Disqus says web comments aren’t just popular — they’re a good business

Disqus, a company that provides comment tools to websites, claims 42% of internet users read the comments after a story or contribute one of their own. The figure, which Disqus shared with paidContent, is gleaned from the company’s more than 2 million clients and provides new grist for the debate over how much reader comments add value to a website.

At one end of the debate are skeptics who think comment sections are cesspools of trolls and cretins. At the other end are publishers like Gawker’s Nick Denton and New York magazine who believe reader contributions should be a core part of their editorial strategy.

Are readers who look at comments worth more than regular readers?

It’s no surprise that Disqus is in the “reader comments are great” camp — after all, the company not only sells commenting tools but is also building up a second line of business dedicated to turning comments into a forum for advertisers . The service, called “Promoted Discovery,” does this by perching links to paid-for content right next to reader comments. It’s already appearing in the comment sections of sites like Mens Health and the Observer and it looks like this:

Disqus screenshot

As you can see above, the tool lets a website surface its own content on the left side while selling space in the right hand “recommended for you” box. In trying to tap this market, Disqus is competing with market leader Outbrain which also helps publishers and advertisers buy and sell web traffic.

Disqus’s big pitch to advertisers is that someone who takes the time to read the reader comments of a story is likely to be passionate about the topic — and more likely to click on, buy or otherwise engage with the proposed content. In its December “report card,” Disqus claimed readers who dwell in comments are more likely to visit other pages and spend more than twice as much time on the site. Meanwhile, reader comments overall are being treated with a new seriousness due to recent studies that suggest they shape perceptions more than we thought.

Big money from “native advertising?”

Disqus is also betting its promoted content will gain traction as a form of “native advertising.” The concept, hailed by some as a magic bullet to solve falling online ad prices, involves selling ads that mimic the content around it — for instance, sponsored tweets on Twitter. In the case of Disqus, the American Express story in the above graphic is a “native” ad. The company is so confident of the concept that it’s betting that the advertising scheme will soon become the bulk of its business.

“We expect advertising revenue to grow from less than 5% in Q4 of 2012 to over 60% of our revenue by the end of this year,” said the company’s CEO, Daniel Ha, by email.

It’s an ambitious goal but can Disqus pull this off? It has a number of factors in its favor, including the presence of veteran VC and native advertising champion Fred Wilson as one of its investors. The company is also in a good position to sign up clients due to the fact that it already has access to millions of websites.

On the other hand, the company’s quest to turn reader comments into gold faces some obstacles. One is Disqus’s capacity to find relevant content. When I visited several sites using “Promoted Discovery,” the suggested stories it proposed often had nothing to do with the article I was reading. A Disqus spokesman responded by saying the product is brand new and that its capacity to propose content will improve rapidly with use and as inventory grows. This seems a fair response — it’s likely Disqus will improve with scale.

The longer term challenge to making money from content is likely to hinge on publishers’ willingness to offer a service that will take readers away from their own website. For now, though, the websites are likely to simply welcome the extra money they receive from Promoted Discovery; Disqus says the first batch of checks is going out this quarter. It will be interesting to see what type of revenue-share arrangement Disqus and other middlemen will ask going forward — a Disqus spokesman wouldn’t disclose any specifics, saying the firm’s take is “industry average.”

And, finally, Disqus’s bet that comments will be an advertising gold mine could also be affected by competition from much larger players such as Tumblr; its founder, David Karp (who is speaking at our paidContent 2013 media conference in New York on April 17), recently said the site downplayed comments in favor of “a beautiful design and no jerks.”

(Image by ollyy via Shutterstock)