The outlook for community news is grim – if your view is from the equivalent of 30,000 feet.
Take this chart on newspaper ad revenue going to the year 2020. It shows, accurately, that newspapers have a long way to go to close the revenue gap from the continuing decline on their print side. Newspapers’ digital revenue is rising, but not living up to early expectations.
There are two main reasons for this:
First, newspapers haven’t made an unchallenged case to advertisers that they have close, trusting relationships with their readers that make those readers more receptive to messages to buy products and services. To make up for this disadvantage, newspapers have to compete with other sites in what is a gigantic numbers game — programmatic advertising and its millions and billions of electronically auctioned impressions — that puts downward pressure on CPMs.
Second, most digital revenue from news and other content – upwards of 85%, according to estimates – is being gobbled up by the giant distribution platforms like Facebook and Google. Because these platforms have numbers that are so astronomical, it doesn’t matter that their CPMs are in the low range.
But if you descend from 30,000 feet to ground level, if you look at what is actually happening company by company, site by site, the view is not universally grim. Several weeks ago, Michele’s List reported that eight entrepreneurial community news pureplays had cracked the $1 million revenue ceiling, where previously only one site had reached that pinnacle. Very soon, I’ve learned, an entrepreneurial pureplay cluster will announce a major partnership with a competitor — in a metro area where a prominent chain-owned legacy daily is dominant.
Nancy Lane stays close to the ground as President of the Local Media Association, whose members include 2,400 newspapers, pureplays and other media organizations. I spoke to her recently about what she sees from her close-up view:
Are the three recent assessments of the news business telling it like it is?
There are certainly challenges on the traditional side of the business, and at LMA we acknowledge that. We aren’t defensive about it. Instead, we are intensely focused on helping local media companies discover new and sustainable business models.
To me the real headline is the amount of innovation that is going on and how some local media companies are truly transforming themselves. Many are offsetting the traditional losses completely with these new business units that they are creating. That gets lost or overlooked in many of these reports.
GateHouse Media is a company to watch, for sure. They doubled down on digital marketing services with the launch of Propel Marketing four years ago and it will be a $50 million business for them this year. They just acquired ThriveHive, a platform that addresses the needs of very small businesses (10 FTE’s or less) and they are quickly staffing a 100-person call center in New Hampshire to sell this product to very small SMBs in need of cutting-edge digital marketing.
The Dallas Morning News has also invested heavily in digital marketing agency services with several key acquisitions. The $40+ million that is now coming from this business has allowed them to almost completely offset their print losses.
What about revenue streams outside of display ads and marketing services?
Events are also a rapidly growing revenue category for progressive media companies that choose to invest in this area. GateHouse Media hired the guru of events for our industry, Jason Taylor, to launch a full-blown live and virtual events division. This is going to diversify revenue in a big way across all of GateHouse’s properties. Utah Media Group, owned by Deseret Digital Media and Digital First Media, is now the largest events company in the state of Utah. Events are critical to media transformation.
You cite a lot of innovation. Can small community news sites do this?
Innovation spans large and small news operations. I’m consistently impressed by the smart innovation coming out of the Victoria Advocate, a fairly small, single news property serving readers in the Victoria, Tex., area, near the Gulf coast. They just moved their digital team of 20+ FTEs into new and hip offices, on the other side of town from the newspaper. Their agency, Advocate Digital Media, is highly profitable and also places competitive media buys. They get it.
So for me, it’s not about the negative headlines. That is nothing new. It’s what companies are doing about it to reinvent themselves.
What about the giant distribution platforms that gobble up so much revenue?
It’s true that Facebook and Google control a large share of digital advertising. Local media companies have responded by being resellers of Google and Facebook. Propel Marketing sold $0 in Facebook ads one year ago and now it represents $7.5 million or 15% of their total revenue. Of course they already sell a lot of search via Google AdWords (much more than $7.5 million). SMBs need help in placing these campaigns and Google and Facebook don’t have enough feet on the street to service all of them the way that local media companies can. For this reason, both companies actively seek partnerships with media companies that offer digital agency services.
I do think local media can counter the platforms by establishing a diverse portfolio of products. That’s why events are critical – ticket sales, booths and sponsorships in local communities can be very lucrative (with high profit margins in the 30% to 50% range; much higher than digital). And media companies can leverage traditional and digital products to promote them. A huge advantage over out-of-town companies that come into markets to produce events.
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.