Online Revenue & Sales Strategy for Hyper Local Media
Can Radio beat Newspaper in the online news space?
Here’s part 1 of last week’s webinar we did for a group of Radio executives. Merlin Media and Genesis Communications are featured in this session. We focus on the issues affecting Radio’s ability to build sustainable, online business models.
We hope Broadcast and Newspaper execs fully understand why Yahoo! terminated it’s CEO; Carol Bartz.
Sure, Bartz didn’t hit her numbers. But here’s the key take away for local media and the NAB, RAB, TVB and the NAA:
YAHOO! relied heavily on pageviews, commodity content and CPM or ‘cost per thousand’ selling of banner ad inventory. With online ad inventory growing everyday, that creates a glut. When ever there’s too much of something, the value goes down. Simple supply and demand principles.
Yahoo, along with AOL and MSNBC are getting killed with the exact sales method that most TV, Radio and Print companies employ in running their digital operations. Is the NAB or NAA paying attention?
The Wall Street Journal highlighted many sources that support what we’ve preached for many years: selling your web inventory via CPM or ad networks is bad business and turns your journalism and content into a commodity.
At Yahoo, that (CPM) rate dropped to an average $6.50 in July 2011 from $7.65 in July 2010, while at AOL, that rate dropped to an average of $7 in July 2011 from $9.45 in July 2010.
Not only have CPMs declined over the years, but the old axiom of ‘content is king’ is starting to lose it’s lustre. Unique content will always have excellent value. But if you’re just building and boasting about about page views & Facebook fans, your toast. Relying on these once useful formulas is a recipe for slowly killing your local media business.
Rob Norman; executive at WPP PLLC’s GroupM North America, told the WSJ. “Just because you have a lot (pageviews) doesn’t mean that you have something that is of distinct value.”
Perfect timing! And from our ‘what were they smoking files’, Gannett just did a deal with YAHOO! to sell the Internet giant’s low-value content. Sweet. Gannett is not only selling damaged goods, but they’re also admitting that their own Gannett home-grown editorial is poop nobody wants to sponsor.
Take a look at the chart below from the Wall Street Journal. You’ll see why old school, web revenue tactics don’t work anymore.
Radio & TV execs throw alot of money, manpower & worthless research at digital. Radio still only gets a 2% share of local web revenue and TV claws for about 10%. Compare these anemic numbers to the hefty 50% local share that goes to pure-plays like Groupon, Google and Reach Local.
Will any of this be honestly discussed at the NAB Radio Show 2011 in Chicago? Probably not. Will the NAB or RAB step up and sound the alarm? Hmmmm. I wouldn’t hold my breath. By the looks of the 2011 Radio Show agenda and list of same speakers we hear, year after year, the Internet is still being downplayed and discussed as a “nuisance”. No wonder Radio get less than 2% local web revenue share.
Broadcasters still haven’t gotten their digital-revenue act together. They still haven’t understood the very real threat of these new, hyper-local competitors who are out to eat their lunch.
The reason why Radio and TV struggles with online revenue generation is simple:
The wrong people are probably in charge of the digital assets. Their compensation package doesn’t light a digital fire under their ass, so why should they worry about profit?
Still letting a program director or webmaster call the digital shots? Your newsroom manager controlling everything that goes online? Well, good luck with that. There’s no motivation and penalty from those executives to get them serious about making you a big, fat, digital profit. So why did you put them in charge?
What to do: The one person who is ultimately responsible for the financial success of your web initiative must have their compensation directly tied to digital profit.
Newspaper recently came to grips with this sticky issue and is steadily replacing old school, newsroom managers with digital-first executives with biz-dev skills. They had to, as they saw Patch poaching their staff. They saw Facebook, DataSphere, and cable operators ramping up their local, online sales efforts.
At the recent NAB Las Vegas show, CBS Radio’s Dan Mason admitted to getting his staffers digitally motivated was still a big problem. “Our biggest frustration is educating and bringing along our own people” said the CBS Radio chief.
Dan also compared the threat of Pandora, to 8-tracks and satellite radio. Funny, the Newspaper industry made the same kind of dismissive mistake by blowing off Craigslist a few years back, and lost most of their classified advertising.
Have ya noticed? Local media CEO’s always boast about their Internet efforts at conferences. They claim growth in streaming hours, page views and Facebook fans as if any of that really matters. It doesn’t. What really matters is cash flow and digital profit margin.
In TV & Radio you have one person who calls the final shot. That’s the GM. If you have a “team” that’s in charge of the website, your screwed. You don’t have an Internet business model…..you have hobby.
Putting a finer point on it: you have a non-profit hobby that’s a time and money suck.
Watch this video clip that describes the growing digital threats that Radio and TV face in their local markets.
Meredith TV admits they can’t sell local web. The broadcaster recently handed off one of the most critical pieces of their business to the crew of 20-somethings at DataSphere; the tech company/call center in Bellevue, Washington. WATCH VIDEO BELOW.
Meredith Television joins the now infamous group of local media companies like Gannett, Raycom and Fisher Communications, all of whom outsource a big slice of their local internet sales effort to DataSphere Technologies.
DataSphere is one smart company. They created a cheap and easy, hyper-local solution for hyper-short sighted, local broadcasters. It’s a perfect offering for TV general managers and Internet VP’s that just can’t figure out how to sell local web. That’s too bad. Digital marketing is the fastest growing expenditure for local business owners. Local broadcasters need to keep control of that action, since small business is the life blood of local media.
As we reported last year, (read here) (and here) these types of deals might look good on the surface, but they’re deadly. (quick web revenue with no disruption of sales force)
Broadcasters who drank the DataSphere Kool-aid, were given awards and honored for their lapse of fiduciary responsibility. “Innovator’s Awards” were bestowed upon those who let outsiders build primary relationships with local clients. Gotta admit, that certainly is innovative if the goal was to fully automate a TV station sales force.
What’s the real deal about how Meredith and other broadcasters use Datasphere? The local TV station outsources web development and local sales to DataSphere, where they represent the local station…to local advertisers. A boiler room operation that cold calls your local business community….using your call letters…..hard selling them on questionable, online offerings that have a too high chance of churn.
We hear the howls from local Meredith sales reps. No doubt, they’re heads are exploding as they learn of how Meredith corporate hired a room full of green horns to destroy the very relationships that the TV sellers took decades to build up.
Oh yeah. It get’s worse. DataSphere has the primary relationship with the local client, and keeps a VERY LARGE percentage of the revenue. Sweet.
To help Broadcasters get the most out of the NAB RAB 2010 Radio Show, our team gathered a list of issues devoted to digital business models. This collection isn’t focused on the usual topics of brand extension, FM on cell phones, HD, streaming, mobile apps and social. Rather, it’s a fact-based list of debilitating, online revenue challenges still confronting the industry today.
Hard to believe, but some owners still operate their digital assets like it’s 1999: build content, get traffic, sell ads around traffic by leveraging advertiser relationships. This contributes to why Radio only gets 2% of local web dollars. Compare this to Patch, Reach Local & Google that collectively get over 50% (and growing) of web budgets.
All is not lost. Even though competitors are multiplying like rabbits, Radio can still get back in game and significantly grow its web and overall revenue share.
Step #1: Radio should study the moves of DESERET MEDIA in Salt Lake City. CEO; Clark Gilbert, has dramatically restructured his portfolio of Broadcast (KSL) , Print and Web units into a digital first powerhouse that dominates reach & revenue.
Step #2: Address and remedy the most common, interactive choke points. The following list identifies what our team refers to as the ’800 lb. gorillas in the room’.
1. Top management & owners need specialized web training. How can you manage what you don’t fully understand? Dependence on expensive research and intellectual consultant/vendor babble only burns through cash and puts your stations deeper in the hole. Radio doesn’t need more data & analysis, it needs action in the field and updated management & compensation structure. Ex: If you delegate sales strategy to a content & tech focused VP of Interactive, you’ll just get well-trafficked sites with a ton of unsold inventory. Conclusion: Relying on VP Interactive or the Internet/marketing manager is a recipe for disaster without knowledgeable oversight from the very top. CEO’s: Get a closed door, WEB BUSINESS MODEL training session asap.
2. Director of Interactive qualified? Staff properly motivated? Too few Interactive VP’s or web managers are qualified to implement a realistic revenue strategy. While building slick sites and driving eyeballs have value, these skills do not always equal revenue & profit. Suggestion: hire a corporate VP of Interactive Revenue that reports directly to the CEO. Bonus all applicable staff based on web profit, not web traffic. Install mandatory web budgets and non-financial objectives that includes both financial incentives and penalties…for reps and management.
3. Dangerous thinking: ‘selling web cannibalizes Radio sales’. Are these words are still being uttered by some? Yes, but not in public. If those in charge would prefer to focus on their core Radio product, that’s fine. If these managers believe that “web revenue is small, so let’s not put too much time into it”….that’s fine too. But at the end of the day, if you’re not going run your web assets like a profit-first business…then why even have a digital initiative in the first place? It’s a fact. Advertisers are moving more ad dollars to online. They’ll buy digital marketing from their Radio rep, or someone else. While web revenue is still relatively small, it is the fastest growing revenue stream. At the very least, Radio should focus on growing its overall revenue share, by smartly leveraging its digital assets.
4. Limited web training of sales reps. How can they sell new products without seasoned direction & regular training? Is your staff taught by qualified web-sales trainers, or by a Radio ‘web-geek’? Is your staff forced to endure theory & classroom lecture, or are they getting real world training by being taught in the field? Radio needs to look outside of the industry for fresh and seasoned perspective on Web sales. Be wary of training from those who do not have recent local/direct, web sales experience.
5. Management structure conflicts. Conflict #1: Web managers typically report to a Broadcast manager. The Broadcast manager has a compensation package that substantially encourages spot or total sales. This may be one of the most critical choke-points of growing online revenue. Where do you think Broadcast managers will place most of their efforts? Conflict #2: Programming departments are primary operators of most websites, including where and how content & advertising is placed. If we would never allow the PD to determine the on-air spot load, why do we allow them to determine online ad units and placements on the website? Just like your Radio station, the website must be ultimately run by those with ‘web profit & revenue first’ goals.
6. Poor attention to fast changing, online environment. Radio execs typically follow other Radio execs for determining digital plans. Some harshly suggest it’s the blind leading the blind. If Radio barely gets 2% of local online revenue, it might be best to also look outside the industry for best practices in web sales. New competitors like Patch, Reach local and Groupon are ramping up their local staffs, and are going after the budgets in your own backyard. Is your team familiar with these new players and their sales plan? How do you keep up? Do you have a plan to thwart these new competitors? One way to win is to provide Web 101 workshops to local advertisers. By taking an educational approach with clients, they’re more likely to rely on you for all of their marketing needs, and not some outsider.
7. Setting web budgets too low. This little sleight of hand allows sales staff to quickly hit web goals. Once hit, they push web sales down to lower priority. In this situation, money is left on the table and gives corporate management the false impression of successful, local web selling. Making matters worse, this (by default) allows remaining local web budgets to be redirected to online-only companies. The only thing worse? The foolish trick of reps converting spot costs to web, thereby teaching clients that web should always be viewed as a value-add. And please, don’t flaunt web revenue increases based on percentages, when you’re coming off a very low comparable. Better: grow top line, non-Radio business via web and increase overall advertiser count. Make sure every rep knows client’s digital strategy, and grow that share. WARNING: CEO’s & investors will blow a gasket when they find out some hid behind lame % increases and hit wimpy numbers, while your local advertiser base keeps spending more with digital competitors.
8. In-effective inventory & yield management. Nothing says poor web-sales management than seeing a lame Google AD Sense or network ad on your home page. Geez, you can’t sell your most valuable, most powerful ad unit to a local sponsor? That’s like placing per inquiry or PSA’s in your 7:20 stop set on a Monday morning. If more than 20% of your available web inventory is sold to 3rd party ad networks…your local sales strategy needs to undergo a crisis intervention…now.
9. Confusing media kits, sales packages & pricing. Local business owners prefer simple offers, delivered using retailer-friendly vocabulary. They’re not sure of the value of 1 or even 10 million page-views. Most can’t even spell the word: CPM. Excel spreadsheets with ad units, cpm’s and other confusing data only frustrates the advertiser. It also freaks out the sales rep who’s trying to clearly explain the features & benefits of a cross-platform marketing program. Remember: Small business doesn’t care about your cool site chock full of marketing & programming BS. Instead, they want to see OTHER local advertisers looking and performing great using your site. They want case studies with definitive ROI. Do this, and they’ll line up to buy your cross platform and web-only packages all day long.
10. Over-reliance on vendors & research for sales strategy. This goofy analogy says it all: just because I sold you a beautiful kitchen & gave you the best cookbooks, doesn’t mean that you’re now on the way to becoming a master chef !
It was an interesting NAB Radio Conference, (National Association of Broadcasters) here in Philadelphia.
I was invited to do a session on Web sales. It was called: How can Radio learn from Newspaper and other Online Revenue Leaders.
As a former Radio guy, it was kinda nice to be speaking in front of my former colleagues as they grapple with monetizing their Web assets. (Got my start as a Regional Sales Director with Clear Channel Interactive in 1999)
Main take-away: learn from the local, online revenue leaders.
Topics I covered: Common Radio Website Mistakes, Online Video for Sales, Rep Compensation, Job Description Overhauls, Overcoming Common Objections, High-Value Inventory, and Integrated Promotions.
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