05/15/2015

It’s a revenue problem, not an audience problem

By Dennis Hetzel, Executive Director

“It’s not an audience problem.”

I get asked often enough by legislators about the state of the newspaper industry, that I have an elevator speech that starts with that quote.

Usually I get that question because the legislators are genuinely worried about what’s going to happen to their local papers and what it means for their communities if newspapers disappear.

Sometimes they get mad at the local papers, but they know that newspapers, regardless of whether the delivery method is physical or digital, represent the journalistic outposts that offer steady, regular coverage of everything from courts to soccer scores. They know that newspapers are the ones most likely to pay attention to the issues they’re facing. And, no offense to our broadcast colleagues, they know that radio, television and random bloggers won’t replace that.

My elevator speech goes like this:

It’s not an audience problem. If you combine the print and Internet audiences of almost every Ohio newspaper, even if you subtract out duplication, it’s the largest audience of readers they’ve ever had, and it’s almost always the largest audience, by far, of any media outlet in their community.

But, it’s a revenue problem. Besides the kick in the teeth everyone got during the worst economic collapse since the Depression, the reality is that our advertisers have many, many more demands on their marketing budgets, and their own increased costs of doing business. The other reality is that, for all kinds of reasons, you just can’t make as much with digital advertising.

We’re not dead. Not by a long shot. But we have to try new things to survive and thrive in the future, to find the revenue streams necessary to cover the news the way we should, and the way you expect. So, hang in there with us.

What I don’t say is how much I worry sometimes about whether we will find those revenue answers in time. What prompted this column was Thursday’s version of “Daily Clips,” a terrific newsletter I know many of you read with news related to newspaper industry advertising and marketing.

One article was from AdAge, “Why One Auto Dealer Believes in the Power of Pre-Roll Ads,” describing how an Arizona auto dealer is shifting spending from broadcast to digital. It cited a 2013 Google study about how much video auto shoppers watch before purchasing.

Now, this is an opportunity in one sense, because our websites mean we can compete for those video dollars. Most Ohio newspaper websites can offer pre-roll video.

Here’s the scary part: This dealer is using YouTube for his pre-rolls. (Reminder that YouTube is owned by Google, so that’s where his money is going.) He pays an average of 15 cents per watched ad. He has to pay around $5.50 a click for a Google paid search ad because most of the Phoenix-area dealers are trying to buy the same types of search terms.

And, he can target like this:

… “Google can tell when a shopper is looking for a pickup by attaching tracking cookies, or bits of software code, to the shopper's Web browser, then anonymously tracking other shopping behavior ... The cookies allow Sands Chevrolet to set up a campaign that gets the pre-roll ads in front of the shopper when the consumer goes to watch videos on other sites, including non-shopping news sites, he said. Targeting also can zero in on specific ZIP codes of shoppers close to the store, he said … Sands Chevrolet, Mr. Ament said, sets its targeting parameters to never send pre-roll ads to video watchers who are less than 25 years old or for whom YouTube doesn't have an age”….

Now let’s turn to politics.

Consider: Websites Are Selling Out of (Political) Ad Inventory for 2016. This National Journal article includes this nugget:

If the Internet can seem a vast and endless space for potential ads, the universe of premium spots for political campaign ads is actually far narrower. Specifically, what's selling fast are the kind of ads that automatically play on Hulu, YouTube, and other Web-based videos and that users can't skip past.

Later Thursday, a Facebook friend recommended this article from Salon: “Utter insanity and stupidy:” Ex-Reagan adviser unloads on GOP, lobbyists and the myth of the “moderate Republican.” Of particular interest to all of us should be Bruce Bartlett’s observations on the world of broadcast and cable political advertising, which explains what we find all the time at AdOhio about the difficulty of getting political consultants to recommend anything but a heavy dose of television commercials to their clients:

… “There’s an enormous bias in the system. That results from the fact that basically campaign consultants make their money, by running as many ads as you can possibly raise the money to run. I’m not sure how many contributors really understand how the system operates.

See, what happens is, these consultants, they own the advertising companies that buy the advertising time and so they get a commission of like 15 percent on every dollar of advertising that a campaign buys. The more advertising that they buy, the more money that goes into their pockets. So it’s in their interests to keep buying more and more advertising, long past the point at which diminishing returns have set in.”

I see two common threads in these examples.

First, newspapers and newspaper websites aren’t part of any of these conversations. That’s the really scary part. If you’re not on the field, you have no chance to play. Secondly, the focus in each of these examples is on video, and every study suggests that won’t stop. Short video commercials are going to be more effective than tiny banner ads at the bottom of smartphone screens, where more and more of our digital audiences are headed. Do we have the level of sophistication with technology and targeting to compete?

Still, a funny thing can happen if we can just get in the door to tell our story. Sometimes the best answer is print advertising. I can’t think of a better way to escape all that Internet clutter.

Whatever platform or combination of platforms they choose, it’s not an audience problem. We have the eyeballs. We must shout that louder and figure the rest of it out.