Kmart Closings Lead Papers to Focus on Small Accts.

By: Lucia Moses David Keyes was just about to turn in his 2003 annual budget last week for the Bonner County Daily Bee, a 4,701-daily-circulation newspaper in Sandpoint, Idaho, when his secretary slipped him a message that made him blanch: Sandpoint's Kmart was among the 326 stores chosen to close as part of the retailer's plan to exit bankruptcy.

Since it opened in 1990, the Sandpoint store has come to be the Daily Bee's fifth-largest advertiser, accounting for about 8% of the Hagadone Corp. paper's ad revenue. But Publisher Keyes figured its days were numbered when a Wal-Mart store opened across the road in 1995.

Keyes had drawn up plans to offer incentives to bring more local retailers into the paper. Now, he won't waste any time putting them into motion. "Nothing's secure," he said. "I guess it's a wake-up call to not keep all your eggs in one basket."

Industrywide, the impact of the second round of Kmart store closings within the last year may be somewhat less dramatic than in Sandpoint. The retailer, which spent $104 million in newspapers in the first 11 months of 2002 and said last fall it planned to boost its use of the medium, represents less than 2% of ad revenue to most public newspaper chains, according to Kevin Gruneich, an analyst for Bear, Stearns & Co.

Industry observers believe that the business still has a considerable way to go in weaning itself away from relying too much on too few advertisers. Scott Stines, president of the mass2one marketing consultancy based in Cedar Rapids, Iowa, wrote recently that as much as 95% of a newspaper's retail ad revenue comes from 5% of its accounts. And Gene Grant, a partner in Insight Edge, a Sacramento, Calif.-based consulting firm, said short-term budget and corporate pressures on managers can undermine efforts to broaden a paper's advertiser base.

Motivated by retail-store closings, mergers, or simply the urge to increase revenue, papers have intensified efforts to widen their advertising bases by wooing small and midsize businesses. While more feet on the street is a common theme, strategies have varied across the industry. A sampling:

* In the past few years, Pulitzer Inc. has added sales representatives, juggled the number of active accounts per rep, realigned sales territories by geography, and rewarded reps for adding active advertisers at its 12 community dailies, said Mark G. Contreras, a company senior vice president. The number of active accounts grew about 10% and total ad revenue rose about 3% through November, he said.

* Lee Enterprises Inc.'s "blitz" teams -- groups of top salespeople who go into a market to work with local sales reps to target infrequent advertisers -- brought in more than 20,000 new advertisers during the 2001 fiscal year and rang up $11.7 million in revenue for the 2002 fiscal year, which ended Sept. 30. As a result of the focus on contracts designed to foster long-term relationships, ad reps sold or upsold new contracts to 13,500 clients in the latest fiscal year.

* The McClatchy Co. has stepped up efforts to increase its offerings to all advertisers of all sizes. They are consistent with the company's core value of raising revenue, but the ad recession was a "huge motivator," said Bob Weil, vice president of operations. An example of the payoff: a new commission-only sales team at the Star Tribune in Minneapolis last year generated more than $10 million in new revenue, mostly from small and midsize accounts, he said.

Smaller accounts may be less profitable than larger ones, but Contreras said the profit is there: Pulitzer's investment in building small-business revenue in Year One was returned three times in Year Two. "It's a lot of elbow grease for less money than you'd get with one major advertiser," he said. "But in the absence of majors continuing to grow in number ... it's a strategy that makes sense for us."