If Newspapers Cease to Be, There Will be Two Causes of Death -- Part 2

Cause of Death #2: Failure to focus on ROI

Read Cause of Death #1

Mainstream media organizations have spent insane amounts of time and effort trying to teach traditional sales reps to sell digital ads (give up, they will never do it well).  

Instead, that time and money should have been invested in discovering what drives Return on Investment (ROI) for advertisers and then building new products and services that deliver it.  Relationship selling is nice, but an advertiser cares much more about making the cash register ring than they do about who walks in the door to sell the ad.

Let’s face it, in the past, newspapers really didn’t have to worry about ROI.  They were the biggest game in town and sheer mass reach created results for advertisers.  There was no way to accurately measure ROI because there was no way to know how many people saw an ad.  Besides, there were very few other options.  So advertising rates could keep increasing and advertisers would keep paying because they believed that their businesses depended on it.

Unlike newspapers, advertisers (particularly retail advertisers) have always been very concerned about ROI.  Until recently, there simply weren’t tools to provide an accurate picture of what was working and what wasn’t.  But if legendary retailer John Wanamaker were alive today, he wouldn’t be worried about which 50% of his ad budget was wasted.  He’d know.  And everyday, he’d be finding better, more efficient and effective ways to spend his ad dollars. 

Hell, he might not even need media at all.

PFI Western Wear are online retailing pioneers (no pun intended) who have taken to creating their own high-value content including 30 to 50 second product videos and a weekly ½ hour show.  The results have been phenomenal.  More time on site, higher order values and a 50% higher conversion rates on products that have a video.  You can learn more about PFI and commercial video here.

Media execs need to get obsessed with what drives ROI.  They need to create teams of advertising, marketing and product development staffers to focus on nothing but building now ROI-based advertising products.

The solutions don’t have to be overly complex or even original. The simplest things can make all the difference. 

The Starlight Theatre in Kansas City (another PFI venture) discovered that marketing emails that include video (of live performances, interviews, behind the scenes) increased ticket sales by 593%.

Group-buying service Groupon is a relatively simple product that not only provides direct, measurable ROI, but guaranteed revenue too.  It’s also highly replicable.  I must admit, I’m somewhat puzzled by the newspaper companies which have opted to partner with Groupon rather than go it alone.  Most of them already have the advertiser relationships and are sitting on HUGE customer email databases.  It could be a highly profitable business opportunity.

Contextual environments provided by vertical sites are another way to drive ROI.  Vertical sites create much more engagement, more time on site and a more receptive audience for appropriate advertising messages.   

Behavioural advertising drives ROI.  A March 2010 study by the Network Advertising Initiative revealed that behaviourally targeted ads are more than twice as effective at converting click-throughs into purchases than run-of-network ads.  These ads also generate significantly higher CPM’s – on average 2.68 times higher.

Yodle and ReachLocal both offer live up-to-the minute reporting so advertisers can see exactly how effective their campaigns are right now.  No waiting with fingers crossed for the monthly click-through report.  They will even provide a custom phone number and record customer calls so advertisers can determine the quality of leads produced and their sales rep’s responsiveness.

That’s proving your value.

By the way, this message is not just for mainstream media companies.  Pure plays such as Washington’s TBD.com and Toronto’s OpenFile.ca need to focus just as much (probably even more) on ROI if they’re going to support themselves with online ads alone.  TBD is off to a great start (along with the Journal Register Company) by partnering with GrowthSpur.  (Full disclosure, I'm on GrowthSpur's advisory board).

In an age where ad blindness is causing click-through-rates to continue to fall through the floor, banners and big-boxes are surely to die.

Then what?

Without a dedicated focus on ROI, I predict that the end will be near.

Comments

[Ian Lamont]

This is excellent analysis that should be required reading for all newspaper advertising departments -- as well as vendors' marketing decision-makers.

I did have one comment about the following statement, though:

"The solutions don’t have to be overly complex or even original. The simplest things can make all the difference."

Unfortunately, many companies aren't equipped to do relatively simple things, which very often require an investment in tools and staff. That can be a financial hurdle, and a mindset hurdle. I once had a chat with some marketers from a home & garden products company, who had trouble convincing their CEO of leveraging digital media in even very simple ways. He was more comfortable with the idea of print-based campaigns (which he had used for decades) and was convinced that his customers were too old to use/respond to most digital campaigns, despite some very encouraging engagement from a simple email-based product club. Other companies (especially smaller ones) don't even have basic tools or know-how to handle email newsletters, video, and AdSense. Convincing such companies that behavioral advertising and digital media is effective and is worth the effort will remain a great challenge in the next few years.