Changing the Paradigm
News organizations must think more creatively about how to attract online ads.
Barb Palser (firstname.lastname@example.org), AJR's new-media columnist, is vice president, account management, with Internet Broadcasting.
At the National Association of Broadcasters' Las Vegas schmoozapalooza in April, most of my conversations with digital media colleagues centered on search marketing, online classifieds and partnership opportunities with Google and YouTube. We're all looking for ways to grab the long tail — not of content, but of revenue.
On the content side, traditional newsrooms have reached an acceptable level of competence — sometimes even expertise — when it comes to publishing news online and attracting Web viewers. Defying predictions of obsolescence in a world of citizen media and pure-play Internet operations, old-media brands still rule the roost. In overall numbers, the online news audience has more than compensated for declines in traditional media use.
Now the pressure is on sales departments to reel in the advertisers that were supposed to follow that audience. Revenue growth at news sites is robust, but still makes up a small share of total revenue — 3 percent to 8 percent for newspapers and 1.5 percent to 3.5 percent for television stations, according to the media research and consulting firm Borrell Associates. The magical word everyone is waiting to hear is "offset." Can online and mobile media offset not just audience drift but also future revenue losses on the traditional side?
Not without a radical change in thinking about the business.
In the past, it was possible to make a fairly confident correlation between audience and revenue potential. Media companies carried that paradigm to the Web, encouraging editorial staff to attract viewers and page views with the expectation that advertisers would show up when they were good and ready.
Well, advertisers are ready. Large piles of money are being moved from traditional to online advertising. Private equity firm Veronis Suhler Stevenson predicts that online ad spending will overtake newspaper and television spending in 2011. Other estimates are more conservative, but show aggressive growth.
In March, General Motors announced plans to shift half of its $3 billion ad budget online over the next three years.
The twist is that companies are finding more precise and efficient ways to spend their online ad dollars than with traditional media. It's what the authors of the Project for Excellence in Journalism's 2008 State of the News Media report call "the decoupling of news and advertising." We've come unhinged.
Search marketing tops the list of alternatives. Those ubiquitous sponsored links are predicted by research firm eMarketer to account for 40 percent of all online spending in 2008. Companies love search marketing because it offers laser-sharp targeting and an appealing pay-per-click model.
Another chunk of money is going to online classifieds, which are expected to make up 17 percent of online spending this year. Newspapers still take a share of this revenue and many broadcast sites have developed classified products, but national brands are gobbling up dollars that used to flow directly to the local paper.
When it comes to display (banner) advertising, companies can go to social networking sites or any of a gazillion niche content sites. They also use one-stop-shop ad networks that will place banners on numerous sites across the country, a region or a local market. National sites can compete with local ones by targeting ads based on the location of users' Internet service providers.
The upshot is that advertisers have far more options than they did a few years ago. This is not the result of a strategic screwup by traditional media, unless you consider failing to invent Google a strategic screwup. We can kick ourselves, and we often do, but this shift was way beyond our control.
We can, however, control what we do next. The worst move would be to react with the same zero-sum mentality news managers exhibited when they realized their readers and viewers were free to roam the Internet. For several years they banned off-site links and promoted themselves as "the only site you'll need." It wasn't until they found a little humility and started participating in the back-and-forth exchange of links and information that their sites became really valuable.
Likewise, traditional sales managers can't hope to contain their advertisers with the same limited advertising options they've historically offered. They need to play up their role in a mix of options that's vastly larger and more complex than before.
For starters, they should look for ways to co-opt emerging ad formats. To complement their traditional ad packages, for example, sales reps can assist clients with their search marketing goals. Many traditional sales departments are already doing that; others wouldn't know where to begin.
Some companies are also building stand-alone niche Web sites that provide a targeted environment to advertisers. Examples include the Orange County Register's OCMoms.com and the Indianapolis Star's pet site, IndyPaws.com. Others are launching hip city guides such as WCAU-TV's DigPhilly.com and KING 5 Seattle's CitizenRain.com. Diversification away from news is a smart way to reach new viewers and revenue streams, but these sites will be competing with numerous local and national brands — so they'll have to be pretty darn good.
Whether in print, on air or online, people will continue to seek news, and advertisers will want to be connected with it. But new options have changed the game; things won't go back to the way they were.###