Free e-mail accounts, conference calls, search engines, social media networks—companies offer these Web tools to us at no charge so they can build up a critical mass of users. Once that’s done, they try to figure out how to make their services pay. The trick is to do that without driving users away.
Like many other companies that started out by offering “freemium” Web services, San Francisco-based Disqus has been seeking revenue by partnering up with advertisers willing to pay for the chance to reach potential customers online. But will a recent expansion of Disqus’ advertising strategy test the tolerance of its users?
Disqus, founded in 2007, helps Web publishers and bloggers handle the time-consuming chore of moderating the comments contributed by their readers. The service includes spam filters and an easy sign-on for readers through their existing social media accounts such as Facebook. Operating the service gives Disqus a wealth of information about the readers of many different websites—including the sites they visit, their general interests, and their preferences. This is the kind of data that helps advertisers target their online ads toward the readers most likely to be interested in their products.
To capitalize on that value for marketers, Disqus has recently introduced a feature called Sponsored Comments—an advertiser’s box placed between a publisher’s article and the string of readers’ comments about that article.
Publishers get a share of the revenues Disqus receives from the advertisers. They have some degree of control over the types of advertisers whose messages will appear amid their own opinion pieces, news coverage, advocacy campaigns, product reviews and product descriptions. (More about those controls later.)
But they can’t opt to exclude Sponsored Comments entirely from their pages, says Disqus general manager David Fleck (pictured above.)
“When we talk to advertisers, we need to know what inventory we have available,” says Fleck, a veteran digital advertising executive who joined Disqus in 2011. In exchange for hosting the new Disqus ad feature, website operators can also benefit financially, he says.
“Publishers are constantly trying to figure out how to make money.” Fleck says. The revenue share for publishers depends on factors such as the number of their readers targeted by advertisers. The ads will only be visible to those readers.
Sponsored Comments is part of a movement toward “native advertising,” or marketing content that is often blended into the layout of a host website. It may look more like a feature story than one of the annoying banner ads that urge readers to make a specific purchase.
But there are risks for Web services companies if their advertising strategies force publishers to alter the content or look of their websites, says Kipp Bodnar, vice president of marketing at Cambridge, MA-based Hubspot. Hubspot (NYSE: [[ticker:HUBS]] is a software company that helps companies promote their own websites to readers, and find customers for products they sell.
“I think if you’re a publisher, it’s because you want to control your own destiny,” Bodnar says. “Any time somebody takes that away from you, it decreases the value of your site.”
This isn’t the first time Disqus has opened up that well-placed spot above the discussion threads to advertising. But Web publishers have the ability to opt out of the company’s earlier advertising vehicle, Promoted Discovery. That ongoing feature, introduced in 2012, is similar to the content recommendation ads that appear on publishers’ websites under headings like “Seen On the Web.” The New York firms Outbrain and Taboola are established purveyors of such “content discovery” ad placements, but Silicon Valley giants including Google and Facebook have also been entering the market.
The Promoted Discovery feature has done well for Disqus, Fleck says. “It’s a major revenue line item for us,” he says. Publishers also share in those ad revenues.
However, Disqus allowed its users to opt out of the Promoted Discovery feature because some publishers were already bound by contracts for such ads with competitors such as Taboola, Fleck says.
With Sponsored Comments, however, Disqus is capitalizing on its leading position as a provider of comment moderation services, Fleck says. No competitor has reached the same scale, he maintains. More than three million websites use Disqus, which claims a 70 percent market share in the field, he says. Its customer base includes well-known media names such as the magazines Rolling Stone and The Atlantic, as well as small independent publishers that set up their websites on blog hosting systems such as WordPress and Tumblr. (Note: Xconomy is a Disqus user.)
The sample Sponsored Comment boxes Disqus provided to Xconomy contain many different means for advertisers to engage readers, including text elements, videos, and playlists. In addition, readers can comment on the content of the ad itself, before moving on to the comments about the publisher’s article they’d originally been reading. Disqus doesn’t have
