Online Revenue Strategies For Newspapers.

Once upon a time there was a tiny hamlet in the Swiss Alps. This hamlet was in serious trouble. The well that supplied water to the village went dry. The people began to panic.

There was, however, another well flowing with water across a deep gorge on an adjacent mountainside. An imaginative young thinker came up with a solution. He built a bridge across the gorge.

The villagers were elated.

A bucket brigade was formed immediately, and the water supply was replenished. Needless to say, the bridge became very important to this group. It was their source of life.

They honored the bridge. A committee was formed to take care of the bridge. Only certain people were allowed upon it, and then only on certain days, and then only wearing certain clothes. No one could see or cross the bridge without permission.

Unfortunately, there were disputes within the committee. The disagreement centered around whether a canopy should be built over the bridge. So the bridge was closed until a decision could be made. Many villagers died of thirst while the leaders debated.

A similar tale is unfolding in the newspaper industry. Just as the village in the Alps found another source of water, newspapers have found another source of revenue on the internet. Like the Swiss villagers, they need to work a bit to bring that revenue over. Unfortunately, some newspaper companies have begun to mismanage access to this new source of revenue.

The landscape is different, the product is different and the business model is different, yet too many newspapers are trying to fit interactive models into a print framework. If they’re not careful, newspapers run the risk of putting themselves out of business by not recognizing the differences between print and on-line in their efforts to increase on-line revenue.

Here are some thoughts on the differences between print and on-line models that newspapers should keep in mind in their search for new revenue over the next 5 years:

I. On-line Sales Strategies Are Not The Same As Print Strategies:

Many newspapers are treating on-line as just another product. Training programs are in place to teach print reps how to sell on-line ads. Internet Sales Managers are put in place to coordinate sales efforts and ride-along on appointments. While it’s true that these practices have been helpful and necessary, on-line only sales efforts also need to be put into play. Here’s a few reasons that Newspapers should consider on-line only sales strategies:

1. Print reps are ill-equipped:

Besides the lack of technical skills required, interactive products require much more support after the sale. Without laptops or even access to computers in some offices, its challenging to make presentations and support on-line products after the sale.

2. Core Compensation Plans Discourage On-line Sales:

When faced with allocating a clients campaign budget, print execs take care of the core first in an effort to hit their monthly budget or goal. On-line compensation plans are often based upon a flat percentage with no contribution to core revenue targets. Certainly special bonuses and spiffs can be put into place, but these “Pep Talks” wear off and sales execs go back to their bread and butter core sales activities.

3. Territories Are Gone:

While print sales execs are often comfortable selling and taking ownership of a territory, on-line campaigns are network wide by nature. Execs need to be able to sell into a network of sites. Some newspapers have actually begun trying to territorialize their on-line sales teams, encouraging execs to sell on-line in their territory only. The result is less revenue and poor performance for clients. On-line only sales execs can focus on selling products across territories, reaching businesses who have never advertised with the newspaper before.

“The” Objection:

The major objection to on-line only sales teams seems to be the fact that these new execs will be taking revenue away from print reps who are already struggling. I would suggest that these new execs would actually bring more revenue in for print reps by pulling in advertisers who have never advertised in print. This is “reverse-publishing” at its best.

Perhaps shared revenue programs can be put into place to encourage print and on-line reps to work together. On-line campaigns can be turned over to on-line only execs who are more skilled and better equipped to support on-line products. On-line only execs can do the same with print and bundling opportunities that they run across in the field.

II. Online Ad Production Is Not The Same As Print Ad Production:

Too many newspapers are treating on-line ad production like print production. They need to remember that there are no hard deadlines with on-line. Ad production systems need to be streamlined by leveraging the technology and standards the WWW offers. Any on-line ad producer who has built print ads will tell you that on-line display ads with set IAB sizes are much easier to produce than print ads. There are even some companies like ImpactEngine and AdReady who have built a self-serve business behind standard ad sizes and themes.

Creative services teams need to build similar systems in-house to streamline ad production. On-line specs are a much larger part of the sales process than print specs. On-line specs need to be shown on a website spec, not on a white background as they are in print. It’s like taking a newspaper into an advertiser and showing them their spec ad in the newspaper in the exact spot that it will run. Something newspaper companies have never been able to do, can be done easily on-line.

III. On-line Fulfillment Is Not The Same As Print Fulfillment:

Web traffic changes hourly, unlike print circulation which is more static in nature. Too many newspapers are over-managing their ad-delivery systems. With an often lengthy and layered submission and approval process, newspapers have made it difficult to fulfill on-line advertising orders. There are also too many automated restrictions in the process. At some newspapers, campaigns are actually being rejected by ad serving systems because their impression goals exceed “projected” impression availability by 100 impressions or less. Newspapers need to remember that “available” impressions is a “dynamic” quantity. On-line campaigns need to be started and billed, impressions can be made up later if necessary. Who knows what local news event will occur tomorrow that results in increased traffic and impression inventory.

IV. Performance Metrics For On-line Are Not The Same As Print Metrics:

Newspapers are right at home with CPM models for measuring performance. They’re actually starting to treat CPM’s like CPI’s, a metric they’ve been using for years. Elaborate metrics reports are being developed and refined to help compare different newspaper groups and increase average CPM’s.

It’s time for newspapers to realize that there’s not enough revenue in on-line display ads. Banner revenue is limited by traffic and we can’t just add more pages like we can in print. The formula is simple (Total Banner Inventory Available/1000) X (Target CPM). Perform this calculation for any newspaper site and you’ll see that banner revenue is not going to sustain the industry. While behavioral targeting and niche site development are going to help CPM’s, the CPM metric is the last thing newspapers need to focus on right now. The focus needs to be on (in this order):

1. Interactive Revenue (non display):

Newspapers need money now. Local search (directories), Search Engine Marketing, On-line Video, Web Site Development and hosting, Email Marketing are all recurring revenue opportunities, independent of banners that newspapers can take advantage of now.

2. # Of New Advertisers:

Newspapers need to use their brand to build networks of new customers in local markets. Self-service products need to be developed and sales forces need to penetrate ALL businesses in the local market. Ted Leonsis, former vice chairman of AOL, states it well in his recent blog post where he lays out his “Ten Point Plan For Newspapers“.

Ted writes:

“Create mini local third party networks. Embrace and extend your reach locally by building a great digital sales force and then network and ingest local unique visitors, page views and engagement from third parties. Do locally what Advertising.com has done nationally, superset the region by creating a network of affiliates and build up massive scale of local sites. Promote them in your print-based property..”

3. Traffic Building Content:

Desperate times call for desperate measures, so content comes last. While they still have some quality journalist left, newspapers need to look for innovative ways to deliver quality content on-line. Again, they can leverage technology and partner with companies wanting to reach local markets.

The veil between sales and editorial needs to come down completely and newspapers need to build content initiatives with sales objectives. There are too many instances where sales is not aware of a new on-line section that suddenly appears on the web site. Editors need to let they’re guard down a bit and invite sales people into meetings about on-line special sections. Widgets can be built to syndicate content across other local sites, encouraging viral traffic growth.

Crossing The Gorge:

It should be clear by now that the solution for newspapers and the tiny hamlet in the Alps is to cross the gorge. They need to get out of the newspaper business and into the internet business. Sure there’s competition, but they still have a foothold on local markets. Newspapers also have a brand that’s been around for hundreds of years versus even the largest and most successful internet companies that have only been in existence for 10 to 15 years.

The answer is not in applying old methodologies, they need to create a new framework and business model to redefine the industry.

“The Word Is Alive”