Gifts That Keep on Giving ... Ad Dollars

By: Joe Strupp More retail-ad programs requiring advertisers to come up with little or no money up front are appearing at dailies around the country. One approach that's proving successful: selling merchant-provided gift certificates online at a discount, with the newspaper pocketing the income ? and merchants grabbing the ad space and customers.

"The benefit to the advertiser is they get the value of the advertising without having to write a check for the advertising; it is directly related to their cost of goods," says Chris Wood, advertising director of Florida Today in Melbourne. "They also get new customers who are more likely to use the certificates."

Florida Today has taken this approach for online promotions around Valentine's Day and Thanksgiving, primarily with restaurants. In past deals, the newspaper has received $500 worth of gift certificates from local restaurants, in $20 increments. The certificates are then sold on the paper's Web site for half-price ? and only a limited number are available.

"We get $250 [from readers who buy], and the restaurant gets $500 worth of advertising," says Wood, who notes that the last such promotion in February resulted in $16,000 worth of gift certificates purchased, with $8,000 spent by readers that the newspaper keeps as revenue. Advertising executives say the approach lures in new advertisers and those thinking of cutting back because it requires no upfront cash, and usually brings them new customers.

"We have taken to heart the Newspaper Next report and partner with key businesses on a no-risk basis," says Travis Quast, vice president/sales and marketing for The Idaho Statesman in Boise. The promotions, he added, are done not just to generate additional revenue but also to foster the paper's image as "a good business partner. We are only as successful as our clients are."

Quast took the new approach with eateries too, but on a larger scale in both print and on the Web. The Statesman published a 64-page restaurant guide in late June that included ads on each page from different establishments. He says 75% of the restaurants in the guide paid for their space with gift certificates. Of the $20,000 in advertising revenue the guide produced, $16,000 came in the form of gift certificates the paper is selling online.

The gift certificates are put up for sale on the paper's Web site at a sliding scale: If you purchase one the first day, it is at a 10% discount, the second day at a 20% discount, and so on until Friday when a 50% discount kicks in. The catch is that each offer is limited. "When they're gone, they're gone," Quast stresses. "I am hoping we will sell them all on Monday at 10%; there is a risk. The other win for us is that we do them online and promote the site and attract new users."

Even though advertisers are still paying for the ads by giving away products and services, ad executives contend that most prefer that method. "They get additional exposure," says Bobby Rice, regional advertising director for the Pensacola (Fla.) News Journal. "They get the full value of a coupon in ad space."

Rice used the approach for a promotion in November 2007 that listed some 30 restaurants and spas in a full-page print ad directing readers to go online and purchase gift certificates at a discount. He says the paper took in about $80,000 in revenue through the gift certificates that were sold online at a 25% discount. "That [print ad] drew people to the Web site," Rice explains. "Then they would come down and pick the gift certificates up at the paper."

Rice adds that the program works best when targeting non-advertisers who are less likely to take advantage of a traditional ads, but may sign on for other advertising if the new approach works. "You have to focus on people who don't traditionally advertise in the newspaper," he says. "The majority of what we got was new business, because we focused on inactive customers."

Quast in Boise says he is considering other such "no-risk" ad approaches, perhaps for classified as well. "We could take a percentage of each sale made," he says, citing used car ads as an example. "If you've got a car to sell, we partner with you and handle the marketing and get a percentage of the sale. We take the risk because we know our product works." He says the approach is similar to real estate agents who take a percentage of a sale only when the deal is done: "It will have to depend on how receptive the marketplace is."