By: Eric Wolferman
Revenue enhancement is fast replacing cost reduction as the driver of newspaper-technology development. In the last two decades, process automation has yielded huge savings in labor and material. Achieving a return on investment (ROI) for systems and equipment was relatively easy.
Today, a great deal of the initial savings prompted by automation has already been taken out of the operation. Those savings were derived from one-time cost reductions that no longer can be used to justify new technology. To establish economic justification for new technology now, publishers must consider whether a project can generate revenue, as much as save costs.
A notable example is the push for technologies that can extract and analyze business information so we can identify new market opportunities. Investment in these technologies presumably can be justified by the resulting increase in revenue.
A case in point is The Dallas Morning News, where Information Technology Vice President Lorie Schrader has developed a remarkable system to extract data from the newspaper’s advertising, circulation, and finance databases. This information is then manipulated and analyzed to identify opportunities.
Schrader calls the project a Business Intelligence solution. Using Cognos Inc. software tools, data elements are extracted from various business systems to form three primary “datamarts,” or repositories, for advertising, circulation, and household-demographic data. The demographic database contains information on 2.3 million households as well as data acquired from outside sources. The data are then organized into multidimensional “cubes” that present the information in a variety of ways. About 200 “power users” and business analysts in the advertising, circulation, and finance areas use the system.
In one case, using the collective information from advertising-sales and household-demographic data, the Morning News was able to design a very successful product specifically targeting key areas. In another, the customer list of a large furniture advertiser (about 50,000 households) was fed to the newspaper’s demographic datamart. A segmentation analysis identified noncustomers among 1.6 million households that most closely matched the profiles of current customers. A resulting targeted mailing to those specific households generated revenue for the newspaper.
It took Schrader two years, in between other ongoing tasks, to develop the system. She estimated the overall investment in software and consulting services to be about $200,000. Meanwhile, advertising and marketing executives claim that nearly $614,000 in revenue can be tied directly to the ability to access and analyze the data so far this year. How’s that for an ROI?
As another component of the project, Schrader is developing what she calls the Executive Information System, a kind of “digital dashboard” for executives to check key business indicators on a daily basis.
Cognos, whose tools the Morning News used to build the Business Intelligence solution, is one of a growing number of companies providing OLAP — online analytical processing — software and other business-decision-support systems.
Another recent entrant is 5 Fifteen Inc., a relatively new company offering an assortment of newspaper production and business tools. The company is marketing a software package called Viper, billed as a data-mining and analysis tool.
Executives at 5 Fifteen said they have interfaced the software to the Atex Enterprise classified system, with a successful implementation running at The Chronicle of Higher Education in Washington. Viper generates on-demand information from the Enterprise database to identify market trends, perform “what-if” analyses, assess the effectiveness of rates, and other functions to help with decision support.
And Cox Newspapers Inc. is working with SAP to implement integration of advertising, circulation, financial, human-resources, and payroll data at its Dayton (Ohio) Daily News.
It has taken a long time for publishers to recognize how to use the wealth of data at a newspaper in truly effective ways. A large part of the problem has been the proprietary nature of newspaper production and business systems. Rarely have these systems made it easy to exchange and aggregate data among them.
The new generation of decision-support middleware, designed to eliminate the obstacle of disparate data sources, has the potential to produce opportunities by using data with pinpoint accuracy.
One word of caution: Like most modern tools, decision-support software can only be as effective as the user. Don’t presume that data-analysis software will make an expert of a novice, any more than powerful drawing software will make an artist out of those of us whose best work is limited to stick figures. New software tools will make it easier to slice and dice information, but only trained and skilled analysts can turn the pieces into fuel for new revenue.