Call it addition by subtraction, or deduction over misdirection. The commercial progress of Talking Points Memo is a telling lesson in the maturation of digital native news companies.

TPM was born very much a blog, one of those early political blogs built on single-minded strong opinion and dogged work. Josh Marshall worked solo, building it up from 2000 to 2005. Then he began turning into a site, one with a staff and a business in search of a workable long-term revenue model. Over the last couple of years, he says he’s found it.

Now, as TPM approaches its 15th anniversary, one thing remains consistent: TPM’s brand. Its voice is unabashedly left of center. This week’s headlines include “Why The GOP Is So Flustered By US-Sino Climate Change Deal” and “Seven Times Joni Ernst Showed Her True Wingnut Self.”

What’s morphed is the business — a small, profitable one, with a staff of 13 journalists, including Marshall, and 10 on the business side. TPM reaches about 4 million unique visitors a month, claiming 20 million pageviews and counts 170,000 Twitter followers. It’s a going concern, but like all others, still edgy about where money is going to come from in the next several years.

Unlike many, though, it believes it’s found a route to stability. Its road map includes two increasingly familiar destinations: content marketing and native advertising. Those are disciplines used more by bigger news companies, from The New York Times and The Washington Post to Atlantic Media, Forbes, BuzzFeed, and Slate. How the modest TPM is finding its way offers some smart lessons for smaller national news sites and smart regional ones.

In about one year’s time, Marshall says TPM has built a $1 million-plus business in native advertising. Direct ad sales, he says, are up 54 percent year over year. Like the bigger native players, TPM works the increasingly familiar landscape of Fortune 500 “thought leader” advertising, corporate reputation, and advocacy groups. The company’s SHIFT@TPM studio is the center of the new business.

Take the current PhRMA “sponsorship,” as TPM calls the business. PhRMA is Pharmaceutical Research and Manufacturers of America, which calls itself “the country’s leading biopharmaceutical researchers and biotechnology companies.” It’s a powerful trade group. Like other such lobbies — including, prominently, energy companies like Chevron and BP, fans of the native approach — it knows the importance of working both the court of public opinion and the halls of Congress. So PhRMA is running an ad, shown below overlaying the homepage, but only to Washington, D.C.-based TPM readers.

The format of the ad is large. TPM calls it a Forum ad, similar in content to the Texas Tribune TribTalk content marketing initiative (“The Texas Tribune launches its new combination op-ed page/sponsored content pitch”).

The PhRMA campaign is one of about 15 that will run on the site this year. About half of those are complex, multi-month runs, with content changed out multiple times. The other half are shorter one-ad runs, often up a week or a month.

It’s the long-running ones that have established the substantial new business, with organizations and companies paying seven figures to participate. Why will these companies pay mid-double digital effective CPM (cost per thousand viewers) rates? TPM cites high engagement. Ads like the PhRMA Forum one drive “25 to 40 percent interaction rates and 15 percent content read rates,” TPM says.

These interests believe they are reaching an influential, if sometimes smaller, crowd (“The newsonomics of influentials“). Each year, TPM asks its readers to complete a detailed online survey to understand both their interests and their demographics. While the demos line up in age with the web overall, and skews male over female (60/40), its education level is sky-high; 50 percent of the readers have advanced college degrees. Unsurprisingly, they’re overwhelmingly Democrats. That D.C. targeting favored by PhRMA this week is bolstered by this number: 23 percent percent of the DC readership says it is involved in “writing policy.” The annual survey might not be scientifically sound, but it’s sufficient for advertisers for a key reason: It rings authentically true to the nature of TPM’s content and mission.

For Marshall, the current business model developed out of two key understandings.

“The epiphany is that we were competing without having any unique factors and advantages of our organization working in our favor. We were competing with The New York Times or Huffington on terrain where scale is all that matters. That’s ridiculous,” says Marshall. “At the same time, we could see the commodification of banner advertising.”

TPM continues to build its system, but already, we can draw a few applications from it:

• Do addition by subtraction. Marshall replaced three direct sales people — who had sold smaller space display — with one, who now sells the content marketing sponsorships. Amanda Hale, vice president for ad and creative solutions, not only sells the campaigns but shepherds them through the creative and design process. To be sure, that process requires labor, but overall, TPM is getting more back from its sales investment. Non-content marketing ads produce about a quarter of the revenue of the natives, but are now all sold programmatically. Further, Marshall says TPM has been able to optimize its programmatic ad pricing, carefully watching the relevant analytics.
• Choose deduction over misdirection. The misdirection is the chasing after the same kind of display advertising that a few big players increasingly dominate. Marshall, like so many others, deduced that simply getting bigger — chasing the top line numbers of unique visitors and pageviews — would never build the business sustainably on the basis of traditional digital display.
• Work the sectors you know. Pitch those who work in your site and social circles. TPM speaks the same policy-oriented language as its target advertisers; many other sites don’t. Similarly, nonprofit local news sites like MinnPost and Voice of San Diego have found kindred spirits with large regional health and education nonprofits.
• Keep the reader engaged on your site. That’s where “native” comes in, in content marketing. Native ads fit into the flow of site’s presentation, even when they are clearly demarcated as ads. That means readers don’t click off — and away from the site — as they click on traditional ads. The ad reading experience ideally is but a short detour from the editorial, and offers a quick cut back to it.
• Disclose clearly, and separate. The division between the editorial and business (including content marketing) operations is clear, as is the labeling on the site of ad “storytelling.”

Is this content marketing business a sure sustainable road forward? Nothing’s certain, given the pace of digital change.

Hale, though, makes the good point that the defensibility of the model is that it’s not “transactional.” In other words, Google and Facebook would find it harder to automate the business; at this point, at least, it requires human interaction. Hale underlines that as she explains the often-long sales and design cycle through TPM’s SHIFT@TPM studio. It may demand patience, and a real understanding of a site’s unique audience, but in defending against the digital ad giants, it offers a smart, actionable way to be on offense. Smaller sites like TPM share this thinking with such sophisticated large sites like the FT, which also increasingly specialize in “strategic” consultative sales.

Marshall makes the point that TPM offers these advertisers a double value. First, it leverages its storytelling expertise on behalf of interests often versed in the art of the press release but not in engaging storytelling. Second, it knows how to tailor ads with TPM’s specific audience in mind.

Increasingly, that means putting a premium on facts and charts. In fact, TPM will unveil two new chart-heavy ad products in February. Consider those TPM content marketing 2.0. The big lesson: Make the formatting easier and more visual.

Marshall makes the point that he didn’t set out to specifically execute a content marketing strategy. That push came after looking at the marketplace. It’s about something all good journalists know, what he calls “high information,” even if the ad information is plainly commercial: “Content marketing is something we fit into this concept. Content marketing is part of high information messaging, and high information ad creation.”