Hitting the coffin nail on the head for newspapers

But time may be running out. Now, for the first time, pure-play Web companies have the biggest share of the local online-ad market. In 2007, Internet companies had a 43.7% share of the $8.5 billion local online-ad market, while newspaper companies had a 33.4% share, according to the media research firm Borrell Associates. Just three years ago, newspapers had 44.1% of the local online-ad market. (Directories such as the Yellow Pages have 10.1%, and local television outlets 9.3%.)

Local media companies, because they are based in the communities they serve, would seem to have an edge over Internet sellers when it comes to persuading the diner or corner hardware store to take out an ad. But they have largely failed to convert that advantage into sales. Instead of tailoring their sales to local businesses, many newspaper companies initially focused on selling ads to bigger advertisers who were already buying space in their print products.

That Wall Street Journal story hits the coffin nail on the head. Newspapers are losing their own core market because they didn’t understand the scale of the internet. They still thought mass when they should have realized that small is the new big. That is, online, newspapers still threw their lot in with the big advertisers who had been the only ones who could afford their mass products. They didn’t see the mass of potential spending in a new population of small, local advertisers who never could afford to advertise in newspapers but who now could afford to buy targeted, efficient, inexpensive ads online. There’s growth — yes, growth — there. But newspapers ignored that — apart from some half-hearted attempts to come up with crappy online Yellow Pages — and handed what should be their local market over to Google and other online companies that set up efficient means to sell a lot of little ads, which equals big revenue.

I saw this first hand in many companies. Print sales teams didn’t know how to sell online. Oh, they’re trying to catch up now, but it’s often too late, for advertisers are already using their competitors; newspapers lost the opportunity to usher small advertisers onto the internet. Even the online sales teams at newspaper companies didn’t how now to sell small; they were — as I once put it in a meeting — putting all their effort into saving the old $100,000 advertiser and saw getting 1,000 $100 advertisers as a distraction. The new-media divisions had already become big and old. They weren’t nimble. They lost out.

If it’s not too late, here’s my long-standing (now free) advice: A newspaper (or, for that matter, TV or radio) company needs to set up a new, hyperlocal company that is designed to go after those 1,000 $100 ads. Let the big, old newspaper and online divisions keep serving and saving those big advertisers. Start a new company that makes small, local advertising its sole focus. That means they need to set up automated systems to accept and place highly targeted local ads and directories. That means they need to come up with new means of selling without on-the-street sales staffs: outbound phone sales, direct response, even local sales network (instead of citizen journalists, citizen sales people), making aggressive use of the promotional power of the newspaper while you still have it. That means they need to have lots of targeted local content without large editorial staffs. That means they need to set up networks with local bloggers and others and they need to encourage more people to join and the way they will do that is by sharing revenue and so these need to be both content and ad networks. This is unproven but I know that this won’t happen in the existing structure from print or even online staffs. It’s hard and its new but — as the Journal now well proves — if you newspapers don’t do it, your online competitors will.

Rather than creating new networks that serve new advertisers in new ways, though, the newspapers are trying to outsource this by joining big networks with the likes of Yahoo and Monster – which are just big, old media companies without the presses. As the Journal says, that’s no silver bullet:

Increasingly, newspapers are deciding to form deeper alliances with their main competition. More than a year ago, Yahoo struck a deal with about a half-dozen newspapers to create a national online-ad sales network. Since then, additional newspapers have signed up. In the coming year, papers in the alliance will start using Yahoo technology on their sites so that they can sell more-sophisticated ad offerings, such as behaviorally targeted ads. Separately, a group of 11 newspaper companies representing nearly 300 newspapers recently formed a partnership with real-estate site Zillow.com to tap into more real-estate classified ads.

Analysts say these kinds of steps will help but that none is a silver bullet. “Ultimately, it is going to take a lot of singles to really have a significant impact on the overall operations of the company,” says John Janedis, a publishing-industry analyst at Wachovia Securities.

The internet is an entirely new economy. It’s not built on big. It’s built on a mass of smalls. And newspapers think big. That’s their real challenge.

  • Walter Abbott

    Broadcast televsion networks are next. By the end of this decade or shortly thereafter, television networks as we have known them for the past 60 years will cease to exist. Their news divisions will dissapear even more quickly.

  • alex

    It’s amazing how big of an opportunity the big city newspapers have lost. Instead of being the trusted hubs of local information, they have ended up as also-rans in their home markets, while at the same time literally spending themselves into commodification.

    Newspapers were ideally positioned to be the source of local goods, services, and information in the internet age, but squandered the opportunity. The funny thing is, there’s still (some) time left, but they still just don’t get it.

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  • Most importantly: don’t get the cart before the horse. We have a great online directory. We hired a proven telemarketing company to test the water. 500 calls – zero response.
    We were ahead of the market. Small advertisers don’t use the internet, therefore they don’t see the value in it.

  • “Small advertisers don’t use the internet, therefore they don’t see the value in it.”

    And what part of the word “marketing” don’t (didn’t) you understand? Your “proven telemarketing company” probably made a bunch of blind calls to busy retailers that started out, “Hi, {insert business name here}, how’re you doing today! Well that’s great! I’m {insert phony name: like “John” when you’re obviously calling from Bangalore} from {insert your company name}, and I’ve got this fabulous deal on internet advertising.” Instant hangup.

    As a small business owner, let me tell you something. We get hundreds (really!) of calls each year from people who want to sell us out-of-market Yellow Pages advertising, ad sheets in direct mail packets, school sports calendar space, “support” ads in the Chamber of Commerce directory, postcards, ads on cash register tapes and on grocery shopping carts, billboards, and, yes, internet directory advertising. We’ve been burned so often that it’s no wonder we don’t see the value. If your marketing people (who are already tying up my telephone line and taking me away from PAYING customers) can’t explain within 15 seconds why your particular proposition isn’t going to be different- meaning yours is both affordable and effective- from all the others, you’re wasting my time and your own money. No wonder you didn’t get any response.

  • “your particular proposition isn’t going to be different”
    Read: “is” for “isn’t”. (Obviously, this time it needs to work.)

    Preview would be my friend if it existed :-(

  • Now I remember why I stopped coming here.

  • There are plenty of small advertisers using Google now. Not to mention eBay. And there’s only growth. Plus, a directory is probably the wrong vehicle; there are tons of directories (starting with Google!!). You need content. Where’s the content going to come from? See above.

  • $100 ads? You’re still thinking too big. Facebook sells ads for as little as $5, and college students even sign up for that. Newspapers don’t understand the power of selling in the aggregate.

    We should be trying to sell ads for as low as $5 so people can advertise local meetings, garage sales or other small events. We should then be selling $100 ads so people can talk up their business, and we should still be attracting the big advertisers too.

    But we need to think small first, because there is way more money in the masses of little people than the few big people.

    The problem is that the majority of a newspaper’s business staff should probably be let go. They don’t know how to sell ads online, nor do they know how to properly attract local advertisers. Plus, many of those positions should be replaced anyway. A well designed Web site can automatically handle ads, like Facebook.

    Newspapers need to be offering ads starting at $5 a day, that’s where the real sweet spot is. Plus, there is tons of money to be made off of classified ads, if done right.

  • Jeff

    Say more, or point me to more, about this: “set up networks with local bloggers and others.” Better yet, show me. What does it look/feel like? What is the user experience? What does the visitor see, on the screen?

  • Nobody seems to have mentioned it above (not even Jeff, except to say “small is the new big”) but this story in essence is the story of what happens when “The Long Tail” hits newspaper advertising.

  • mike p

    want to know what newspapers will look like in 10 years?
    These are both hyperlocal news sites founded by downsized actual journalists… The one thing that Google/Yahoo does NOT have is a reporter at city hall.

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  • O-Shift

    >Rather than creating new networks that serve new advertisers in new ways, though, the newspapers are trying to outsource this by joining big networks with the likes of Yahoo and Monster – which are just big, old media companies without the presses. As the Journal says, that’s no silver bullet …

  • Roger

    You are mixing metaphors with the skill of a bartender at Harry’s. Keep it up.

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  • Jeff, you are spot on, I can tell you from personal experience that there are a ton of mom-and-pop businesses out there who have always wanted to advertise in the local paper but found ROP too expensive. The smart newspapers are using the ‘Net as a way to show these folks results. How so? They build niche-specific categories and put local ads adjacent to the copy. (Why should a small florist in Piqua, Ohio put his ad on the knott.com?) Once they can show a local advertiser results they can upsell him to the print product. Small is the new big.

  • You make a good point about small advertisers, but I think small publishers are just as much a threat. Small is the new big–very true. I think the only way these giant publishers and newspaper companies can survive in the online market is to embrace a smaller, tighter organizational model, and to also embrace a wider variety of advertisers as you suggest.

    Just like in the music industry, as a whole new middle-class of musicians is emerging, a whole new middle-class of news organizations must emerge, with more targeted, specific news as well as advertising.

  • Interesting Article!
    It’s obvious that as I need to understand this new trned more, also advertisers in this area will need more information from our media (newspaper)to make more clear what advantages we offer to them.
    Advertisers care for profits and thats the message I have to send to them. Online advertisers has more traffic and ways to reach more customers than print media; but also is much more profitable.

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  • There seem to be two streams of thought here. One says newspapers need to get smaller and more local(ized?). The other says that they need to harness the internet. This second view seems predicated on the notion that websites, etc. are successful small local(ized?) tools for communications and advertising. That may be, but they aren’t newspapers.

    I believe newspapers (can) do things the web can’t. Maybe they shouldn’t bother – that’s another argument. But I’d like to live in a city with a couple of small dailies offering local news, views and ads in newspaper form.

    Could they get small enough to match their expenses to their circulation? I don’t know. (A couple tried over the past 15 years, but they were always bought out, and usually shut down, by our local media baron – the sole publisher of all our province’s English-language dailies.)

  • roger rainey

    Can’t wait to see what Jeff has to say about this. The lack of foresight and high-handed defensiveness would be extremely depressing to me if I were a student contemplating a career in journalism.


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  • Google serves small businesses by letting them design and price their own targeted ads? Wow, that’s crazy talk!

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  • Antoine Clarke

    Mark Van Patten says:

    “We have a great online directory. We hired a proven telemarketing company to test the water. 500 calls – zero response.”

    I say:

    “You have an obsolete product. You hired an overpriced consultant to annoy people. 500 calls – 500 anti-customers.”

    One could argue the telemarketing company had done an excellent job of accurately describing the product. So maybe NOT overpriced.

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