. But not all media companies are hoping to just attract audiences to their content -- some are hoping exposure will help generate user growth.
In May, New York Times Co., along with eight other media organizations, announced a deal with Facebook to produce "Instant Articles," in which articles will be directly shown from the Facebook app so that users will not have to wait as long for articles to load in a separate window. As part of the deal, news publishers can either sell or embed advertisements in the articles without having to share revenue with Facebook or they can allow Facebook to place advertisements and split revenues, with the social networking site taking 30%.
Many question if the deal will hurt the participating companies' user numbers because they will no longer be directed back to the original publisher's site, but the companies rejected this claim, saying spreading their content across a wider platform is more important than driving users back to their site.
Facebook had more than 158 million unique mobile visitors in May, while Google had nearly 170 million unique mobile visitors, according to research firm comScore. In May, the New York Times Digital and News Corp's (NWSA) Dow Jones & Company had 38.4 million and 15.9 million unique mobile visitors, respectively.
Clearly, neither The New York Times nor The Wall Street Journal will be able to reach the audience levels of Facebook or Google by boosting both the quality and quantity of their content alone. Brian Suthoff, chief strategy officer for marketing and analytics group Localytics, said media companies need to better understand their end user in order to profit from mobile advertising.
"If you look at a Facebook or a Google, the reason they perform so well is they are able to give people the right message at the right time," Suthoff said in a phone interview. "And in order to do that, and know what the right message is, you need to know the user and the more you know their preferences, behaviors and how they interact with your own brand, the better you're able to deliver advertising that will perform better than the advertising at other places."
Facebook and Google both work as information gatherers in a sense. Both companies take user provided information and use it to target their users better.
In its data policy, Facebook said it collects information "when you sign up for an account, create or share, and message or communicate with others. This can include information in or about the content you provide, such as the location of a photo or the date a file was created." Facebook also collects information that other people provide on its servers about other users.
Google and Facebook are often criticized for how closely they track their users, but Suthoff said media companies, such as New York Times, Dow Jones & Company and Yahoo! (YHOO), have to better understand their end users in order to be competitive on digital advertising.
Currently, The New York Times app on both iPhone and Android collects and transmits users' phone IDs to third parties, according to a report done by The Wall Street Journal. For its part, the Journal, also owned by News Corp, reported its mobile reader app only collects phone IDs for itself and not third parties.
Suthoff said the New York Times is an interesting example because when it first introduced its application to the market in 2008, content was free but later the company installed a paywall to generate revenue from the app itself. Currently the application is free to download but limits access to nonsubscribers to 10 free articles a month from any section. In order to access the app's full content, users must become a digital subscriber which can cost anywhere from $195 to $468 a year depending on the package. The New York Times app ranked fourth on a list of the top apps for 2014 based on U.S. iOS and Google Play revenue, according to app tracker App Annie.
In May, New York Times Co. reported an overall 5.8% drop in advertising revenue compared to the same period the previous year, driven by a 10.7% increase in digital advertising revenue and an 11.1% decrease in print advertising revenue. Digital advertising revenue made up 28.2% of the Times' $384 million in revenue for the first quarter, according to company's filings. Digital advertising includes all mobile and video platforms, paid posts and programmatic buying.
By comparison, Dow Jones saw a 5% drop in revenue for its first quarter compared to the same period in 2014. News Corp. does not break down its news and information services revenue to detail just how much Dow Jones is generating. The news and information services of News Corp. generated $1.4 billion in revenue compared to the same quarter the previous year in which it generated $1.5 billion.
For the quarter, advertising revenue dropped to $15 million as a result of declining print advertisement sales, according to company filings. News Corp. does not break down its advertising revenue to reflect the differences between print and digital advertisements.
Recently, The Wall Street Journal has been making a large push at redesigning itself and its digital offerings to adapt to the mobile world. The paper launched its redesigned Web site in April, pairing the launch with its announcement of an Apple Watch app.
The Wall Street Journal will also release its first mobile-only product, called What's News, which will be a paid, digest-style news app, according to Capital New York.
Releasing a mobile-only product might be a strong step forward for The Journal and something other media companies might benefit from doing themselves, especially since so much of the media's current content on mobile is just a translation of its desktop content, which IHS Technology analyst Eleni Marouli says is part of the problem.
Marouli said another issue facing traditional media companies is that it is practically impossible to transition desktop advertising to mobile, especially banner ads.
"If you think of a traditional banner ad already it's becoming much more difficult to see on the mobile," she said in a phone conversation. "And some display ads are monetized on a cost per click basis and the clicks don't work on mobile because they are often clicked by accident." Marouli said that because traditional advertising is difficult to monetize on mobile, it is effectively driving down what publishers can charge advertisers for mobile advertisements.
Marouli said while it is still playing catch up, Yahoo! is doing a decent job of adapting its standard advertising style to a mobile community.
CEO "Marissa Mayer has launched this kind of native, social, in-stream advertising, and I think they are doing okay," Marouli said. "Again we're talking mobile, so these banner ads don't work on mobile, so they are trying to create them in this kind of Facebook news feed style rather than the traditional banner that's annoying on the side."
Yahoo! controls 5.5% of U.S. digital display ad revenue, but is expected to lose its standing in 2015, dropping off to just a 4.6% market share, according to eMarketer estimates.
Yahoo! currently offers 17 apps on the Google Play store and 13 on the Apple App Store. The iOS version of the company's Yahoo! News Digest app was selected as an App Store Best of 2014 and Apple Design Award 2014 Winner. But the success of its easily digestible news app does little to help boost the company's revenue since it is both free of charge and advertisements.
Yahoo! recently reported it generated $1.0 billion in revenues down from $1.1 billion in revenues from the same quarter the previous year. Of that mobile revenue was up 61% from $145 million to $234 million. Yahoo! also reported more than 600 million monthly mobile users, including users on its blogging Web site Tumblr.
Marouli said the area where these companies are strongest is that they are content providers, something Facebook and Google have been playing catch up on as of late. She said with branded content, which are advertiser-sponsored posts that link readers to the advertisers site, will allow media companies to easily generate revenue while making advertisements merge seamlessly with their own content. With branded posts, advertisers' content will blend much in the same way advertisers' content appears on Facebook's news feed.
Even with the potential success of branded content, video continues to be the next frontier for media companies, and the numbers prove it. As of the first quarter, Facebook received more than four billion daily video views, while Google-owned YouTube also received more than a billion views daily, with 300 hours of video uploaded on YouTube every minute. What's remarkable about this is that half of the millions of hours people spend daily watching YouTube videos are watched on mobile devices, according to the company.
Even after the New York Times announced in October it would cut over 100 newsroom jobs, the publication was still working to expand its digital staff. Currently there are 75 full-time video staffers, with the site boasting over 18 million monthly video views by the end of 2014, according to Digiday. Compared to the larger staff at the New York Times, The Wall Street Journal's 40-person video staff is still able to produce approximately 40 videos a day with approximately six million monthly video views, according to Digiday.
Marouli said media companies' investment in video content is what could save print publications from going extinct.
"The New York Times and some other news agencies, like The Guardian here in the U.K., are doing is that they are investing in video, and this is what I think will be the recovery of print publishers," she said. "Video content monetizes much better than traditional display ads, and it's something that on mobile you would be watching and engaged with."