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Feb. 24, 2014, 9 a.m.

Local newspapers and TV stations are building their own private ad exchange with Google

After a reboot and the rise of programmatic ad buying, the Local Media Consortium is hoping that news outlets can have more market leverage negotiating as a group than as individuals.

In 2006, 176 newspapers came together in a partnership with Yahoo to found The Newspaper Consortium. The idea, a simple one now, was an important step forward for the development and growth of ad networks. Yahoo had the reach — 400 million users worldwide at the time, according to The New York Times — but the newspaper companies (which included the MediaNews Group, Hearst, Belo, Scripps, Journal Register, Lee, and Cox) — had the experienced ad sales teams. Together, they sought to increase revenues all around — so that a newspaper could sell local ads to local businesses that ran when local readers went to Yahoo, splitting the proceeds along the way.

For a while, the project seemed like a success. In 2009, Lem Lloyd, a Yahoo VP, told the Times, “It seems to be hitting the sweet spot for both newspapers and Yahoo.”

But it’s been a rocky ride for Yahoo, and newspaper companies haven’t exactly had a great few years either. In 2010, the project’s lead at Yahoo, Hilary Schneider, left the company. Alan Mutter described at the time how, for Yahoo, the consortium had become more unwieldy and less profitable than they’d expected. In Mutter’s view, it was the ad tech that made the deal appealing to newspaper companies, who couldn’t afford to develop those platforms on their own.

Around the same time, some of the newspaper executives had left the group — MediaNews Group’s Eric Grilly and Scripps’ Rusty Coats. In 2011, the consortium’s executive director, Michael Silver, left to head the Knight Lab at Northwestern. Yahoo’s tumultuous years continued, and as major changes were made to it’s “flailing ad business,” little was heard about the Newspaper Consortium.

That is, until last fall, when the project relaunched as the Local Media Consortium under the leadership of Coats.

The new Local Media Consortium has 800 newspaper members and 200 local broadcast members. In October, Rick Edmonds at Poynter explained how the mechanics of the consortium had been updated. Most important, the network no longer negotiates exclusively with Yahoo. In addition, Edmonds highlights its overall growth, move away from a 50-50 revenue share, increased network reach, and the inclusion of broadcast companies.

“When we signed the first 30 companies in late September, [consortium chairman Christian Hendricks] referred to them as ‘the cult of the willing,'” Coats told me over the phone. “They saw the potential, and knew we were going to negotiate deals on their behalf, and were taking a bit of a leap of faith on all of that. That’s where working together for seven years does lend itself to a high level of trust. You’ve earned it after seven years.”

Now that trust is paying off. Today, the Consortium is taking a step towards fulfilling its promise of increased revenue through a new partnership with Google. The deal is supposed to strengthen Google’s relationship with local publishers by “turbocharging” the online news business via “growing budgets” for programmatic buying, according to a company blog post by Laurent Cordier.

Two facets of the deal, access to DoubleClick for Publishers and Google AdSense, are products that member publishers can already use on their own. Google will likely gain DoubleClick users from the consortium, but use of both products is optional.

The real draw of the Google partnership for consortium members is a new private ad exchange that sells publisher inventory programatically. Writes Cordier in an email: “The exciting part about this new exchange is that it allows all of the consortium’s members to bring together their inventory in a private exchange — this is unique in the industry. The vision is that this will be not just about remnant inventory, but a way for the consortium members to monetize their full businesses.”

For the 40-odd member companies, the exchange should net an overall better deal than they could get selling their unsold inventory to remnant networks, which generate low CPMs and which some blame for reducing the value of news sites’ higher-end self-sold advertising. “The goal here is cohesion to all of that inventory, so we’re not being pecked to death by ducks and we’re not seeing our rate destroyed,” says Coats.

Increased revenue through targeted selling has been a central goal of the consortium since the days of its exclusive deal with Yahoo. “What we learned early on with targeted selling was that if I wanted to sell, on a banner ad campaign, to women under 30 who were interested in fitness, and the only site I had to sell that on was the Knoxville News Sentinel, I did not have thousands of those women,” Coats says. “I needed to have a partner like Yahoo, so I could have thousands of women under 30 who were interested in fitness, and target those banners at them. If you think about that on a global perspective of brands wanting to reach into local markets and sell millions if not billions of impressions against that — you being out there on your own as the hometown news — you’re just not going to be coming up on the radar of these agencies.”

But by banding 1,000 publishers together under the brand of the consortium, Coats says he’ll be able to efficiently offer brands 10 billion impressions. Negotiating as a single entity gives him greater leverage than 41 companies operating independently. “The idea is to make buying us so efficient that we get more of those dollars and there’s less nipped off the edges,” he says. “I’m hoping as this rolls out, it becomes a bit of a no brainer.”

The mechanics of programmatic ad sales are complicated — braver men than I have tried, recently, to explain it. But it’s not going anywhere. “I see programmatic buying as oxygen now,” says Coats. “It’s the way the system works.”

Google says the numbers are there to support that feeling. “Analysts predict 75% growth in the next year alone and we’re seeing huge interest across our own systems,” writes Cordier. “One of the most exciting developments is that it’s drawing interest not just from direct response advertisers, which were early adopters of the technology, but from major brands as well.”

Coats is adamant about flexibility for consortium members and doing away with the exclusive model of the past. “There was a lot of concern about making sure that there was exclusivity in partnerships, and that was absolutely the right stance to take for that era,” he says. “It’s been very common in our past to negotiate exclusivity. If we have this obituary product, then the TV station across the street will not have that. I think that’s a lovely and antiquated worldview.”

Indeed, Coats says he’s currently finalizing a renewed deal with Yahoo and is also in talks with other “big platform portal folks.” Overall, he says the renewed consortium has gotten a lot of attention from vendors and there are opportunities for investment.

The benefits of membership extend past the purely financial. Members, especially smaller publishers with fewer resources, are provided with an opportunity to share best practices, from legal advice to product development. In an often fractured field, the importance of the consortium’s cooperative nature cannot be overlooked.

“It’s very light at the top. We don’t have a big corporate office or anything like that,” says Coats. “We all want to help each other succeed.”

Photo of a different kind of trading exchange by Baron Visuals used a Creative Commons license.

POSTED     Feb. 24, 2014, 9 a.m.
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