Make New Money, Don’t Just Replace Old

By: Steve Outing

Is the Internet a zero-sum game for the newspaper industry? Will gains

from Internet-related ventures merely make up for inevitable losses on

the print side, as more readers migrate over time from print delivery to

digital delivery of the newspaper company’s news and advertising?



Or is there new money to be made? Can gains by a newspaper’s new-media

operations be what grows a company as print revenues flatten due to

increased digital distribution?



That’s a big issue for many publishers as they formulate strategy for

the next few years. Do they stick with a primarily defensive strategy,

where new-media operations are expected to be the part of the company

that grows in the decade ahead by in effect taking money away from the

print side? Or do they act aggressively to find untapped revenue on the

new-media side?



The only answer



The logical answer to these questions is to figure out how to find new

money, not just take money out of the right pocket and put it into the

left. If your newspaper’s Web site is primarily advertising supported,

the goal should be two-fold:



Find online advertisers who have not been customers of the

print edition.

Devise new online services that will cause existing

advertisers to dig deeper into their pockets to spend more with your

company than they have in the past.


Let’s look at No. 1 first. The most significant opportunity will be in

attracting smaller local businesses – those that have not

previously advertised in the newspaper because of cost (or simply

because it didn’t meet their needs) – to advertise on the

newspaper’s Web site or other digital services. Just look to the yellow

pages print directory to see the likely candidates for lower-cost,

targeted online advertising. Many small service businesses can benefit

from online advertising – bringing in new dollars to a newspaper

company.



Online news media consultant Peter Zollman, principal of Advanced

Interactive Media Group, says that smaller local companies have for some

time been priced out of advertising in many large- and even medium-sized

newspapers. Examples include independent dry cleaners, sandwich shops,

small specialty retailers found in shopping malls or strip malls,

independent sporting goods stores, etc. Because efficient print

targeting often isn’t possible, such enterprises may shy away from

buying print ads – not wanting to pay for distribution of their ad

to the north side of town if their store is in the south section, for

instance.



Many such small businesses spend their advertising budgets in suburban

or community newspapers, or “penny shopper” papers serving their

neighborhoods. Other businesses use local radio or even TV but don’t

find newspaper advertising useful. Newspaper Web site salespeople thus

should spend some of their time courting advertisers from other local

media that might be inclined to move some of their ad dollars to the

Internet. If your site has an online business directory or yellow pages

service, that’s an obvious place for such advertisers – but think

beyond that to targeted advertising and e-commerce opportunities on the

Web site.



Such businesses don’t have to be small, Zollman points out. Some local

law firms spend profusely on TV ads (but not for print), so there is the

potential for significant ad revenues from such businesses. Be

aggressive; think about taking money away from other local media.



The key to attracting smaller businesses is offering something that’s

useful to them and reasonably priced. For example, a pizza shop may want

to spend its advertising dollars at certain times of the day. A news Web

site can add the shop’s banner ads during the hours of 3 p.m. to 7 p.m.

– when busy office workers are thinking about what to feed the kids

this evening, or just got home from work and must decide what to do for

dinner – or during the hours before pro football games. For the

cost-conscious pizzeria, this means that it’s not paying for ad

impressions during breakfast time. (The pizza place could get similar

time-targeting on TV, of course, but the costs would be much higher than

online advertising.)



Another good market for “new” online advertising money: Businesses that

cater to out-of-town customers. Hotels and motels, for example, seldom

advertise in local newspapers, but they will advertise if a news Web

site is a destination site for out-of-towners looking for information in

preparation for a visit. Tourist attractions, rental car companies, and

discount-store shopping malls are examples of advertisers that will want

to reach an out-of-town audience.



Sometimes businesses that do well with online advertising are

unpredictable. At the St. Petersburg Times in Florida, Web

publishing General Manager Ronald Dupont Jr. says that one of the

most successful online advertisers was a company offering balloon

rides.



What they’re doing wrong



Dave Morgan, founder and chairman of Internet ad services company

Real Media, believes that running a newspaper Web site does not need to

be a zero-sum game – though many publishers behave as though it is.

Too many publishers are unwilling to devote the resources and take the

risks to find new revenue streams that will mean future growth for the

entire enterprise, he says. The result this risk aversion is that their

Web sites will do little more than pull in money from existing

advertisers that before would have gone to print.



The ideal way to pull in more new money from existing newspaper

advertisers is to offer them additional compelling services, Morgan

says. The ideal news site will not just carry banner ads for local auto

dealers, for example, but will actually sell cars online, as well as

related goods and services. The smart site will allow its users to shop

online for auto insurance, tires, mobile phones, extended warranty

services, baby seats, etc. – facilitating comparison shopping and

taking a cut of each transaction.



Such a strategy allows advertisers to spend more money on online

advertising and e-commerce programs because they sell more products and

services as a result of participation. In this way, a publisher can

squeeze more money out of an advertiser because the client is selling

more – adding to the bottom line of the newspaper company and not

taking away money from other departments.



Of course, such an approach can be scary to a traditional newspaper

company’s executives – for in the selling cars example it could be

perceived as marginalizing auto dealers, which have long supported the

print edition.



Morgan points out that this evolution in local advertising is happening

whether local news publishers want it or not. The Internet is creating

better ways to target advertising to select groups and more efficiently

sell products and services. Local companies will migrate to these new

forms of advertising. Newspaper companies must take advantage of the new

opportunities presented by online advertising – and force

themselves not to fret over what it’s doing to the core print

product.



To truly make a news organization focus on acquiring new revenues

instead of replacing old with new, publishers need to be thinking about

a wholesale revamping of their companies’ organizational structures.

Morgan is one industry observer who advocates a bold stroke: Take a news

company’s new-media division and put it on top of the entire enterprise.

That division becomes responsible for the brand and the content of the

company, and the print side of the company becomes a single appendage

responsible for but one mode of distribution of the core asset,

content.



I think he’s right, for it will take the new-media side’s separation

from the print master – to set it free to “be all that it can be”

– for a newspaper company to be able to act assertively in going

after new revenues.



The Internet likely will be a zero-sum game for newspaper companies that

continue to approach new media with traditional thinking. Those that

keep Internet ad sales within the confines of a print advertising

department will succeed mostly in getting the same amount of money out

of existing advertisers, but spreading it among a wider variety of print

and online placements.



The better approach will be taken by those companies that free their

new-media departments to run wild – aggressively going after new

advertisers who’ve yet to do business with their newspapers, and

presenting existing advertisers with new services that will entice them

to spend more money with the newspaper.



Other recent columns



In case you missed recent Stop The Presses!, here are links to

the last few columns: Low-Cost Credit Card Content Sales, Wednesday, Sept. 13

What’s Wrong With Newspaper Discussion Boards, Wednesday, Sept.

6 The Interactive Newspaper Columnist, Wednesday, Aug. 30

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Steve





Got a tip? Let me know about it If you have a newsworthy item

about the online news/interactive news media business, please send me a

note.







This column is written by Steve

Outing for Editor & Publisher Online. Tips, letters and feedback

can be sent to Steve at steve@planetarynews.com





Copyright 2000, Editor & Publisher.

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