SimsBlog

Two Ways News Execs Will Have to Radically Change Their Thinking in 2012

Forgive me, I’ve been a shamefully negligent blogger these past few months.  

Between COO’ing at my own company and advising three others, I almost forgot how much I enjoy telling newspaper executives what to do! (Well, except for my role as a PostMedia Network digital advisor, but they actually want me to tell them what to do, which kind of takes the fun out of it).

So, here you go newspaper executives, the two things I think you will have to start thinking about in radically different ways in 2012:

1.  I’ve said it before and I’ll say it again: It’s not about ads, it’s about ROI.

As Newsosaur Alan Mutter pointed out on his blog last week, the big guys (and some littler guys too) are coming after your local advertisers.  

Google is expanding its GYBO.com (Get Your Business Online) program, Facebook is offering do-it-yourself extreme targeting and a CPC payment model.  Then there’s Groupon, Living Social et al, Foursquare and a zillion different mobile products.

What do all these solutions have in common?  They provide direct, measurable ROI to local advertisers.  And believe me,  that’s all local advertisers care about.

It used to be that an ad in the weekend newspaper would make the cash register ring.  That’s because newspapers used to be as much about shopping as they were about news.  Think about it - a news hole of only 50% meant that the rest of the newspaper was all about display ads, classifieds, special sections and flyers.  And because of that shopping environment, they delivered excellent results to their advertisers.

But now, shopping is a thing that is done digitally.  Even if we don’t always buy online, we’re most certainly doing our product research, feature comparing and deal hunting there.

And over time, newspapers have become less effective at making the cash register ring.  The old days of slapping up a display ad and not proving that its working are well behind us.  Just ask the folks at Patch.  Or ask your advertisers.  You'll quickly find that the more they know about which advertising vehicles are driving their sales, the less likely they are to buy display ads.

Asking print reps to sell digital display packages is a short-term solution that takes advantage of the knowledge gap of many retailers who have yet to learn the many advantages of digital advertising. This is not a long-term strategy.  Far from it.

News organizations are going to have to spend a lot more time studying what works and what doesn’t for their advertisers.  

Gannet, Tribune and the Tennessean are taking advantage of the knowledge gap in a different way. Through products such as Gannett Local, 435 Digital and 1100 Broadway they’re helping local advertisers navigate the digital advertising world.  They’re saving them time and providing proof of ROI.

The contextual environments of content verticals drive a much higher click through rate than running the same ads in an environment of unrelated content.  In my experience, behavioural advertising and re-messaging ads can out-perform even so-called “high-impact” display ads by a factor of 10:1.  Who in your organization is thinking about these and other ROI focused products?

It’s time to get serious about understanding the online advertising world.  Competing in this space is not a part-time job.  Nor is it for the faint of heart.  

Meeting the local advertising challenge can’t be done without great digital talent.  And that’s where radically different thinking challenge number two comes in...

2.  It’s time to get greedy about talent.

I don’t mean to be alarmist, but no one wants to work for you.

Let’s face it.  It’s all about supply and demand.  Great digital talent, especially at the executive level is very difficult to find and even more difficult to keep.

It’s not personal, it’s just that you’re not as exciting as other digital companies, nor do you offer the (even remote) possibility for your employees to become multi-millionaires as a result of an IPO.  On top of that, you’re old media, with old processes and old...well, you’re just old.

Actually, it’s not just newspaper companies that are challenged in the talent department.  AOL has had a 50% turnover at the executive level in the past 6 months and even the mighty Twitter is having trouble keeping engineers and executives.

Sites such as LinkedIn and PleasePoachMe make it easier than ever for your competitors to find and to start a nice chit-chat with your talent.  If you’re going to keep them, you’re going to have to start thinking very differently.

Give them control over their products and strategies.  You’ve hired them to do a job.  Trust them.  Don’t force them to keep explaining why the sky is blue - they hate that.  (I once had the CEO of a large media company ask me why digital people working for mainstream media companies are all so very bitter.  Constantly having to explain basic digital concepts is one of the reasons).  Get lots of great digital people, not just one or two.  That way they can collaborate, as well as push and energize each other.  And for Godssake, don’t have them report to non-digital people (and most definitely not the CFO).

And here’s the big one....Give them a piece of equity in the new products they create for you.  You heard me.  Equity.

Not willing to go there?  Well, feel free to sit back and watch as start-up after start-up start eating away at the local revenue you have left.

 

It's Time We Talked About Patch

A couple years ago, I visited the very groovy, very lofty Soho offices of Patch.com.  At the time, there were less than ten Patches in existence, all in the tri-state area but the team was hopeful that they were building something that would become much, much bigger.

They were very kind to me, a VP from a Canadian newspaper company who they didn't know, (and who had a nasty, snotty, sneezy cold to boot) and we spent an hour or so talking about each other’s businesses and possible ways we could work together in the future.  They even let me take pictures of their offices for my blog, which was at the time less than three weeks old.

My main memory from the meeting was that they didn’t appear to have any understanding of how challenging the local online advertising space was.  They seemed to have a blind faith that local advertisers would appear, with very little sales effort. 

Knowing how challenging they were going to find the local advertising space, I walked away thinking that although they were a great team, their business was likely to fail.  I never did write a post about them.

Imagine my surprise when only a few days later, it was announced that Patch had been acquired by Aol.  I was baffled then and I remain so now.  Especially since Aol seems to be counting on Patch to deliver them into the future as a digital content company.

But all is not well in Patch-land.  Recently, anonymous Patch editors and sales people have confessed that not only is Patch no picnic to work for, the model isn’t working.  Editors are under-paid and over-worked, sales reps are struggling to keep advertisers.

Let’s look at the facts:

There are currently around 800 Patches in the US and there are plans to have 1,000 by the end of the year. 

Each Patch has a full-time editor.  In addition there are approximately 100 sales people (way too few in my opinion).  I can’t imagine the herculean effort on the part of Aol’s HR department to fill all those positions.

In Q1 of 2011, Aol invested $40 million in Patch and total investment for this year is on track to hit $120 million.  Investment was $75 million in 2010.

Holy crap, that’s a big bet.

My estimation is that Patch needs at least 30 million UV’s per month just to break even (5 ads/page, $10 CPM, 65% sell through, 10 PV’s per UV).   But despite the heavy investment, Patch reached a total of only 6.9 million monthly unique visitors in April (fewer than 10,000 UV’s per site).  This dismal fact led to a “full-on course correction” which included an attempt to recruit 8,000 bloggers to make the sites more timely and interesting and perhaps boost traffic.

While aggregation may result in higher traffic for Patch sites, it still doesn’t address the fundamental flaws in the Patch concept.

First of all, most local advertisers are high-maintenance clients that are time consuming and expensive to acquire and difficult to retain (there’s a reason Groupon demands a hefty 50% of deal profits).

Small business owners are busy and it can be very difficult just to get a meeting with them.  If they are not digitally savvy (and most are not) they require a long and detailed education before committing to a digital ad campaign starting with how ad servers work and why they won’t see their ad every time they come on the site.  Most of them don’t have digital creative, many of them don’t even have a website.

Where small business owners are very sophisticated is in understanding what makes their cash register ring.  So while a Patch sales person may be able to convince them to try a Patch banner ad once, they are unlikely to get a renewal if that ad doesn’t generate significant store traffic.  And let’s face it, 10,000 UV’s per month is very unlikely to do that.

Second, the Patch business model is just plain old fashioned.  It ignores the fact that there has been an unbundling of news and advertising.  The reason that local advertisers bought ads around news content (primarily within newspapers) was not because they thought news led to sales, it was because news was where the eyeballs were (and there were very few other options).  This is certainly not the case online.

I'm not saying that it's unwise to seek to fund a website through advertising revenue from local businesses.  But I do think that you need to focus on helping your advertisers realize quick, measurable ROI.  I don't think Patch is delivering.

What works in digital brand advertising is context.  An ad for a bridal salon is out of context on a news site and is unlikely to be effective.  Put that same ad on a site for local brides and watch what happens.  My experience has been that click-through rates on relevant vertical sites are exponentially higher than on general news sites.

And that’s where Aol is missing the boat.

Aol already has dozens of vertical content sites.  If I were heading-up Aol, I’d dump the entire Patch strategy and move toward the evolution of the verticals so that they are both national and local in nature.  What if you could go on ParentDish, Aol Autos, KitchenDaily or Engaget and drill down from the national level to also see local content, listings and ads? 

That’s how you create reader value.  That’s how you create ROI for advertisers. 

Perhaps it's time for an even more radical course correction.

9 Things: My Keynote to the ACNA

The start-up world has kept me hopping these past few weeks and I've been a very bad blogger.  Time to get posting again!  And I'm starting with the keynote presentation I delivered to the Atlantic Community Newspaper Association on May 13th.

Slide-by-slide commentary is below the SlideShare.

 

Judy Sims ACNA Keynote Presentation

View more presentations from Judy Sims.

1. Title

2. My name is Judy Sims and my day-job is as the COO of a Toronto Internet start-up called CanSport LIVE where I’m busy revolutionizing the business of amateur sports.

3. But up until 2009, I worked at the Toronto Star where as VP Digital media, I was responsible for thestar.com and also launched 4 digital products in 2 years.  Though my day-job is no longer in the newspaper industry, I keep a toe in the water as a member of the PostMedia Digital Board of Advisors.   I’m going to set the stage for our conversation today with a few slides on the new economics of media.  My apologies, there will be some charts and graphs, but I’m a nerd and I can’t help myself.  But the truth is, I find that talking in scientific terms, rather than emotional ones is the most effective way to begin discussing change.

4. What we’ve seen happening over the past 15 years is a fundamental shift in the way the economics of media work.  The root of that shift is the move from a world where media content was relatively scarce to one where content is very abundant.  The barriers to entry are down and anyone can become a publisher.

5. And not only is there a lot more content available, that content has become “atomized”.  Media is now consumed in smaller and smaller chunks across a wider and wider range of media sources.  The average YouTube video is only 3.5 minutes compared to a 30 to 60 minute TV show.  A blog post is only 3 to 10 paragraphs verses 20 or more in a newspaper or magazine article.  Twitter has reduced this even further to only 140 characters.

6. And now we’re even seeing this happening in the advertising world.  Ads have become unbundled from news.  Flyers are becoming daily deals. 

7. Workopolis, Kijiji, Autotrader, Flyerland, Craigslist – the ads are the content.  They’re the prime attraction.

8. The result of this atomization is that economics of this new media world are the inverse of the old media world.  Where content was once scarce and attention was abundant. 

9. Now content is abundant and attention is scarce.

10. Okay, here we go with the charts.  The economics of media, like the economics of any product or service are based upon supply and demand.  Where supply is low, demand is high and where demand is low, supply is high.  Where the two curves intersect determines the balanced market – the quantity produced and price it sells for.  This applies to the cost of a newspaper or movie or the cost of advertising.

11. This is what supply and demand for media looked like before the Internet.  Because there were significant barriers to entry as a media company, i.e. you needed a printing press or a TV studio or movie camera, supply was relatively limited and demand was relatively high.  Thus prices were high.  In our case, that meant that we were able to charge high rates to our advertisers.  Looks good doesn’t it?  We could even do a little marketing or increase circulation by moving into a new town or subdivision and we could even grow our demand and increase the price we charge advertisers.  It was awesome.

12. This is Umair Haque.  He’s an Oxford-trained economist who has been studying the impact of the Internet on various industries.  He defines this media 1.0 world as the Age of the Blockbuster.  The blockbuster resulted in very high revenues and profits for media companies for decades.

13. But Media 2.0 changed all that.  Reduced barriers to entry have increased media supply exponentially.  All this new content has made it easier for us to find what we like online so we actually consume more of it, shifting the demand curve out.  Good news right?  Well, the problem is that the demand curve hasn’t shifted out nearly as much as the supply curve.  The result is a hyper-deflation of media prices.

14. And we are in fact seeing this in action in the online world where supply of advertising inventory is much higher than demand.  And, technologies are being created everyday that make the purchase of advertising inventory increasingly efficient and increasingly complex.  As a result, there has been downward pressure on advertising rates both online and offline.

15. Umair Haque believes that we are witnessing the end of the Blockbuster Age

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.

10 Questions to Ask Potential Advertisers BEFORE You Build Your Website

I’ve been speaking to - and reading about - a lot of want-to-be news entrepreneurs lately.  They believe that they have sound strategies.  Most of them intend to be ad supported (smart), but few of them have actually spoken to the people who are (supposedly) going to be paying the bills (dumb). 

That’s not a strategy, it’s a stragedy.

Talk to your potential advertisers.  You have to.  And do it early in the process.  I guarantee that their input will change some of your key strategies.

Ten simple questions are all you need.

Question 1: How’s business?

Are they reasonably successful or just getting by?  Are they new and eager or older and established?  Is their industry facing new realities and big changes or are things pretty much the same as they ever were? Are there cheaper, better, faster alternatives causing disruption?  Are they keeping up with changes in customer tastes and values?  Is their customer-base growing or shrinking? 

These questions will help you determine if this is a customer or even an industry you want to target as potential advertisers.

For example, you may find out that restaurants tend to make terrible customers.  They have little money, pay bills late (if at all) are extremely high maintenance (constant changes to their ads for menus, entertainment, etc) and go out of business with alarming frequency. 

MedSpas however, may turn out to be much more attractive customers (no pun intended).  They are in a growing industry with a growing, up-market customer base.  And, their industry is constantly innovating and creating new products and services.

Question 2: Who are your customers?

Are they targeting the same people as you?  If no, you have a problem.  If yes, dig deeper.  They are likely to know much more about your audience than you do.  And understanding your target users will help you build a better site.  Every time.

Smaller advertisers are likely to have a more intimate knowledge of their target customer based on personal interaction.  Larger advertisers will have spent big bucks on research that they may be willing to share. 

A lunch with a Kia Motors marketing exec in which he explained the intricacies of the “new car purchase decision-making funnel” changed the entire structure of the automotive website I was creating (and every website I built after).

Question 3: Who are your competitors?

Your advertisers’ competitors should be your prime sales targets.  If one of them is on your site, the others will be compelled to be there too.  Your site will become a marketplace.

You will get a lot of obvious answers, but some might surprise you. 

An Indian restaurant may be more concerned about the gay-friendly pub down the road than other curry joints.  A Lazik surgeon may be worried about the cosmetic dentist down the hall because the vain may only have so much money to spend this year.

In an eye-opening meeting with marketing execs at a large hardware chain, I discovered that they wanted to own the “outdoor living” category in the Summer and the “hockey equipment” category in the Winter.  They had two completely different competitive sets depending on the time of year.  This gave birth to a sales strategy I never would have come up with on my own.

Question 4: What are your marketing objectives this year?

Knowing this will help you determine what kind of ad products to offer on your site.

Are they hoping to build brand awareness?  You’ll need attention getting products like the OPA specialty positions, tool sponsorships, category ownership, integrated promotions, rich media, etc.

Are they expanding to new marketplaces?  Maybe you need to offer geo-targeting and online flyers to promote grand openings.

Are they looking to generate leads or drive revenue?  You’ll need text links, listings pages and finders, online coupons and a damn good reporting system that can prove you’re driving ROI.

Question 5: What is the size of your advertising budget and where are you advertising now?

If you are targeting advertisers with tiny budgets, you will need low cost, high volume advertising products in order to become profitable.  Ads will need to be low maintenance and easy to sell, perhaps even self-serve.  They will most likely be in listing form.  Your site will need to be designed so that users can easily find advertisers listing pages.

Larger ad budgets require a more sophisticated sales rep and group of ad products.

If your advertisers are buying many other sites, you will need to ensure that your site is demonstrably different and better at meeting advertising objectives than your competitors.  

If your advertisers are currently spending most of their budget offline, you have a big opportunity to move budgets.  But, you will likely need to teach them the basics of online and keep ad products simple.

Question 6: Which elements of your advertising mix are working/not working and why?

This is where you learn what your advertisers will expect of you.

Sometimes they can’t tell you why they advertise where they do.  It’s based largely on gut reactions and relationships.  If the client is large enough, get your most charming sales rep over there and maybe invest in some basketball tickets or a round of golf.

If the advertiser has a very good understanding of what’s working and what’s not, they are probably quite data driven.  They will be very ROI focused and you will need to deliver to stay on their buy.  Carefully watch the sites that are currently working for them.  What are those sites doing right?  Also pay close attention to how that customer’s ads are trafficked and optimized.

Question 7: How do you want to be serviced?

How frequently will they want to see a sales rep?  Will they need creative services?  How often will they want to change their ads?  In the case of agencies, do they want a single point of contact for the whole agency or do they want you to structure your reps by category (i.e. one who specializes in automotive, another in travel, another in large retail)?

It’s important to know these things while still in the business planning stage because high maintenance clients can cause unexpected costs for start-ups.

Question 8.  Here’s what I have in mind for a site.  Does this appeal?  Why or why not?

This can be a bit tricky.  This is the first time your potential advertisers will hear about your site.  It’s imperative that you present it well.  Rehearse what you’re going to say.  Don’t be too selly, but make sure you get across what is truly new, different and exciting about your project.

Then listen without being defensive and write everything down.

Question 9:  What would you do if you were me?

I once asked a marketer at a major retailer this question when I was developing a strategy for building vertical websites.  I wanted to know which verticals were likely to be successful.  He told me to focus on “major lifecycle moments”.  The times in our lives when we are likely to not only spend a lot of money, but to spend a lot of time researching those purchase decisions.  Times like buying a house, becoming a parent or dealing with health issues.

It was good advice.  Later that week two other major retailer marketers repeated it.  Turns out that lifecycle moments are where retailers focus their marketing dollars.

Question 10: What would be the dumbest thing I could do in your eyes?

By far my favourite question.  Advertisers LOVE answering it for you.  Just ask them.  You’ll see.

A few more helpful tips:

Show up.  You’ll get much richer information and build a stronger relationship if you interview the advertisers individually, at their places of business then if you try to gather a bunch of them in a room for a couple of hours.

Do your homework.  Do a little research on the advertiser you’re interviewing and their industry.  It shows respect and saves time during the actual interview, as they won’t need to explain as much to you.

Follow up.  When you launch, send your interviewees a personalized thank you including notes on how you addressed their specific needs and suggestions.

Do it again.  Objectives, budgets, environment and customers all change.  Repeating the interview every 12 to 18 month is a great way to stay connected.   And, advertisers will think that you are particularly on the ball.

In the beginning, you won’t be able to implement all the recommendations and strategies that arise from these interviews.  But, you will start off on a much better footing and be in a position to build a long-term product road map.

Now get out there.  What are you so afraid of?

Local Media: The Magic Combination that Means More Trouble for Newspapers

It seems to me that 2010 is going to be the year the game changed for online local. 

The right factors are finally converging:  quality local content, awesome mobile devices, and local advertising services.   It’s getting much easier to envision what the tapestry of local media and advertising will look like in just a few short years.

And for that reason, I say to the newspaper execs of the world:  please stop fussing about with pay walls and get serious about online local.

Let’s look at what they’re facing.

Content

Yes, there are thousands of excellent local bloggers out there.  But online local is not just about independents anymore.  Big money is being spent on local websites.  And the new tapestry is a mix of professional and amateur, old and new.

Examiner.com is now in 240 major local markets in North America with plans for continued expansion.  In fact, they recently announced that they hope to increase the number of “Examiners” (local contributors with specific interests or areas of knowledge) from 30,000 to 85,000 by the end of the year.  The site brands itself as the “insider source for everything local”.

NPR also has plans to delve further into online local.  Prong 1 of Vivian Schiller’s 3-pronged strategy is “A focus on local”.  In April, Schiller told MediaBistro that there is “a big gaping hole to serve Americans local coverage”.  Why local?  Schiller says “Because our unique offering is the fact that we are local.  The stations know their communities.  There’s different demographics.  There’s different sensibilities”.

BusinessInsider reported this week that AOL’s Patch.com will increase their number of sites from 30 to something in the 100’s in 2010.  Patch hires professional journalists.  AOL’s careers site has 53 job openings at Patch, mostly editorial positions.  (I believe there is huge potential for Patch to drive ROI for local advertisers by utilizing AOL’s network of 80+ other sites, but that ‘s another blog post.)

And then there’s the much anticipated and yet to be named Jim Brady project at Allbritton.  Jim is hiring 50 of the digital world’s best journalists (including Steve Buttry, a big favourite of mine), to go head-to-head with the Washington Post.  If Jim is successful, his site will spawn many imitators across North America.  (I had lunch with him last month.  I think it’s going to be terrific.  And he promises to give it a name soon.)

Last, but certainly not least, the Guardian in the UK is getting in on the act with the launch of their Leeds site earlier this week.

Awesome Devices

An iPad not only allows you to take the Internet with you wherever you go, but unlike a dumb-old lap-top, it actually knows where you are.  It’s connected to your community.  So is an iPhone, Blackberry or a Nexis One.  If the job of local media is to reflect, affect and connect the community, things just got a lot more interesting.

Not only is there now more local content, devices are able to target that content, along with advertisements to consumers with greater accuracy, creating greater relevancy and likely, greater ROI for advertisers.

I’d say something about Google Buzz here, but frankly, I’m still on the fence…

Advertising

An August 2009 Kelsey Group survey revealed that 77% of small and medium sized businesses are using online media (compared to 69% using traditional media).  However, a Nielsen study found that half of small businesses spend less than 10% of their marketing budgets online. 

Why haven’t more local advertisers spent more on the web?

I think it’s because it’s just been two damn hard.  Too hard for local businesses to buy online ads and too hard for local websites to sell online ads.  

Advertisers have had to manage a complex dance of multiple ads across multiple sites, calculating multiple ROI’s and working with multiple sales reps.  For publishers, the problem has been finding a profitable business model. Sales reps often encounter high-maintenance, unknowledgeable clients who lack websites and online creative.  The cost of sale becomes prohibitive in a high service, high volume, low revenue environment such as online local media. 

But it’s starting to get easier.

Take PaperG’s PlaceLocal product.  Enter a business name and it will pull images, reviews and other information from the web and create an online ad for the advertiser.  Automatically.  Cool.  The time and cost of creating online ads has been one of the major stumbling blocks preventing local websites from acquiring new advertisers, or generating sufficient profit from the ones they have.

Mark Potts is doing his part to make things easier with GrowthSpur.  As he told BusinessWeek, the platform will help enable “citizen ad sales” as publishers will be able to sell ads onto each other’s sites.  GrowthSpur will also provide much needed sales training.

In addition to GrowthSpur, networks such as CityGrid by City Search, Reach Local, Local.com and Addiply are all trying to make it easier for small businesses to begin advertising online.  If they succeed, the revenue potential is enormous. 

Now.  How will newspapers respond?

I hope they will separate their print and digital organizations and operate their websites like lean, mean, start-up machines.  I hope they will enable a team of smart, excited digital staffers to create the Complete Community Connection like the one that Steve Buttry will surely introduce at the new Allbritton site. I hope they will see the iPad as a tool for delivering more context to readers and ROI for advertisers instead of a great way to finally make users pay for content.  I hope they will form a local ad network such as GrowthSpur and hire expert digital sales staffers to make it hum. 

But I fear they will do none of those things.  I fear they will hinder themselves with their large, expensive infrastructures and traditions. 

You know what I mean.  Print staff selling online ads, old media notions of staff roles, (i.e. one role, no multi-taskers) and how they should be paid, a fear of voices and opinions from outside the newsroom…

Ugh.  It’s depressing.  I hope someone proves me wrong.

 

Lots of Smart People, No Simple Answers

Last week, I went on a dream tour for media geeks.  I had 10 meetings in New York and Washington DC with some of our industry’s best thinkers.

I met with leading academics at CUNY and NYU, very smart people at large media companies (IAC, AOL and Bloomberg) and more smart people at start-ups (SeeClickFix, GrowthSpur, Daylife and Allbritton’s yet to be named “Jim Brady Project”.)

Here’s what I learned:

• No one feels good about the future of most newspapers and television networks.

• All agree that content curation will remain a key strategy for smart editors.

• No one can agree on which sites and models are going to succeed though Jim Brady’s new project for Allbritton (parent company of Politico) and Mark Potts’ GrowthSpur are generating a lot of excitement and curiosity.

• All acknowledge that existing revenue models aren’t working.

• Many think that the best opportunity for revenue is in local advertising.

• Others think that there is opportunity in national advertising, though the model will be built around sponsorships, events, vertical creation and content integration.

• All agree that mobile will continue to grow in importance, but no one had solid plans for monetizing it.

• Two people told me I should leave the media business entirely and try PR or perhaps managing a corporate website. (ouch!)

No simple answers indeed.

2 Big Myths that are Killing Newspapers

The Big Newsroom Myth: Reporters and editors don’t need to understand how the business works.

Earlier this month, I tweeted this Robert Picard blog post about how "The Biggest Mistake of Journalism Professionalism" is how journalists “spent nearly a century denying responsibility and involvement in business decisions”.

Bill Doskoch, (@billdinto), a much-respected Twitter friend, pushed back.  “What bearing does that have on the avg reporter’s job?” 

This thinking has been pervasive in the newspaper industry for a very long time.  There is a belief that journalists should be free of knowledge of the business side so that they can carry out their reporting with integrity and objectivity free of pressure from the advertising department to report favourably about their customers.  Journalists should be above it.

I get it.

But the more I think about it, the more I realize how damaging this thinking has been to the newspaper industry.

It infantilizes the newsroom.  “Don’t talk to the kids about money – it might upset them or worse, corrupt them”.  And, it creates a state of willful ignorance, the last thing you’d want reporters to be.  Surely a mature, intelligent group of people can understand that we must report with integrity and that we work in a business that must make money.

The result of this siloed newsroom is that a large chunk of the organization has no real understanding of how the business works.   

And it’s a problem. 

Innovation in large organizations often comes from the bottom up.  That’s why Google allows company time for personal projects and has “office hours” where any employee can approach management with proposals.

A lack of business understanding leads to poor product development efforts.  Editorial recommends (or worse produces) sections and features that advertising can’t sell.  I must have seen 10 different gardening magazine proposals in my time.  (Hint: we live in Canada, we have 4 months of warm weather/year)  And then there was that fishing magazine proposal….

But far worse, it’s resulted in the failure of newsrooms to create a sense of urgency when the web emerged.  Had the newsroom really understood what it meant when the very profitable classifieds started going away, or how new capabilities in customer analytics was creating a focus on advertising return on investment and changing how advertisers were planning their budgets, there may have been earlier moves to understand the online world and to succeed in it.

But let’s not let the advertising department off the hook!

The Big Advertising Department Myth: We sell eyeballs

Not really.

Eyeballs are about mass and placement in the form reader demographics, circulation numbers, lines, columns, colour and position requests.  

What advertising departments actually sell is connection and context that lead to sales results.

Had they been thinking about their product as a connection between buyers and sellers, they would have seen the devastation that online classifieds would bring a lot earlier and taken steps to win in that space. 

They would have also seen that in the online world, their audiences are relatively small and flighty and that in that world, they are not nearly as good at providing those connections as they were in print.

Had advertising departments been thinking about context, they would have known that it creates greater user engagement and advertising click through rates.  They would have seen the explosion of online content due to blogs and niche sites that focus on narrower and narrower content areas and realized that they would need to create more of their own verticals.

Had they been thinking about connection and context, they too would have seen that the instant accountability and return on investment provided by search advertising makes it the ultimate solution.  Advertisers can now target ads directly to people who are actively searching for their products and services.  They would have seen that this would change the advertising game forever.  Maybe they would have realized that it isn’t all about banners and big boxes and that most traditional print advertising sales reps aren’t qualified to sell online advertising in such a complex environment.

These myths caused newspapers to sit back and do nothing while their world was changing.

Perhaps the biggest myth of all is commonly heard in newsrooms and advertising departments alike: That the newspaper has to survive.  It just has to.

7 New Years Resolutions News Execs Should be Making in 2010

I should be in the gym right now instead of writing this blog post.  Like most people, I suck at keeping my New Years resolutions.  That doesn’t stop me from telling other people what I think theirs should be.

So here they are, the 7 New Years resolutions newspaper execs should be making in 2010.  I've saved the hardest one for last.

Resolution 1:  We will talk to our advertisers.

Sounds simple enough, but you’d be surprised how little communication there is between newspaper executives and the people who pay the bills.  In talking to advertisers directly, instead of through the sales team (if you actually bother to do that), news execs will learn that advertisers are completely focused on return on their advertising investment and that the more they know about what drives ROI, the less likely they are to be advertising in a general news environment.

Another interesting thing about advertisers is that the smart ones often know your readers better than you do. Marketers know that it is better to study who a person is rather than ask them what they want.  It’s their job to know their consumers.  They spend a lot of time and money understanding the interests, lifestyes, needs (and yes, purchasing behaviour) of consumers during various stages of their lifecycle.

And who are your readers?  Yup.  Consumers.  Knowing them better could change your content strategy.

Resolution 2: We will not rely on banners and big boxes for our online ad revenue.

Two words – ad blindness.  My theory is that this is a much bigger problem online than in print due to the templated nature of most websites.  When you see the same layout on page after page, you’re more likely to start ignoring the ads.  Dismally declining click-through rates support this theory.

Online advertising needs to become a lot smarter.  There needs to be more cooperation between advertiser, sales rep and editorial department so that custom advertising products such as sponsorships, content integration, events and exclusive access promotions can be created.

Resolution 3: We will create vertical sites.

Context drives engagement.  Engagement drives ROI for advertisers.  It’s such a simple formula.  Don’t let content farms like AOL’s robo-content management system and Demand Media win in this space. 

Use your data.  Analyze audience and revenue trends in your market and then build vertical sites to serve them.  Create high quality environments that readers love and advertisers love more by including a mix of news, information, data, listings, maps, advertising and e-commerce.

Resolution 4: We will become the Complete Community Connection in our town or city.

I’ve written about my love of Steve Buttry’s Complete Community Connection before.  I think it is the best hope for newspapers to begin to win in the online space.

In Steve’s words:

“For consumers, we will be their essential connection to community life – news, information, commerce, social life.  Like many Internet users turn first to Google, whatever their need, we want Eastern Iowans to turn first to Gazette Communications, whatever their need.  For businesses, we will be their essential connection to customers, often making the sale and collecting the money.  We will become the Complete Community Connection. 

Resolution 5: We will start blogging and Twittering.

Don’t tell me you’re too busy.  Alan Rusbridger, editor of the Guardian does it.  Kai Keikmann, head of Bild does it.  Arianna and Tina do it.  It’s now a basic requirement of your job.  When anyone with a keyboard can be a publisher, you can no longer afford to hide behind your (dwindling) staff.

Listen to your audience and just like your advertisers, they will tell you important things you didn’t know.

And, appoint a community manager if you don’t have one.  It’s 2010 for God sake!

Resolution 6: We will not erect pay walls where we are not providing unique value.

Think very carefully about the value you are supplying and how easily it could be replicated by a lower cost organization.  Yes, I know, it works for the Wall Street Journal and Financial Times.  That’s because financial sites provide value that is difficult to replicate and directly impacts a user’s wallet.  It doesn’t hurt that the audience for financial sites are wealthier than the population at large and work for organizations that pay their subscriptions for them.

Where’s your value?  Put up a pay wall without finding it and you will assure your own quick demise while enabling new competitors to enter the market.

Resolution 7: We will get comfortable with being uncomfortable. 

Integrating your print and online organizations feels good.  It looks good on paper.  It makes you look like a take-charge leader whose eyes are on the future as your feet are planted firmly in the needs of today.  It keeps the print people from feeling that they are forgotten, left to manage decline as their skill sets become obsolete.  It makes the digital people miserable, but who cares about them?  They think they’re smarter than everyone else and that’s really annoying.  Besides, they’ll get used to it soon enough.

Know what else feels good?  E-readers.  They allow you to essentially duplicate the print experience online in a controlled, closed environment that looks an awful lot like our traditional printed product but with videos and photo galleries.  And, there’s no need to link to other sites or allow readers to comment or interact with us in any way.  Perfect.  Never mind that that’s not really how people use electronic media.

Ooh, and it’s also comfortable to tie most of your online revenue to classified advertising and then tie that to print revenue.  You can call it “leveraging our core assets”.

There’s just one problem with comfortable solutions.  In the online world, chances are, if a solution makes you feel comfortable and in control, it’s probably not radical enough to work.

That’s why in Q3, online revenue at newspapers fell 17% from 2008 when the online advertising industry as a whole fell by only 5.4%.

That’s also why when the online industry as a whole saw the beginnings of an advertising recovery with a Q309 increase of 1.7% over Q209, newspaper online advertising still declined 4.6%.

Stop trying to feel comfortable.  You are not in a comfortable situation.

 

Why I'm a Huge Fan of Steve Buttry's Complete Community Connection

There’s been a great deal of back and forth lately about the plausibility of ad supported local news sites as presented by a team at CUNY and their New Business Models for News.  The team focused on what would happen if a major daily newspaper (in a single newspaper town) closed “today”.  Team lead Jeff Jarvis makes the very clear point that the goal of the project was not to determine what model or strategy will be the lasting solution for local news.

Smart call. 

I really don’t believe we’re likely to have a lasting strategy for some time.  The online world is still changing too rapidly.  And as the economy begins a slow recovery and new entrepreneurs appear, I believe that the competitive landscape for local advertising is about to get much more complex.

Most business models for local news sites assume that advertisers who might once have appeared in newspapers will migrate to online as soon as they are given a viable alternative that works as effectively.  I agree, they will.  But I’m afraid the migration won’t all be to news sites.  A large portion of it will be to Google and a new crop of specialized listings sites.  (I’m amused by how newspapers are spending so much time and effort worrying about Google “stealing their content” when it’s their advertising revenue that they should be worried about).

Put yourself in the mind of a local business.  You have limited funds with which to advertise.  Every advertising dollar comes directly out of your own pocket and you need to ensure that the money you invest drives store traffic and sales.  This means advertising in the place most likely to supply qualified leads.  As click-through rates for display ads continue to decline, ad efficiency is not likely to be achieved through display ad on a news site. 

Now put yourself in the mind of a consumer.  It’s highly unlikely that you would be reading an online story about a local fire, see an ad for an interior designer and click on it.  The context isn’t right.  You’re not in the right mindset to be thinking about hiring an interior designer.  (Unless I guess, it was your house that was on fire.)

No, if you’re looking for an interior designer, you’re most likely to Google the name of your city and “interior designer’.  First, you’ll find Google’s local business results complete with photos, profile pages and user reviews.  We can argue about the quality of those listings.  When I searched Los Angeles Interior Designers, the 5^th listing was for a restaurant and the 3^rd listing was for a cheap and cheerful fabric shop.  But it’s Google, I think it’s safe to assume they’ll improve this experience in time.

In the near future, you might find that the next listing is for Decorati.com.  I’ve been spending a lot of time on Decorati lately.  I can’t get enough of it. I’m addicted to it because I think that it and sites like it are going to have a major impact on the ability of local news websites to operate profitably.

Decorati is a national site that connects interior designers and customers at a local level.  But it is much more than a simple directory or listings site.  It’s cool, well designed (of course) and VC funded.  It’s a great mix of content, shopping and listings.  You can look for furniture, explore different styles, participate in forum discussions, read a blog and find a decorator in your market that suits your taste and budget.  It makes money by charging decorators for listing fees.

One thing I know for sure is that advertisers love context.  It attracts qualified leads and makes the cash register ring.  If Decorati really takes off, it’s easy to see how it could become the top source for lead generation in its category. 

This site can serve as a blueprint for many other listings-based businesses that directly target the very same advertisers local news sites are hoping to attract.  Think of sites for hospitals, cosmetic surgeons, furniture stores, spas, camera stores, private schools, and any other number of local advertising categories, with each site combining content, forums, products and listings.

How can local news sites compete?

In my opinion, the best hope is the Complete Community Connection proposed by Steve Buttry on his blog back in April.  Steve argues that you create engagement (and therefore advertising results) by becoming the ultimate resource for living in your city.  The site becomes valuable to advertisers because of the sheer comprehensiveness of the site’s value to the city and community.  It becomes the place locals look for information on their city.

In Steve’s own words:

“For consumers, we will be their essential connection to community life – news, information, commerce, social life.  Like many Internet users turn first to Google, whatever their need, we want Eastern Iowans to turn first to Gazette Communications, whatever their need.  For businesses, we will be their essential connection to customers, often making the sale and collecting the money.  We will become the Complete Community Connection. 

Our company will provide an interactive, well-organized, easily searched, ever-growing, always updated wealth of community news, information and opportunities on multiple platforms.  We need to become the connection to everything people and businesses need to know and do to live and do business in Eastern Iowa.  We need to change from producing new material for one-day consumption in the print product or half-hour consumption in the broadcast product to producing new content for this growing community network of information and opportunities.”

I love it.  He’s got some fantastic ideas all designed to help the site “be the answer’.

The very good news is that there are two opportunities for newspaper companies in the local space.  First, choose a local advertising category and create the next Decorati (or several Decoratis).  Second, create a team that is completely separate and independent from your regular operation, put a smart product development person in charge and let them create the Complete Community Connection in your city.  Yes, yes, it will cost money to create, but it could very likely save your business.