The first local ad networks weren’t online, but instead were networks of local newspapers that worked together — usually through state press or newspaper associations — to allow larger advertisers to place ads on multiple publications. And to this day most such groups still offer an ad network for their member papers.
This setup is great for newspapers. They receive almost the same amount of revenue from an ad placed by the newspaper association as they do if one of their local sales reps had sold it — and in some cases they receive more because they are charging a national not a local rate.
One would think that the Internet would help these networks operate with even greater efficiency, but instead state and regional ad networks are still in the early stages online. The main reason for this is that online remnant providers got to the newspapers before the associations did. In the early days of newspaper websites, remnant networks began buying unsold inventory on the cheap. The remnant networks then resold the inventory for way below what the newspaper would typically sell it for. Over time national, regional, and, now even local advertisers began purchasing from these networks.
“The accumulation of user knowledge and audience access in the marketplace have created a commoditization of advertising inventory,” says Rob Wescott, VP of publisher solutions for North America at cXense, a company that works with publishing organizations to help them regain control of their ad inventory and audience data. “It has become all about reach: Advertisers can effectively buy commodity audiences on exchanges with limited perceived upside to premium publisher placements.”
State press associations have found it difficult to charge the newspaper rate card when ad networks are charging the same client far less. And because newspapers are used to charging the press associations their rate card fee, in some cases it would be cheaper for the press association to buy the newspapers’ inventory from an ad exchange than go directly to the newspaper.
But press associations aren’t there to sell ads to bring in revenue. They are nonprofits set up to help newspapers. These kinds of organizations can help increase CPMs and assist newspapers with ensuring that their ad inventory is always sold at a set value in two ways:
1. Advocate and educate member newspapers about how to properly deal with unsold inventory.
In an ideal world (for newspaper owners), all papers would agree to not sell any inventory on exchanges at a rate below a set CPM. There are two problems with this: 1) It’s never an easy task to get two newspapers to agree on, let alone all of them. 2) It’s highly illegal and would be considered price fixing.
Instead, there is room for helping with educating newspapers about the ramifications of putting all unsold inventory on exchanges without a floor. I’ve talked with a number of C level executives at large and small newspapers who had only a minimal understanding about how exchanges operate and the impact on their overall business.
Rob James, sales manager at the Nebraska Press Association and Advertising Services, explains this can be a key way for press associations to show their value: “We are approached frequently by member newspapers asking for online advice,” he says. “It’s obvious that monetizing their website is moving up the priority ladder for many of our member newspapers.”
2. Create a buying desk for state, regional, and national advertisers that offers products that other networks can’t.
Newspaper organizations should be focused on regaining control of inventory for their member newspapers. These organizations should contract with technology providers to create a buying desk that sells ads on the newspaper’s website as well as offering inventory from other exchanges.
“Press associations must first and foremost offer a product suite that engages with audiences across multimedia platforms to ensure relevance with agencies and national accounts,” says Samantha Johnston, executive director of the Colorado Press Association. “The key is offering scalable product portfolios based on membership.” The association is partnering with technology companies to not only offer products that will benefit their members but also extend those products to other press associations and newspaper groups.
The first step in creating a buying desk is for the press associations to get their member publishers that are passing inventory to them on one platform. Nebraska’s press association is working with its members to put that together: “We are in the process of establishing regional and statewide newspaper online networks,” James says. “These ad networks will better position our newspapers to compete against existing digital ad networks.”
Additionally, a press association’s buying desk could offer products that other networks can’t such as larger-format ads and, at some point, native advertising opportunities. While this might sound like any supply-side platform, the difference is that this organization is focused on raising CPMs for newspaper publishers and not just increasing volume.
These types of solutions are starting to arise not only from some newspaper associations but also from private organizations like QuadrantOne (a joint partnership between Gannett, Hearst, The York Times. and Tribune) and Adhance Media (created by GateHouse).
For example cXense has had some success in helping publishers gain control of their ads and audience data. Wescott says publishers in Spain, Switzerland, and Colombia have effectively shut out Google’s Adsense program, as well as third-party display ad networks, and are looking to do the same in the United States.
While it’s easy for me (or a tech vendor) to spell out what press associations should be doing, I also understand it’s not easy to make these changes. A major challenge is coming up with a solution that will work for all member newspapers. Sure, there are both large chains and independently owned papers, but there are also dailies and weeklies. Meanwhile some sites have an ad server; some don’t. And let’s not forget that not all newspapers even have websites. These differences make it hard to find a solution that everyone will be happy with.
“Associations must be experts in the digital space and be able to offer training, consultation. and audience engagement tools to member news organizations seeking new revenue opportunities beyond traditional print and newspaper dot-com products,” Johnston says. “The key is offering scalable product portfolios based on membership. One size does not fit all.”
“The challenge will be getting newspapers to buy into the network concept because it will likely require additional staff training and the acceptance of a competitive pricing formula that may be different from their local online pricing strategy,” James says.
While it’s great to see some of the press associations moving full speed ahead and even turning into regional ad agencies, part of what I think can make a solution work is when an advertiser can place ads across state lines without having to manually place ads with a different press association. Having this capability will be necessary to stay competitive, but it won’t be easy. Some of the press associations are already using a shared system for their print ad network. A similar setup online would likely work best.
Press associations have a short window of time if they want to play in this space. Their solutions will only be successful if they can truly compete long-term with other ad networks on pricing, product, and technology.
Matt Sokoloff is a 2012-2013 Reynolds Journalism Institute fellow working on a project to help local independent websites and bloggers gain additional revenue opportunities. His background is in building digital products for media organizations. Read more about his current work here and respond in the comments or at firstname.lastname@example.org or @MattSokoloff on Twitter.