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Nieman Journalism Lab
Pushing to the future of journalism — A project of the Nieman Foundation at Harvard

How to grow local revenue, despite the ad inventory glut

So, what to do about this over-abundance of advertising inventory in our local markets?

Unlike some in this industry who are looking, again, at some form of paid content as the solution to the revenue crisis, I still believe that there’s a lot of life left in the ad-supported model. We haven’t been particularly creative in building ad solutions that work well for advertisers and that generate sustainable revenue for newspaper companies.

Given the diminishing returns of the CPM market outlined yesterday, the move is on to find a better model. Recently, The New York Times’ David Carr looked to Apple for inspiration:

Those of us who are in the newspaper business could not be blamed for hoping that someone like (Apple’s Steve Jobs) comes along and ruins our business as well by pulling the same trick: convincing the millions of interested readers who get their news every day free on newspapers sites that it’s time to pay up.

For a long time, newspapers assumed that as their print advertising declined, it would be intersected by a surging line of online advertising revenue. But that revenue is no longer growing at many newspaper sites, so if the lines cross, it will be because the print revenue is saying hello on its way to the basement.

The iTunes Solution.

And yet there is no parallel between selling songs — which customers will play over and over — and selling a recap of the City Council meeting. Apple didn’t simply say “What do we have that we could sell to people?” They looked for a need in the marketplace — a better way to buy music — and created it.

Apple does two things brilliantly. First, it takes existing ideas and makes them better. Personal computers. Music players. Phones.

Second, Apple convinces people to pay a premium price. As a premium brand, it doesn’t wallow in the mud of the average marketplace. It stands slightly aside and slightly above, commanding higher dollars and greater loyalty for products that their customers say are worth the extra coin.

Apple doesn’t want to be Wal-Mart. Neither should newspapers. So in that, Carr’s right to look to Cupertino.

But how on earth can a newspaper become like Apple. Or Audi or Nike? By becoming the go-to brand for local (and, in some cases, national) businesses when they need an effective (not cheap) marketing partner.

Some specifics:

1. Don’t join the race to the bottom of the CPM pool. The CPM marketplace is a supplement, not the main business. Yes, if you have some unsold space in non-prime areas of your digital properties, by all means let Google or Advertising.com sell that remnant space for you. Maybe it pays for the heat or the gas in the reporters’ cars. But it’s not going to sustain a newsroom. For that you need a robust and growing local revenue stream.

2. Build effective and innovative local ad products, so good that local advertisers won’t be able to resist. As Steve Yelvington says in the comments of the previous post:

Local businesses are not interested in ad avails, CPM rates, clickthough rates, and all the other details. They’re looking for results (actual business transacted in the brick-and-mortar world) and — importantly — service. Local media sites have an opportunity to focus on understanding the client’s business needs and tailoring packages of creative solutions that meet those needs. This requires a different skill set than past practices (mostly taking orders and picking up slicks), but a local news site is infinitely better positioned to provide such services than some randomly chosen global giant.

Do local advertisers think of the newspaper as the place to go for counsel on how to spend their marketing dollars? I’d doubt it. For years, newspapers were able to sit back as the dollars flowed in. No longer. So what can a newspaper offer? Some ideas:

Custom, long-form video. The web finally offers local advertisers the opportunity to get in front of customers in video without having to pay a high price for cable or broadcast media. Take them there. Hurry, because TV’s waking up about this.

Location-aware advertising. Smart Phones aren’t the future. They’re here. How are newspapers – with their market coverage and huge sales staffs – helping local advertisers to understand and benefit from this?

Microsite development. Most local sites are a mess that don’t sell. You have brilliant designers with time on their hands. Make money together.

Social media strategy. Be the expert. Bring value. Give seminars for local advertisers on how to use social media. Teach them about the possibilities of digital media. Don’t give the hard-sell on the ads — if you do this well, they’ll be back.

Ad aggregation. Do you offer consumers in your market the opportunity to ask for ads that meet their needs? Is a supermarket sales database that’s requested by a reader worth more than one that’s simply shoved into 200,000 papers? (I’ve discussed a similar idea previously on my blog)

Performance pay. These are dirty words on most sales floors. Newspapers don’t want to get into the pay-per-click or, worse, pay-per-sale model. But this is where the world is headed. Branding is always going to be with us, but like it or not Google has defined online as a strict ROI model. Expect your customers to want it; make it work so well that they’ll pay more.

Commercial/Sponsored blogs. There are opportunities to create real content that’s valuable to real readers that just happens to be paid content. Think of this as the evolution of the special section — an overpriced and largely unread experiment whose time is over. For example, if you’re thinking of buying a bike, who knows the most locally about bikes? The owner of the bike shop. Yes, she wants to sell you a bike, but she’s also a total gearhead who’s up on the latest technologies, knows about the upcoming novice rides and has some pretty strong opinions about bike lane legislation. Do you think that would be interesting to bike buyers? It’s the new advertorial.

3. Make it easy to buy. Apple and Google know something that newspapers should know as well: When you make it easy for people to spend, they spend more.

Part of this is self-service for those forms of ads that can be self-service, but even with the more complex ideas you may come up with, try to structure the pricing so that it’s drop-dead simple. When the iPhone came out, there were exactly three pricing plans, a far cry from the usual phone sign-up with more options than a 1977 Dodge Challenger. And — here’s the beauty again — these limited options painlessly guided many users into a more expensive plan than they might have chosen otherwise. Not through trickery, but by clearly stating the benefits, and reducing the number of confusing choices.

Newspaper companies have the staff and the market-coverage to change local advertising. They just need the motivation which, like it or not, is here.

What are you doing in your local market to grow revenue? Post examples and war stories in the comments.

RELATED: Terry Heaton — CPM rates are falling (thank God).

                                   
What to read next
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Ken Doctor    July 25, 2014
When people talk about explanatory journalism, the focus is on new players like Vox and FiveThirtyEight, or on giants like the Times and the Post. But can connecting the dots trickle down to the local level?
  • http://www.midadopter.com Tim D’Avis

    Tim, can you unpack the ad aggregation idea a little bit more?

  • http://sellingprint.blogspot.com MichaelJ

    Exactly! When you say ” By becoming the go-to brand for local (and, in some cases, national) businesses when they need an effective (not cheap) marketing partner.”

    I would only change “brand” to sales Person.

    The other missing piece is to sell stuff in addition to whatever revenue you can make selling a “complete marketing service” that is easy to buy and affordable to local business.

    Apple makes a little money from iTunes. They make a lot of money by selling stuff. They are in the selling stuff business, not in the selling music business.

    To sell marketing programs, why not network commercial print sales forces with ad sales forces with design. marketing talent. One simple buy, for web, print and collateral. Everybody gets a piece of the value created. With an afilliate model for cross selling.

  • http://www.timwindsor.com/ Tim Windsor

    Tim D’Avis:

    Yeah, I did make that sound awfully simple and easy, didn’t I. It’s actually a complex mess that marries editorial and advertising in a solution that some would see as an unholy alliance but what I think just might be one of the local holy grails.

    I’ve discussed it more at length here:

    http://timwindsor.com/2008/11/29/shopping-for-readers-a-proposal-for-local-news/

  • http://mediacafe.blogspot.com jeff mignon

    Tim, good post. I strongly believe that we are going towards a “performance pay” model. Small businesses want sales… not blabla. They don’t have a lot of money to invest, so they need performance/ROI. Provocative question: Could local media switch the logic by choosing the ads having the best performances?

  • http://www.localtvnews.wordpress.com Mark Joyella

    Tim,

    While no single Steve Jobs may come along with an iTunes style solution to the current crisis in local media, it will take a lot of Steve Jobs, thinking the way you outline, and pulling their fingernails out of their desks long enough to realize that the old model–simply waiting for the car dealer to start buying spots again and all will be okay–isn’t going to happen.

    Great work…thanks for the post.

    Mark

  • http://virtualjournalist.wordpress.com Anthony Salveggi

    Tim,

    Could the ad aggregation scenario you propose work this way: Newspapers develop a database of participating businesses that readers can choose from so that when they visit their local news site, they will see advertisements that interest them. Advertising businesses would also participate in a Twitter-feed program so that they send out announcements of special sales to those same readers/customers. Does this sound doable?

  • http://sellingprint.blogspot.com MichaelJ

    @jeff,
    that is a . ..
    “Provocative question: Could local media switch the logic by choosing the ads having the best performances?”

    The upside would be there would be a number of use cases of success that could be shown to other local businesses. Also it aligns the incentives of the ad person with the client. They both win, if they both win. Very nice.

    Back at you:
    Does it make sense to edit the ads as well as what fills the news hole. The fact is that good ads are what people are looking for. If ads were edited, that would be a valuable service for a customer (reader.) it’s Search for me and give it to me on Paper.

    Google has pretty tight standards for ad sense. Why not pretty tight standards for Print ads, informed by the best professional marketing advice? The SMB’s learn something they need. As long as the marketing campaign is successful they will keep investing in it.

    Any thoughts?

  • http://timwindsor.com Tim Windsor

    Anthony,

    Yes, I think that’s definitely one way to deliver the information.

    Another way could be location-specific ads. If you’ve just pulled into the parking lot of the supermarket, say, you get pinged on your iPhone with the steak sale. Only if you ask for it, of course.

    Or Maybe it’s social-shopping, with a mix of paid data from advertisers and running commentary from people in the local area who note deals and/or problems.

    Once you start thinking of ads being free from their traditional form, lots of ideas bubble up.

    The only limiting factors are ideas, good developers and — and this is critical — a means to assemble critical mass of users. This might very well mean building in someone elses sandbox (*cough* Facebook *cough*) rather than trying to launch yet another “social network” that is neither.

  • http://timwindsor.com Tim Windsor

    Jeff and MichaelJ,

    Do we really think, though, that any local paper would turn away paying ads?

    There’s no question that the Google model works, but it’s on a huge scale, with thousands and thousands of ads. The typical local ad load weekly is probably in the hundreds at best, right?

    Still, if we’re going to dream, we need to dream big.

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  • http://sellingprint.blogspot.com MichaelJ

    @ Tim,

    I think there are two ways to dream big. Looking down from 30,000 feet and trying to look sideways from the ground. I agree that Google ads make lots of sense from 30,000. But, the problem is that the actual revenue to papers is only a nice to have. IMHO, web ads are a loser. Pursuing them as a main strategy is not going to work on the ground.

    Google has a marginal delivery cost of close to zero after having invested gezilions in social capital, software systems and the best, most reliable server farms on the planet.

    On the ground, the money comes from local advertisers who do successful “multi channel” marketing that starts with Print.

    But, rather than overfill this comment box..here’s a link to a post that tries to describe how it could play out..
    http://sellingprint.blogspot.com/2009/01/iphones-good-news-for-newspapers.html

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  • http://oldmedianewtricks.com Daniel

    I like the last point. If it’s easy to buy, you can cut out the middleman — the sales department — in many cases.

    Why’s this good? Many sales folks just don’t get interactive, in my opinion. This is one case where using a good tool may just be better than interacting with a human.

  • http://sellingprint.blogspot.com MichaelJ

    Daniel,

    I think it’s an incentive problem. The price of ads to local advertisers just can’t support a cost of sales. The more a salesperson sells, the more the paper loses. If the cost isn’t covered, you just can’t make it up in volume.

    It’s one of the tricks of Google – no cost of sales, no salesperson.

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