Borrell on Local Dailies and Their Tiny Digital Ad Share: They Need a New Story

Local digital ad revenue will grow from $48 billion in 2015 to $66 billion in 2016, Borrell Associates projects in its new benchmarking report covering 10,395 sites in all media. (Free executive summary here.) That’s an eye-popping increase of 37.5%. But newspapers will see only a 6% to 7% revenue increase, the report says.  I went to Jim Brown, Borrell’s VP of Sales and Marketing, to find out why newspapers, which used to rule the local space, are doing so anemically in the digital version of their old domain. Here’s my Q & A with Brown, who was joined in some answers by Corey Elliott, Borrell’s VP of Research:

You looked at 10,395 local online properties for your report — from the top 10 cities all the way down to rural markets. Are the bigger DMRs close to being saturated in revenue that’s pulled out of them?
It’s getting close, but that doesn’t mean there is not a lot of opportunity. In the bigger markets there is also a great deal of churn. Businesses will continue to bounce here and there looking for the right combination of digital marketing. The smaller and medium markets still have room to grow – and, of course, suffer from less churn.

Pureplays produce close to 76% of local digital revenue. Do they have a lock on the bigger DMRs?
Not likely. At times, it certainly seems like it – but there is more of an ebb & flow as concepts come and go (insert Groupon and daily deals sites here). Even pureplays can struggle. Local.com filed for bankruptcy while Angie’s List is staying flat. There’s still opportunity for those who have the best solution for their market.

Are there any local news pureplays that rank with the Yelps, Groupons, Craigslist and other commercial sites?
Depends on what one means by “rank”, but, if I interpret the spirit of the question correctly, I would say “no.” News sites, outside of major dailies are getting walloped by commerce sites. Lots of advertisers would rather be seen while a consumer is on a definite path to purchase rather than hanging out on the side rail of a news site. Specific commerce sites have a real advantage – the Knot (weddings.com) makes $5 million in Dallas alone – and it will not be until news media expand their idea of what “news” is will things look better for them.

Newspapers used to rule locally. Each local market’s daily is still the top revenue producer, usually. But collectively dailies control just 11% of revenue in the fast-growing local digital space of their markets. Can they come back, and, if so, what would they have to do in content, audience engagement and making a better cae to advertisers?
They need a new story to tell. They need to embrace commerce and local businesses AS news.  Advertising and news were uncoupled decades ago, and there are many respectful advantages to that. However, it may be time to take a tip from people like Ben Franklin and Mark Twain, who used the news to sell things. Newspapers are in a unique position to bring a local business’s story to life. Granted some do, but the storytelling aspect is something inherent to newspapers that cannot be replicated easily in the aforementioned commerce sites. Newspapers have spent the last 10 years understanding that their focus needed to be local, local. Now they to need understand the advantages of putting a door in that wall between news and advertising.

We hear a lot of worrisome talk about “The Platforms,” most especially Facebook. Are local digital properties immune to how these huge sites are making publishers’ content just another part of the conversations they host?
They are highly vulnerable to it – and there is not a whole lot to be done. Don’t get me wrong, they (local media sites) can certainly try.  They can put all content behind a secure paywall, but we have not witnessed a lot of successes with that so far. The info will leak out – and will show up in a variety of ways on other sites. Local media sites certainly can not control the dialogue as easily when the content shows up on Facebook, but that was never a promise in the first place.

You talk about local digital market leaders having diverse revenue streams, where no one stream accounts for more than 25% of sales? What are the most successful revenue streams?
It’s getting very diversified. Automotive is still a major player. SEM/SEO is bringing in dollars as well. Programmatic will continue to grow as national advertisers gravitate more and more to that kind of placement.

Another benchmark of success, the Borrell report says, is corporate investment in the properties. Do you see the success of the local digital market attracting any major new corporate money?
Yes, but there is a big difference between the “Digital Investors” and the Digital Hedge-Betters. Easily half of the Hedge Betters are really going into conservation mode. Meanwhile, we see the successors acquiring digital properties. Nexstar, Lynn, Sinclair, Gannett, Townsquare and others are actively developing/acquiring digital capabilities to be implemented at the local level.

What can newspapers and news pureplays do to get a bigger share of the 37.5% increase in local digital revenue that Borrell is forecasting for 2016? Is writing stories about successful local businesses one way?
Answer to your first question: yes.

Second (from Corey Elliott):

“That’s one option. Some would call ‘native advertising’ another.  Basically, leveraging the fact that the newspaper is the local news center – AND then treat advertising like news – whatever that could mean. Stories, profiles, sections of local, maps, promotions around neighborhoods.

What would happen if A) you could find the right newsroom with the right attitude and B) say ‘You guys know this local market better than any other media out there – and you have the ability to craft storylines. Local businesses need our help – and we need theirs. What can we do?'”

What trends in local digital revenue do you see taking off in 2016?
We are poised to see big % growth in: online advertising management, mobile media management, social media management, site visitor analysis, reputation management, listings claiming, app design, and online video production — as well as targeted digital advertising and video advertising.

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.