How Hearst Newspapers Became the Leader in Its Peer Group

The Hearst Newspapers of 2015 bears little resemblance to the nationwide chain that press baron William Randolph Hearst assembled starting in 1895. Long gone is the New York Journal with its exclamatory headlines, and gone, too, are nameplates in other major cities, like Boston, Chicago, Atlanta, and Los Angeles.

There are fewer Hearst dailies now — 15 vs. the 28 that “The Chief” ran at his high point in the mid-1920s, but today’s Hearst Newspapers, including its 34 weeklies, is performing far better financially. Its properties shun four-inch-high placard headlines for well-reported, data-visualized stories that get behind the news, like the Houston Chronicle’s March 5, 2015 article, “Immigrants from Around the World Are Transforming Houston,” a segment in the paper’s year-long “The Million” series on immigrants in the metro-Houston area.

Under president Mark E. Aldam, Hearst Newspapers, a division of the privately held Hearst Corp., is going full bore on digital. It has created in-house ad agencies at its larger-market dailies to serve regional business like hospitals and institutions of higher learning. Smaller merchants that don’t want to spend more than about $15,000 annually on ads are reached through Hearst’s digitally refocused LocalEdge marketing company, which extends its reach by partnering with other newspaper groups, like Tribune Publishing. Programmatic advertising gets priority at Hearst as a “huge growth path.” In this Q & A, Aldam details how Hearst has become a top performer in the still financially challenged newspaper industry:

Hearst papers have weathered the protracted downturn of local newspapers comparatively well. How did that happen?
We have invested heavily in adding to the size of our local ad sales teams to insure we have the largest, most versatile, and highly skilled selling organization in each of our markets. We’ve added significant digital sales resources to support our local ad selling teams and, in addition to more than 100 new digital marketing services sales and service resources, we’ve built out digital ad agencies at each of our metro newspapers to move up-market to serve large regional clients including hospitals, universities, and brands with custom solutions. As a result of these investments, our revenue performance has ranked at the top of our peer group and we’ve improved earnings across our Group a total of 109 percent for the past four years.

Hearst Newspapers recently left the Local Media Consortium (LMC). Why did you decide to go it alone with your own ad trading desk?
The LMC provides terrific value to its publishing partners in need of relevant scale. Our local media assets enjoy enormous scale and diversified solutions that we bring to market at competitive costs. We’re committed to establishing premium digital solutions at scale for national advertisers. We hope to extend these opportunities in the very near term as we work with other large-market publishers to establish even greater scale across the markets that matter most to clients.

What kind of CPMs are Hearst papers getting through programmatic? Are the numbers improving?
Our programmatic CPMs are very comparable to direct placement prices. I am differentiating automated buyers with segment preferences and negotiated buying rights/opportunities from remnant, real-time bid network advertisers.

For programmatic advertising, marketers often seek deep audience profiles. Can and do Hearst dailies provide that kind of data about their readers?
Yes we do. We overlay first-party data and match our audience segments from across all our consumer products to target customers our marketing clients want to reach.

Are Hearst papers developing more video content, which is becoming more popular with marketers placing brand messages?
We have a big investment in video production that runs across several entertainment and history segments on our largest breaking news websites. We also customize brand video for clients through our in-house digital ad agencies and Hearst’s Digital Studio. We are extending video storytelling into our local news gathering operations later this year and expect to have breaking news, follow-up news segments, and investigative video assets available in 2016 across our streaming assets.

At most papers around the U.S., print ads are still the dominant share of revenue even as they continue to shrink. What’s the situation at Hearst papers? Is digital ad revenue close to overtaking print ad revenue?
Print advertising still represents more than 40 percent of our total revenue base. However, digital advertising — 30 percent of our total ad revenue base — has overtaken national print ad revenues this year. This revenue diversification has enabled our local operating markets to grow revenue this year despite the double-digit national print declines facing the entire newspaper industry. Our digital ad revenue base has grown by more than 14 percent this year, on pace with the average annual growth rate we’ve achieved during the past four years.

What innovations are Hearst dailies launching to better serve marketers and advertisers?
We continue to invest in marketing services capabilities to serve every customer segment of the local market.  We are continuing to invest in custom digital solutions, including video and native brand marketing, syndication assets, and more mobile products to drive commerce and affiliate revenue. Investments in digital solutions that amplify the impact our core media solutions offer to our business customers remains a focus for continued investment.

Paywalls don’t appear to be major sources of revenue for dailies. Are Hearst’s papers performing better in digital subs than the average across the industry, which looks to be in the 1.5 to 3 percent range of total unique visitors?
We do not have paywalls on our market-leading breaking news websites. Our large newspapers have implemented paid premium digital products to serve newspaper audiences with several digital formats to select from including various apps, mobile browser, and replica editions. Differentiating the content experience between breaking news sites and our premium products is critical to achieving a scalable audience willing to pay for content. We are very pleased with the penetration of these products among our paid print customers and have enjoyed steady growth among former subscribers and new digital-only customers. Our local marketing teams are laser-focused on improving customer engagement with these digital products as the migration to digital alternatives from print accelerates.

Tom Grubisich (@TomGrubisich) writes “The New News” column for Street Fight. He is editorial director of hyperlocal news network Local America, and is also working on a book about the history, present, and future of Charleston, S.C.

This interview has been edited for length and clarity.