By: Alan D. Mutter
In a stunning reversal of fortune for newspapers, some of the biggest retailers in the nation have taken to selling advertising and featuring editorial content on their busy and heavily promoted online shopping sites.
By transforming themselves into publishers, the folks who formerly depended on newspapers to reach prospective customers are building direct, powerful, and sustainable connections with consumers in a strategy that is bound to reduce demand for traditional advertising.
Unless newspapers angle their way back into the mix, it is hard to see how they can stop the slide in advertising that brought industry revenues to some $24 billion in 2011 from $49.4 billion in 2005. The total revenue production for newspapers last year, by the way, amounted to less than two-thirds of Google’s $37.9 billion in sales.
The revenue associated with selling advertising on commerce sites is a succulent attraction for a growing number of merchants, as demonstrated by Target.com, one of the pioneers of the trend.
Whether you are shopping for watches, gardening shears, or socks, you will see a slug of Google-provided ads on almost every interior page at Target.com. The ads, amazingly, tout not only the wares of competing online merchants but also those of such bricks-and-mortar rivals as Pottery Barn and Sears. While most of the ads on the Target site are related to the merchandise on the page, the page views clearly are for sale to the highest bidder. Ads for tax preparation services, for example, were popping up all over the site as the April 15 deadline closed in.
Industry sources report that a site such as Target.com is capable of generating many tens of millions of dollars in ad revenue in a year. Eyeing this potential new revenue stream, competing online retailers are hiring ad experts to monetize the white space around the merchandise. Retail analysts say it is only a matter of time until this strategy is widespread, if not commonplace.
Sites such as Walmart.com and Safeway.com are not only selling ads but also investing in editorial content to encourage shoppers to buy more stuff — and to motivate them to return.
Walmart helpfully provides advice for all the major life cycles: how to plan a Barbie-themed birthday party, how to get along with your college roommate, and how nutritional supplements can ease the creak in aging knees. Walmart recently appointed the former head of CBS Interactive to helm its digital commerce operations, suggesting that an even greater emphasis on content may be right around the corner.
Safeway publishes an extensive collection of recipes that you can sort by ethnicity of cuisine, cook time, the size of the group you want to serve, and the difficulty of preparation. The site encourages users to review and comment on each recipe, the better to build community and repeat traffic. There’s not much advertising adjacent to the content — yet — but it’s not hard to see how that could change.
Like lots of other merchants, Meijer.com, a Midwest retail chain, posts all of its newspaper ad inserts on its website, comprehensively indexing items by brand and category. In addition to carrying the usual bargains and coupons, however, the vitamin insert published in December contained full-page articles on the health benefits of fish oil and the usefulness of melatonin as a sleep aid.
Venturing well beyond selling refrigerators and televisions, BestBuy.com has created a members-only online mall it calls the Rewards Zone, which features products from more than 400 brands ranging from Saks Fifth Avenue to iTunes to Budget Rent-a-Car. Members receive frequent-buyer points for anything they buy at the portal, but the points can only be redeemed at — you guessed it — Best Buy. The program has three major benefits for the retailer: First, it generates some extra cash through commissions paid by the affiliate merchants. Second, it builds customer loyalty for Best Buy. But the best part is that it will provide the company with comprehensive information about the buying habits of each and every registered user.
In other words, Best Buy is pursuing the Holy Grail of digital marketing: detailed and actionable information about individuals, including who they are, where they are, what they have bought in the past and what they might buy next.
The chief way newspapers can remain relevant to marketers in the future is by developing the same kind of information for as many individuals as possible in the communities they serve. To do this successfully, they will have to track customers not only on newspaper-owned media, but also across the widest possible number of digital venues in the market.
Publishers who invest in this strategy will have a path forward, as advertisers increasingly de-emphasize the classic print and broadcast media in favor of efficiently targeted digital marketing.
Advertisers clearly have begun moving on. Publishers need to catch up.
Alan D. Mutter is a former newspaper editor who became a Silicon Valley CEO and now consults for the media industry. He blogs at Reflections of a Newsosaur (newsosaur.blogspot.com).