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Jan. 27, 2009, 9 a.m.

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).

POSTED     Jan. 27, 2009, 9 a.m.
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