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For Publishers Only. The Un-varnished Truth about Newspaper Website Business Models.

Mel Taylor Media exposes why most local media still operate their digital assets in the red. Even if web revenue & traffic have grown over the years, your likely treading water and losing share, no matter how much money you throw at it.

This session is not about sales tips & editorial tricks. It’s not a gee-whiz technology talk. This is not a ‘the future is bright if we only change’ lecture. Rather, we call out the 800 lb. elephant in the room: our sites are not being run like our traditional print business; where profits must come first.

Mel Taylor has first-hand knowledge of these issues and the mandatory fixes that must be applied. He has spent over 13 years working with traditional media and online-only ventures, in their frustrating pursuit of building profitable online businesses.

Topics discussed:

• Pros & cons: the vendors of Internet services.
• Attracting or making 3^rd party digital investments
• Who’s driving your Interactive bus? Do they have the proper license?
• The enemy within. Rooting out the inside saboteurs
• Outsourcing & cost reductions via the latest Internet technology
• Killing the sacred cows. Stuff that doesn’t make sense anymore
• The Checklist. 10 questions to reveal the limits of your online business model.
• They’re quietly eating your lunch; stealth competitors in your own backyard. (Patch, etc)
• The 100% solution. The only HR & commission structures that work for Web.

Session also provides well-documented examples of how local media is using in-expensive tech and tactics to increase editorial coverage, cut costs and drive new revenue. Examples:

• Gannett outsources some ‘soft’ editorial creation to companies like Demand Media. Why this is smart, and how it allows Gannett to focus on hard news.

• Pasadena media property uses ultra-low cost, internationally based call-centers for setting up small biz appointments. Instead of expensive reps spending time making cold calls, they’re on the street with average of 5 qualified, new-biz sales calls a day.

• Partnerships with independent online journalists. Some were smart. Some were really dumb.

> Philadelphia Magazine uses TechPhilly.com for coverage of regional tech issues.
> New York Times uses BayAreaNewsProject.org for coverage of San Francisco
> Allbritton Communications pulled together 200 bloggers in Washington, DC area.

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But in reality, this move is quite questionable for Gannett local television.

Why?

The GM of 10 News allows their hyper-local vendor (DataSphere) to use a Seattle based phone room to cold call Tampa business owners. These tele-sales folks use the call letters of WTSP (trusted, local media brand) to close the deal.

Translation: distant tech company is building relationships with the life blood of Tampa broadcast operation: local business advertisers. Local WTSP sales reps might get a bit ruffled by this.

Outsourcing local sales is rarely a smart move. Especially when it’s to a bunch of young kids with DataSphere email addresses.  See where the questionable WTSP move used to be. Below is actual page before being taken down.

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Local Market Web Competition 9.12.10

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Can Radio get into the hyper-local, and online news business? That all depends if they run their online assets as a business, rather than a hobby. Can they move from old school tactics like mascots and remotes, to offering local business owners a portfolio of online solutions they are clamoring for?

What's Better for Radio; Silly Remotes or Web ?

Radio purists, Broadcast vets, Wall Street and even hardcore music geeks agree on one simple fact: without profit to pay the bills, there’s no programming excellence. So when it comes to the Radio station website and the hyper local opportunities it provides, why aren’t they run in the same financially disciplined way?

When a Radio GM wakes up each morning, what’s likely on their mind? What new Lady Gaga song should be added to the playlist? A morning show bit to post on the station site? While these play a role in the overall success of a station, it’s really not the stuff that keeps the GM up at night. Rather, it’s the sales and profitability issue that makes them toss and turn.

For Radio’s digital initiatives to dramatically drive more cash to the bottom line, they simply need to be operated under the same strict financial, programming and operational pressures of their on-air brethren. It’s really that simple, and there’s no two ways about it.

TIP  #1: Web-training for upper management: Understanding new competition, compensation/hiring issues, rate card, forecasting/inventory yield management, overcoming common objections, managers lead by example (not from behind desk), leverage web to increase overall Radio share, take share from TV, Newspaper, and direct marketing budgets.

TIP  #2: Beware of web sales trainers that haven’t sold web in years. Would you ever hire an overweight, personal trainer to get in shape? Are you following consultants that sound really smart, ‘wow’ you with gee-wiz technology and talk of ‘extending your brand’ online? Ask them to help you craft a pitch, overcome some objections and close a deal. See how they do with that one.

TIP  #3: While research, analysis and classroom lecture is helpful, you need to put money on the books NOW. Be wary of those who will have you believe that expensive data & training will lead you to web profits. The smartest ideas & concepts are worthless, until they are successfully implemented in the field.

Internet business 101 for programming & marketing. When PD’s, DJ’s, marketing execs, & webmasters understand basic online sales models, they create more advertiser-friendly digital opportunities, while developing greater loyalty with listeners. Just as sellers are trained, these non-sales departments need to also be well-versed in digital media & online revenue models. Programming knows how we make money with on-air, now they need the same understanding of our online revenue strategy.

Let me tread here cautiously, since as a former on-air and programming guy, I understand that I could ruffle a few feathers with the following. There’s too much, inherent risk when programming and marketing departments have virtual free reign in managing the online effort. Understandably and with all due respect, sales and revenue isn’t the top priority at this point, for Radio’s creative crew. Their job is all about audience, and they execute on this with great skill. That being said……just as a GM wouldn’t allow DJ talent to pick their own music, or allow the PD to push all the stop sets till after midnight, the GM needs to ensure that business-focused web rules and standards are properly set and adhered to.

TIP: Provide non-sellers with relevant background and regular training in how local businesses are spending their web dollars, the emerging online competition to Radio, and what issues the station sales reps are encountering in the field.

Manage your online inventory like on-air Nobody sells your product & audience better than your own team. Like on-air, local and direct selling of web is preferred over allowing outside middlemen to re-sell or commoditize your unsold inventory.

TIP: If more than 33% of your unsold web inventory regularly goes to 3rd party ad networks, then you have a online sales & inventory crisis that needs immediate attention.Here’s why: would you ever rely on pay-per-call or PSA’s to fill your unsold spot inventory, month after month in morning drive? Of course not, so why do it online?

Running GANS ( Garbage Ad Networks) and 3rd party ad nets on your homepage not only makes the site look cheap, it screams “we have no local advertiser support!” This is even more damaging when it’s the first thing a local advertiser notices when considering a web campaign with your station. Much like Radio, these prospects want to see if other local advertisers are already working with you, so they immediately check out your site. Make sure they see their competitors there, looking great.

TIP: Just like we do in Radio, put pressure on your premium web inventory and keep raising rate. Consider offering short term, pre-emptable and standby rates, as well as end-of-month deals to squeeze as much direct revenue out of your unsold web inventory. Do this before dumping it on the open market at downright ugly cpm’s, and making some out-of-towner, rich off of your local efforts.

Know thy enemy We thought that simply streaming our terrestrial signal would allow us to carve out a winning online position. Unfortunately, we’re now in a world where Pandora is running local ads, i-Pods hold infinite amounts of music, and freshly minted sites are going straight after our local advertiser base. Even the best Radio stations with compelling sites need to stay sharp against this growing cadre of online-only media looking to move into the local marketplace.

TIP:  Make sure you’re team is keenly aware of all competitors invading your local space, and how to effectively sell against them. Remember, it’s no longer just the media properties across the street. Now it’s Reach Local, Pandora, Service Magic, Patch, DataSphere, Yodle, and others. Many of these players are building local sales forces. This growing army of well-trained reps are talking to your clients right now, offering them a portfolio of attractively priced, digital marketing solutions….and they’re buying.

Training management must comes first. Regular staff web-training is important for traditional sales, but it’s HYPER-critical for digital & cross-platform selling. Taking it one step further, some smart operators are having their upper management trained first, complete with custom curriculum. We really like that idea. When you think about it, how can one effectively lead and manage a new effort…when they’re not 100% fluent with the subject matter?

There is good news in all of this Ignore the above best practices at your own peril. They’re incredibly tough to refute since they’re the exact sales and business tactics that Radio has successfully employed for decades.

Radio execs have 99% of the needed skill set, experience & resources necessary for digital & cross-platform success. All of their well-honed skills are easily transferable with regular training, direction and determination. As with any growing business, we just need to apply good ole’ sales 101, along with some boot-strap entrepreneurialism…..just like we do with our Radio stations every day.

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The early days of Newspaper giants such as James Gordon Bennett, E.W. Scripps and Joseph Pulitzer offered many clues that confirmed one of our earliest theories. (Hat tip to Howard Owens at The Batavian.com) These men were first and foremost, entrepreneurs and sales men. They clearly understood the need for immediate cash flow to support their journalistic efforts. They experimented with new technologies of the day, slaughtered a few sacred cows, and did whatever possible to quickly build a Newspaper business model that was self-sustaining, scalable, and NOT primarily supported by subscribers and donations.

Recently, we were approached by a group of investors looking to conduct a study on potential opportunities in the local online space. Of course they wanted intelligence on websites that showed significant editorial or traffic gains, as well as trends in local advertiser spend. But more importantly, they wanted a deeper look into the eco-system, projects & trajectories that could be considered un-discovered gems of ‘value creation’. In other words, projects of community interest that were combined with content, functionality, management teams & revenue potential…..worthy of investment.

Some findings of note:

1. Out of 50 sites and companies that were in the study, only 6 were run by an executive, journalist, or Interactive VP with any significant sales or revenue focused background.
2. A whopping 90% of sites we studied, primarily structured their web model from an editorial & technical perspective, with minimal revenue strategy baked in from the beginning. These sites combine technology & journalism to build readership traffic, which would then presumably attract advertisers. Advertiser support for these efforts were either limited or non-existent.
3. Most sites are captained by journalists, pro-am bloggers, or executives with similar characteristics. Most came up through the newsroom, editorial/programming departments, or imported from Internet pure-plays
4. Major sites run by larger organizations had a cadre of advisors and consultants that were intellectually seasoned and arguably first rate. Their board of directors were chock full of academics, journalists, futurists and research consultants. Yet, less than 10% of the sites we studied, had an advisor or board member with actual sales experience.

Initial recommendations from this study

1. “Build it and they will come”  no longer works as well as it used to. Revenue needs to be primary consideration.
2. Beware of using faulty data & research from sources with limited hands-on experience with ad community.
3. The retro-fitting of revenue tactics into an online news model after reader traffic has been established, is an increasingly flawed strategy that is blindly followed by far too many online operations. While online news sites certainly must have smart editorial & content focused executives, our research strongly suggests the importance of placing a revenue focused exec, side by side with editorial, in order to work con-currently on the challenge.

Part 2 & 3 of this report includes greater detail and recommendation. Please email us for details.

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