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Newspapers chasing small local advertisers is uneconomical. Less sales hype, more hyperlocal news needed 7/31/08

Posted by Steve Boriss in Advertising revenues.
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According to the Wall Street Journal, to make-up for falling ad revenues, newspapers have nearly tripled the number of local salespeople, only to watch their share of local online ads drop by a quarter. And yet, local online ad revenues grew by 57% last year, much of it captured by Google and Local.com.

Apparently, having locally available humans press the flesh is not the advantage newspapers thought it might be. The Wall Street Journal points out several possible reasons, including papers’ past focus only on larger advertisers, low commission opportunities offered my these low cost, small size purchases, and the relative ineffectiveness of banner ads for local merchants.

The solution for newspapers is probably based more on its product than its sales force. Online papers must reestablish themselves as local must-reads. What’s needed is less sales hype and more hyperlocal news. (H/T Garry Rains)

Growing realization that news outlets are more in ad business than news business likely to shake-up journalism 7/16/08

Posted by Steve Boriss in Advertising revenues.
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Journalism and advertising have had an uncomfortable relationship for the past century. Journalism doctrine dictates that those writing news be completely independent from advertiser pressures, so that readers get a pure stream of unadulterated truth. Of course, journalists have made the same demand for independence from everyone else — the government, businesses, even their own management. And the nature of the threat is a little hard to understand, given that the chances of newspapers writing an article that impacted any particular advertiser on a day-to-day basis always seemed pretty small.

But as Terry Heaton points out, with growing financial pressures on traditional media, it is becoming clear that they have been more in the advertising business than the news business all along. Traditional media companies today are suffering, not because new forms of media are taking away readers, but because they are taking away advertising. Having lost their oligopoly control of the limited number of distribution channels advertisers could use to reach consumers, traditional outlets will be under increasing pressure to tailor their publications to provide exceptionally good exposure opportunities for advertisers. Journalists’ independence from advertisers will be seen as a luxury from an age when traditional outlets had more power over advertisers than they ever will again.

Hyperlocal news shifting focus from journalists’ to readers’ interests, but ultimately advertisers’ interests will come first. 7/2/08

Posted by Steve Boriss in Advertising revenues, Hyperlocal news.
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It occurs to me that while much of the discussion in these days of newspaper cutbacks continues to be how to maintain content journalists want, those focused on hyperlocal news are focused on what readers want. For example, in this article by Steve Outing the hyperlocalists consider how to satisfy the news interests of a single person without kids to whom dog parks and train delays are the most important news items.

Focusing on readers is a step in the right direction, but not the final step. While it is painful for many journalists to hear, what will ultimately matter most in the no-paid-subscription, online-news-world to come is what is best for advertisers. If a train schedule can draw substantial advertising from the rail service or similar businesses related to train travel, it will be a candidate for inclusion. If dog park information can draw ads from sellers of pet products, it may also be a candidate. In journalism-think, news must be completely separate from the interests of advertisers. But in the emerging newspaper-business-think, in an environment where advertisers and not subscribers pay the bills, advertiser is king.

Ad agencies now tossing dollars that can fund news into the future. But, Old Media not moving to make the catch. 3/26/08

Posted by Steve Boriss in Advertising revenues.
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The good news: USA Today says advertisers in the next 4 years will increase spending on new media by 82%, and it will account for 27% of all marketing expenditures. Given the lower cost structure of the Internet, that means there ought to be plenty of money to fund online news outlets. So, what’s the bad news? Bloomberg reports that ad spending on Old Media continues to drop sharply, putting the news business into a deeper state of depression, both financially and emotionally. But why is this bad news? The mainstream outlets are the ones with the leading brand names and their self-proclaimed superiority for truth-telling and objectivity. All they need to do is leverage their advantages to succeed online and — bada bing! — problem solved.

But what is becoming increasingly obvious to all but the mainstream media is that they are refusing to make the changes needed for online success. Although their audiences are abandoning them in favor of online outlets that neither promise nor reliably deliver truth and objectivity, mainstream outlets have dug in their heels and will not abandon their failing model. Although it is becoming obvious that newspapers will need to deliver more and more original content, particularly at the local level, the Tribune is poised to dump at firesale prices the potential goldmine that is Newsday, which provides local, original content for an affluent Long Island audience, in favor of squeezing out a few more bucks from its dinosaur big city papers. In baseball, when one player throws, the other sometimes must move to catch the ball. Advertisers are beginning to throw money. Mainstream outlets that do not move to catch it cannot possibly win. And from what we are seeing, it would now be foolish to bet on the home team.

Internet spawning new ways to determine exactly what an ad is worth. Could determine which media will be preferred by advertisers. 7/13/07

Posted by Steve Boriss in Advertising revenues, Measurements.
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For decades, newspaper and TV advertisers have been tangled-up in buzzwords for the measurements that determine what an ad ought to cost, such as circulation, penetration, reach, frequency, and impressions. But the big picture is much simpler. Every dollar that advertisers spend has but one purpose — to make a sale. If an ad’s ability to produce a sale could be measured, it would become almost obvious how much an advertiser ought to spend for an ad, and advertisers would feel they were getting their moneysworth.

But the problem with newspaper and TV advertising is that advertisers cannot see a direct link between exposure to ads and sales being made. So instead of measuring sales, they measure things about the ad that are very weak proxies for a sale. Newspaper ads are largely priced based on “circulation,” which is essentially how many households at least had an opportunity to see an ad, while TV ads are priced based upon households reached, which is a parallel concept to circulation. And that’s the way it’s been for decades. Until now…

The Internet is introducing revolutionary new measurements that bring advertisers farther along the spectrum toward measuring an actual sale. “Page views” provide a better measurement of the total number of individuals who have actually seen an ad than has ever been provided by newspapers or TV. Nielsen has just announced that they will also be measuring “time spent” on each page to provide another helpful measurement, as Scott Karp notes. Progress is also being made with “unique visitors,” although that one is tricky given that people visit the Internet using multiple PC’s and devices. And of course, there’s the Google approach, which is providing advertisers with something pretty darn close to the measurement of a sale — an indication-by-click of how many want to learn more.

John Duncan correctly notes that unless newspapers start to pursue their own alternatives to their circulation measurements, the Internet will ultimately be far more appealing to advertisers. And if that day comes, it will be the newspapers’ days that will be numbered.

Online news sites and bloggers will eventually need to specialize by advertisers’ sales prospects to monetize 7/8/07

Posted by Steve Boriss in Advertising revenues.
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As emerging online news sites and bloggers mature, the psychic satisfaction of getting a large number of daily hits subsides, and thoughts turn to how to monetize, a reality will set in. News sites with a high number of hits alone will not appeal to advertisers, who will be able to find innumerable other sites drawing general audiences, many attracting even more hits. The quality of hitters matters.

The sites with the edge will be those that draw relatively pure audiences of good sales prospects for particular advertisers, especially prospects who are otherwise hard to reach. That’s one of the reasons that hyperlocal news is so promising, as many advertisers’ best prospects live within very limited geographies. But, non-geographically-based online news can be just as, if not more attractive to advertisers — imagine the attractiveness of a site that provides news of fly fishing to a company that sells related gear.

That’s not to say that the one-time surges from being cross-linked by mega-sites like Digg and Fark, as discussed on Lost Remote, won’t always be extremely valuable — they will draw new people to sample the site. But it is how many of the advertisers’ ideal prospects return and, perhaps more importantly, how many poor prospects don’t, that will determine whether a site is a hit with advertisers.

Might newspapers be closer to extinction than anyone now thinks? 6/15/07

Posted by Steve Boriss in Advertising revenues, Newspapers.
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Publishing 2.0’s Scott Karp suspects that the NY Times has been trying to bury some very bad trends in its newspaper advertising revenues, so he decided to grab a shovel and take a look. He concluded that in May, print ad spending had plunged 14%, with a $19 million decline dwarfing a $3 million increase in online advertising revenue.

Maybe it’s time for some sober reflection on how loyal we can expect advertisers to be to newspapers as a medium. Classified ads (27% of Times’ revenues, down 13%) seem destined for extinction given the overwhelming superiority of the Internet as a platform for these ads. Retail ads (23% of revenues, down 15%) continue to be hurt by price-shopping on the Internet, everyday low price trends in brick-and-mortar stores, and the inability of advertisers to target sales prospects given newspapers’ relatively broad and undefined audiences. And, advertisers can forget about reaching the attractive, under-30 crowd through newspapers because most are not picking-up the paper-reading habit.

And speaking of habits, is it possible this is now what it all comes down to? The habits of an aging readership that is more comfortable holding paper in its hands? The habits of ad agencies who enjoy the commissions they receive from placing newspaper ads, and are reluctant to jump into undeveloped, risky new revenue models? However, sooner or later, it must come down to the habit of advertisers to maximize profits.

The free, fully advertiser-supported model for web-based news begins to take shape with recent acquisitions 5/18/07

Posted by Steve Boriss in Acquisition, Advertising revenues, News Associators.
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Based on the vision of the future of news presented elsewhere on this site, a role I call “News Frameworkers” will ultimately develop. These will be the companies that provide the hardware, software, and services that enable those who actually generate and edit the news content to reach and interact with their audiences (early, current day examples include Google News, YouTube, MySpace, Blogger, Photobucket, and Digg). But, in order for News Frameworkers to operate, they need a source of revenue — a tall order given current web users’ expectations that everything ought to be free. The answer is an advertiser-supported business model similar to newspapers and broadcast TV news in which News Frameworkers find a way to expose visitors to advertising. That’s what the recent acquisition activity of Google, Microsoft, and Yahoo is all about. They are snatching-up a variety of companies with expertise in developing, selling, and distributing web-based advertising, primarily to support their own sites. But, as long as they are developing this advertising expertise to support themselves, will they also make this expertise available to others as a separate business? Publishing2.com says “yes,” but I suspect that ultimately these advertising techniques will be easily understood and copied by others, many of whom may be more adept at it or have better access to specialized resources. For the time being, I’d expect that these companies will find a lot more value in building their web presence and audiences, developing core competencies in acquiring and mining information about their visitors for their own use.

Google = Yellow Pages. Just the first of many winning formulas for Internet advertising 4/21/07

Posted by Steve Boriss in Advertising revenues, Earnings, Google, Google benefits, Internet advertising, Online advertising, Search function, Yellow Pages.
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Google’s incredible success in drawing advertiser dollars is primarily based on three benefits it has pioneered: 1) a keyword search function that naturally yields small audiences with specialized interests that are attractive to advertisers; 2) pricing that allows advertisers to share in the lower delivery costs of advertising on the Internet vs. print, broadcast, cable, and direct mail; and 3) newly affordable access to much larger audiences to smaller advertisers and those with geographically-diffused customer bases. These are surprisingly parallel to the new benefits that were provided by Yellow Pages at the time of their introduction. Among Google’s benefits, only the keyword search function is proprietary within its core business. But in the future, we will be spending less of our time searching and more of our time regularly visiting the sites that survived a Darwinian process based upon successfully meeting our needs and those of the like-minded. Our judgment and experiences will supercede choices made for us by search engines, and the sites we visit regularly will offer to advertisers audiences that are even better filtered than those provided by Google.