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”

Newspaper Next Idea-Brainstorming Session 2

We held our second News Paper Next Brainstorming Session this morning.

Though we had 6 out of 8 teams represented (teams formed in Brainstorming Session 1), we were down to a total of 18 attendees. It was encouraging to see that we still had the support of key department heads and executives from circulation and sales. We had at least 5 new attendees, with a strong showing from the creative department. Still no sign of editorial, but it’s clear that next steps in the N2 process will rely on their involvement.

After a brief overview of the N2 Game Plan and framework for flushing out ideas, we spent a few minutes on 6 of the ideas from last month’s session. Team members in attendance were given time to elaborate and suggest next steps for each idea. Of the 8 original teams, only Team 5 led by our ad services manager came prepared with prototype web/print mock-ups , completed N2 Resume Idea Template & preliminary revenue projections.

As new committees/teams were formed to further explore ideas, it became clear that many attendees were reluctant to take on additional responsibilities. “How much time is this going to take?” was the question from sales staff present. While our goal is new revenue, the time investment from commissioned sales staff needs to be justified. With current commission structures focusing on core print revenue within a sales territory, it will be difficult and dangerous to pull talented sales execs away from their bread and butter to work on new “ideas”.

It might make more sense to rely on sales staff less for “hands on” participation and more for feedback as ideas develop. Better yet, in the true spirit of entrepreneurship that N2 fosters, we should consider a “bonus” compensation structure for those employees who spearhead profitable N2 initiatives.

At the end of our discussions we were left with 4 new teams charged with drilling down further into the following ideas/initiatives (for a more detailed description of these ideas see Newspaper Next Idea Brainstorming Session I):

New Team 1: Improving communications and customer service systems.

New Team 2: Coupon advertising program and Auto Display Ad Program.

New Team 3: Hosting industry events tied to publications.

New Team 4: Local kid-targeted special section.

Next steps were also suggested for the following :

1. Creation of a local Hispanic print product: We will be inviting one of our sister publications to provide a presentation on how they successfully launched a “new” Spanish print piece using N2 methods.

2. Alternative News: a prototype of an Alternative News section will be created for presentation at the next meeting.

The following new idea was also presented and accepted with enthusiasm by most present:

PS Weekly (Prep Sports Weekly):

This would be a new weekly print publication highlighting prep sports topics and information. The piece could be distributed free to all high schools and prep sporting events in the local area. With our current on-line dominance in the Preps category, we could also use the product to build out our on-line section. Advertising programs could be developed with the cooperation of schools who would benefit from a percentage of ad revenues.

We’ll be meeting again in the coming weeks to choose an idea to launch within the next 45 days.

“The Word Is Alive”

Newspaper Next Idea Brainstorming Session I

We held our first Newspaper Next brainstorming workshop this morning.

Kudos to our Marketing Director extraordinaire who spearheaded the effort. We were all surprised when over 50 employees showed up to this voluntary event, including department heads from circulation and production. We were even more surprised to notice that nobody showed up from our editorial department. We sat through a brief overview of the N2 initiative including a handout on “Using the N2 Method” and then the real fun began.

As you’ll see from the summary below, many people used the exercise as an opportunity to suggest improvements in the current operations of the company. This, in my opinion, was one of the biggest takeaways from the workshop. It’s apparent that our own employees are concerned with the integrity of the company and the product, an issue we should be addressing first.

We were divided into 8 teams of 6 people and were given the task of completing a blank Newspaper Next Idea Resume. Each team had approximately 15 minutes to come up with an “idea” for the newspaper. We’ll be meeting with our teams throughout the month to flush out our ideas using the N2 tools before the next meeting. At the very least it was a great team building exercise and you could sense some of the excitement in the room as the ideas were explained. The workshop is voluntary so we’ll see who shows up next month.

The following is a summary of the ideas presented:

Team 1 Idea: Improve Delivery and Distribution:

This idea focused on improving existing circulation and distribution systems. Having relocated our press production department to another city, we’ve been dealing with circulation challenges on a regular basis. Team 1 took the opportunity to bring these challenges to light and suggested we focus our efforts on improving circulation above all else.

Team 2 Idea: Create a Local Hispanic Print Product:

Recognizing that we have one of the largest Hispanic populations in the LA area, Team 2 suggested we develop a more local product catering to the Hispanic market in the San Gabriel Valley. The product would be home delivered and would earn income by selling advertising to businesses targeting the Hispanic market.

Team 3 Idea: Improve Communications and Customer Service:

Once again the focus was on “fixing” things that are currently broken. This team brought to light the many basic customer service and communications issues the company has on a daily basis. Although the examples given were borderline sarcastic, some good points were made about how important customer service is before anything else.

Team 4 Idea: Create an On-line Everything Local Guide:

This team discussed the creation of a free on-line guide with hyper-local information for consumers and local residents. This is kind of a community resource center with contact information and resources aside from news stories which are are running currently on the main news site. Again, the project would create revenue from local advertisers.

Team 5 Idea: Create A Topper Coupon Spadea on Sunday:

The idea was to publish a spadea to top the paper each sunday. The spadea itself would feature full color coupon space sold to local advertisers. Examples were given of success of such spadeas and coupons in other markets.

Team 6 Idea: Publish More Alternative News:

This team suggested that news in general had become somewhat “controlled” in the aggregate, and that there was a genuine demand by the public for “alternative” news perspectives on key issues. The newspaper should focus on becoming a conduit to other information sources, without being so concerned with sources and etiquette. As a result the paper would make more money as a better product.

Team 7 Idea: Organize And Host Local Events Tied To Publications:

An example of a “Travel Expo” was given. The newspaper could organize and host a local expo much like the job fairs that have been put on by newspapers in past. The paper could target a specific industry and sell booths along with advertising in an accompanying print publication promoting the event.

Team 8 idea: Create A Product To Target Younger Audiences:

The notion here was that we need to hook them on the paper at a young age. This team discussed the creation of a section or sections in the paper that provided activities, resources and information for kids age 4-12 and their families. The paper could create educational content along with schools and team up with local chambers, community centers, Boy Scouts, YMCA etc. to offer information in print an on-line to this demographic. Advertising sales again would provide the revenue to support the effort.

“The Word Is Alive”

Three Ideas For Newspapers in 2008

Having spent just under 500 days in the industry, I’m not really qualified to comment on where newspapers are going or what they should do in the coming years but I have seen enough to form some entertaining ideas on new business models that might work. 

Along with the ideas outlined here, newspapers have a number of challenges to overcome which I feel are limiting their growth  and future success. The most limiting of these being the ability to activate new ideas often and quickly. In my estimation, newspapers have a 18-24 month window to move on these ideas to maximize their revenue opportunities.

Here’s three business ideas for newspapers in 2008 that may help them capitalize on their position in the local marketplace and acquire new customers over the next 18 to 24 months:

1. Web Development & Hosting For Businesses.

As part of the API’s Newspaper Next initiative, seven local news organizations were selected to launch N2 pilot projects over a 4 month period. Local market research was conducted to determine what “jobs” businesses needed done. One of the prominent discoveries among non-advertising small businesses was that they needed  help developing an effective web presence. Local newspapers are in a great position to develop and promote web sites for small businesses.

Whether it’s a shopping site profile page or a full blown 15 page site, local newspapers can capture the market for local web development and on-line promotion. Local newspapers have creative services departments in place churning out print ads 24 hours a day in many cases. With the proliferation of easy to use web development tools and templates, web ads are much easier to develop than print ads. Most layout and design software including Adobe’s Creative Suite come with “save for web” features built in.

“That’s a completely different business model”, a colleague of mine argued. “How can we maintain the servers and all the programming”. Newspapers may not realize it, but they are already in the hosting and design business. Each section of the newspaper site is its own “mini” web site. Servers are already co-located and there are no real technology barriers to hosting and maintaining web sites today. Newspapers also have the layout, design staff and systems in place which local businesses need.

“But most businesses already have web sites.” it might be argued. While this may be true, I’d challenge any newspaper to take a random sample of 10 local business websites to see what you’re up against. In my estimation 6 out of 10 sites are outdated, poorly designed and generally ineffective as an advertising vehicle. The average local newspaper  has been designing advertisements for businesses for over a 100 years. They know how to write effective copy and turn customer ideas into action generating advertisements. The WWW can be thought of as nothing more than a giant newspaper or yellowpage directory.

Business models and pricing still need to be worked out, but the real value here is in relationship building. There are over 200, 000 businesses in the average metropolitan marketplace, there might be 2000 to 3000 who have been “touched” by the average print sales executive.  Providing these new services expands the prospect base and opens up new opportunities to market products to non-customers who might not ever advertise in the local news paper. Special print/on-line bundles can be created to market a web presence along with additional on-line or print exposure.

Becoming the web presence provider for local businesses is like owning their telephone, fax machine or front door.  Newspapers are effectively locking in a relationship with that business. Whether it’s facilitating domain name registrations, providing self-service web creation tools or complete web services, newspapers are helping businesses attach themselves to their local newspaper, a brand they’ve trusted for years.

2. Renting Mobile CSC Codes to Businesses

Whereas the technology and price barriers to web site development have come down, these barriers are still very much in place for mobile advertising. The cost and price of mobile devices are dropping but the processes by which advertisers can start using mobile advertising are still too complicated and expensive for business owners. There are many applications and ideas for mobile advertising within an industry or vertical market. The basic ability to communicate with customers via text messaging is something businesses will find invaluable for local promotions. 

 The most common mobile programs and easiest to employ are based on CSC (Common Short Code) text messaging. A CSC is a 5 or 6 digit number or letter combination, similar to a phone number which mobile phone users can text messages to interact with businesses.  The CSC itself costs from $500 to $1000 per month, and requires a somewhat lengthy and detailed application process. Newspapers can setup a master CSC for their business community and rent the keyword phrases to local businesses. For example, mobile users might text the phrase “Free Pizza” to  LANEWS (526397) and receive information on a free pizza deal in town. Newspapers can earn monthly fees for renting the phrase and CPA (Cost Per Action) fees for each response received. Because this type of marketing is in its early stages, newspapers can become the front runners in providing local mobile advertising services to businesses. Again, the strong brand and reputation that local newspapers enjoy will help them in acquiring new revenues from advertisers who are currently non-customers.

3. Email Marketing For Businesses

If they don’t have one already, every business should have an email list of all their local customers. Newspaper’s can create programs to help businesses collect email addresses and send emails with promotional information. Newspapers should already be actively collecting email addresses from visitors to the news site and creating opt-in lists of users who are open to receiving information on deals from local advertisers.

With the increase in behavioral targeting capabilites and the proliferation of personalization features on local news websites, newspapers can create databases of consumer information. Local businesses can then be matched up with consumers by interest.  Email marketing can also be bundled with local direct mail campaigns providing for “Total Audience” direct marketing programs.

The Work Factor: 

Henry Ford once said “Opportunity is missed by most people because it is dressed in overalls and looks like work.”

Recognizing that the strength of newspapers lies in their strong LOCAL brand, ad production systems, and local sales forces, these ideas are in no way “easy” to implement.  In fact, I think newspapers and especially their sales forces will have to work harder and more consistently than they ever have to succeed in todays marketplace, but the results will be worth the effort.

 ”The Word Is Alive”

My First Newspaper Next “Idea Resume”

I finished my first Newspaper Next “Idea Resume” today.

Newspaper Next is an initiative of the American Press Institute designed to provide a blueprint for transforming the newspaper through new business models. The “Idea Resume” is one of the Newspaper Next tools developed to help newspapers summarize new business ideas. It’s basically a one page template of questions about the idea and anlysis of critical assumptions. Click here to download the N2 Idea Resume template.

My first idea proposes to generate monthly fees from clients that have never advertised with the Newspaper. It turns out that there are over 80,000 businesses in our marketplace yet we have maybe 500 who advertise with us. We’ll be partnering with a technology company to build a site that allows businesses to promote themselves on-line and in the paper locally.

I wasn’t really in on the Newspaper Next hoopla meeting but the white paper makes a lot of sense. Any intiative that promotes “failing often and failing fast” is ok by me. I really liked the Idea Resume form which helps to identify strengths and weaknesses in new business ideas. It also does a good job bringing out certain key revenue assumptions. The whole process took about 20 minutes so I should be able to crank out quite a few of these first drafts and then go with the best one.

It’s my objective to get as many irons in the fire as soon as possible. This “Newspapers Next” initiative is basically giving us the green light to innovate. Something that I think the industry should have done 10 years ago. I intend to document my progress throughout each of these projects so stand by for more.

“The Word Is Alive”