State of Local

Interesting article in the WSJ today discussing the inability of newspaper advertising to keep pace online (subscription required). Not in absolute dollars, but certainly in share. They cite some compelling stats, mostly from Borrell:

Over the past two years, the number of local salespeople peddling online ads for newspapers has ballooned to 15,500 from 5,900

One thing they touch on, but don’t really spend much time digging into, is the value of participating in a network:

A lot of newspaper companies have teamed up with Internet players like Yahoo on a variety of cross-selling and ad-technology initiatives to get more local ads.

From what we’ve seen at IB, there is a real reason for local publishers to seek out networks. Much of the stuff Mark Potts recommends in his take on the Journal story requires a partner who can bring scale to their investments in technology, sales tools, etc. But, if a publisher finds the right partner, they can outperform the market.

How do we know that networks drive revenue? We had Borrell Associates run a custom cut of the data they used to produce their May study, “What Local Media Websites Earn”. What we found was that sites that belonged to our hosted network make 36% more revenue per TV household than their non-IB TV station site competitors. That’s a weird metric, you might say. And you’re right if you are thinking of an Internet site that wants to attract the web audience at large. The TV household metric, however, becomes very relevant when targeting a local audience. For local sites, revenue is driven by their ability to have greater reach within their local DMA and then their ability to sell against that reach. As a good network, IB provides the tools for reach and revenue.

Specifically, the Borrell report showed:

Essentially, these findings validate what IB has been seeing all along. Our national advertising business is strong: creating $15 RPMs from our national inventory, while other targeted networks generate $5 RPMs. (Note: RPM = Revenue per thousand. It’s the sum of all revenue (regardless of CPC, CPM, CPA, etc.) that is generated off of 1,000 pageviews). We recently launched the IB Local Network in comScore which puts us around the top 40th ad network each month. We’re adding new local publishers to that network each month and are excited about new opportunities across the board.

The Project For Excellence In Journalism has issued its annual “State Of The Media” report, and there are a number of good takeaway points that are applicable to any local news organization. But as is always the case with this type of report, take all the points as interesting nuggets of information, rather than the complete story of the state of the media.

The two points getting the most attention involve audiences and advertising.

The good news for the news business is that audiences are continuing to shift the attentions online, and the traditional media outlets are grabbing larger percentages of the market than they did in the offline world. But the downside of the story is that while the online news audience is thriving, the advertising side of the equation hasn’t kept pace. Content and advertising are increasingly becoming uncoupled, and that only increases the bottom line problems for many so-called “legacy” news organizations.

Here are a few of the highlights from the report (which really should be read in its entirety):

Increasingly, news is moving from a traditional story-based presentation to a world of options. Audiences are moving toward information on demand, to media platforms and outlets that can tell them what they want to know when they want to know it.
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Online advertising revenues exceeded $21.1 billion for the first time in 2007, according to a report based on research conducted by PricewaterhouseCoopers (PwC) and sponsored by the Interactive Advertising Bureau (IAB).

In the latest of their Internet Advertising Revenue reports, the two companies estimated that 2007’s figure will dwarf the $16.9 billion in online advertising revenue reported in 2006. That $5.2 billion increase of 25% percent year-to-year, which is both a record-setting dollar figure and a decline in growth rate compared to prior years.

Which is one of the things to keep in mind as you take a look at the news coverage of these numbers. There are a couple of ways to write the takeaway headline for the report. And while they’re both correct, it’s the perspective that really matters.

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The launch of QuadrantOne is perhaps the clearest signal to date that the local online advertising has come into its own in the past year. QuadrantOne follows Cox Cross Media and, to a lesser extent, the Yahoo - newspaper consortium as publisher efforts to mine the national market for local advertising.

How do these plays affect IB? Well, in one sense, they are direct competitors - they, like us, sell across a national network of branded online local content, and they bring inventory to market for the advertiser interested in targeting local. Most of these organizations, however, are closely aligned with if not directly part of a traditional media, allowing them to also sell cross-media advertising. How much these initiatives focus on cross media bundles vs. selling online only packages will tell part of the story regarding how much of a true competitors we will end up becoming. IB has and will continue to focus its efforts squarely in the online only world.

Another way that these players affect IB is by bringing more attention to the local market - and specifically to the value of professionally produced local content. While online local advertising has been growing quickly, the true competition has been geo-targeted impressions on portals and ad networks. Often, this inventory was easier to access for the media buyer, and was cheaper to purchase. One phone call, a couple of targeting parameters, and the buy was done. However, what is becoming clear is the value of advertising around professionally produced local content. Desire to capture the pricing power derived from high quality content and high quality local media brands is driving these new entrants into the market. We believe that the attention these new entrants will bring to our market will cause more advertisers to seek out professional local content. We believe the market opportunity for IB will expand even further.

The last thing that we must realize, however, is the true challenge that these new entrants will pose. One of the issues with buying local in the past has been that it is hard. It’s hard for the media buyer to assemble all the right inventory. Its hard for the advertiser to measure results. Its hard for the publisher to optimize the campaign. Its hard for everyone involved to know if they extracted the necessary value from the transaction. By entering the local market at scale, quadrantOne is saying that they want to make it easier for advertisers and media buyers alike to purchase local inventory. Making local inventory easy to buy is perhaps the number one prerequisite for local online advertising to continue to grow. We must recognize that today’s state is not good enough. Things are not easy enough. There are not enough metrics. We need to do more. Unless we in the industry meet the needs of the media buyers and the advertisers, local online advertising will migrate to portals, networks and other places that will solve those needs.

Dan Finnegan, the former head of Yahoo’s HotJobs property, is quoted in the NY Times today saying this:

Businesses like travel, shopping, music and even HotJobs were all great products, but none were going to make a huge difference in the fight with Google unless we used them to drive the main search business.

HotJobs has been the main focus of the Yahoo / Newspaper consortium to date. While, in the short-run, HotJobs did get Yahoo the ability to distribute search onto all their newspaper partner sites, is that how Dan meant the quote? My experience has been that Dan’s sentiment generally = vertical search (or, more accurately, Universal Search). It’s about driving query volume for the core search property. If that’s actually the case - and Yahoo is starting to focus on driving core search volume at the expense of their “local” verticals - how much will that hurt help their newspaper partners?

Ken Doctor and Terry Heaton have been providing good insight into the Yahoo - Newspaper consortium for some time now.

I’m one of those folks who believes that creating local vertical blogs makes a lot of sense. If you’re a station who has covered Barack Obama for years, why not create a vertical blog with a separate URL rather than rolling the blog into your main news site?

Chicago’s Fox news has done just that, with the blog Obamatracker.com. The blog promises to be a “one stop for all you need to know if you are tracking Senator Barack Obama’s Presidential campaign.”

It’s a nice idea, but it’s definately a web 1.0 presentation. While I think it’s a great idea not to obviously point back to the main Fox Chicago web site, the blog would be improved with a better template and a place to out at least some generic house ads–even just some Google Adsense ads.
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