Why Even Top Local News Sites Can’t Compete With Facebook on Ads

Our usual image of Facebook is of a global social platform with more than 2 billion subscribers. But this image is very misleading because it doesn’t show how Facebook operates on the community level — conducting business one on one with the hypothetical Mario Donnezi of Mario’s Napolitan Restaurant and other merchants in Harvest Shopping Center in River City, Iowa. And doing the same with millions of other merchants in other communities in the U.S. and elsewhere.

Facebook originates viral posts that reverberate around the world, but when it comes to what pays the bills and produces the plaform’s billions of dollars of profits, most of the activity takes place between Facebook and smalll business people like Mario Donezzi.

It’s all very granular.

The merchant-Facebook  transactions are for promotions or ads on the platform. A restaurateur like Donezzi wants to fill a few more tables on, say, Monday, Tuesday and Wednesday nights. With a few clicks on his computer, using the “Facebook pixel” tool, he can find the best potential new customers.

On his computer — no Facebook salesperson need come to his restaurant — Donezzi can, with support from Facebook online marketing-advertising tutorials, build a six-month campaign that might cost him no more than $200 a month because the messages reach out selectively with a scooper, not a wide net.

Donezzi’s messages will be aimed at nearby residents who have not yet come to his restaurant but are regular diners elsewhere, including places featuring Italian cuisine, and have annual family income of something like at least $45,000. Through its “likes” and other action that its subscribers take, on the social platform and other sites, Facebook is able to deliver potential customers to Donezzi and other businesses that are parsed by 98 attributes.

The power of Facebook ads and promotions was dramatized last fall by the investigation and hearings of the U.S. House Intelligence Committee into Russian interference in the 2016 presidential election. According to information collected by the committee, a Facebook ad targeted to fans of the National Rifle Association and various gun magazines by the Internet Research Agency (IRA) — a Russian trolling farm — “was seen by 300,000 people. Nearly 100,000 of them hit a Facebook ‘like’ button signaling support for the page. The promotion cost…less than $900.”

According to testimony by Facebook general counsel Colin Stretch, 50% of the IRA’s ads cost the trolls less than $3 each and for 99%, the cost was less than $1,000 each because of the micro-sized number of impressions. Some ads went for as little as 50 cents in the computerized programmatic auctions, the committee reported. Yet these ads, however ridiculously low priced they were because of auction results, were generally super-effective — testimony to Facebook’s power, which, at least until recently, didn’t seem to have any ideological or political bounds.

Donezzi used to advertise in the local news site, but that was before the data he got from Facebook showed him that his ads on the platform were delivered to the right people, and very cost-effectively. The local news site just didn’t have the resources to find enough people who  might come to Mario’s Napolitan Restaurant, and at a reasonable price for Donezzi.

This is the predicament that community news providers everywhere face. It doesn’t matter how valuable their news might be to local residents. What matters is advertising that delivers a return on investment. Local merchants like Donezzi can’t afford to spend thousands of dollars on ads that are in large part guesswork in who they reach, but cost as much, and maybe more, than what the merchants at Harvest Shopping Center pay for their precisely delivered messages on Facebook.

The new realities were driven home in what two local news publishers said about advertising in Tuesday’s “The New News.”

Here is Liena Zagare, founder and publisher of Bklyner, who launched an emergency voluntary subscription program  in December to find enough revenue to stay in business:

“Local independent media sources like ours are in real trouble. Revenue from advertising and classifieds that once fueled local news is now being lost to Facebook, Google, and other global internet giants. We cut our costs deeply last year, but it wasn’t enough.”

Here is Chris Krewson, the editor at Spirited Media’s first site, Billy Penn in Philadelphia, and who was promoted recently to vice president of strategy and reach at the “new class” local network, said:

“We’re walking away from direct-sold display advertising. There’s no point in us going head-to-head with Facebook, Google and a slew of local competitors. As the Wall Street Journal notes, our revenue is 20 percent below projections thus far in 2017. Yes, we’ll still have advertising on our sites — we’ll primarily use networks or resellers — and will still offer direct-sold ads as part of broader revenue packages. But we want it to be — need it to be, in fact — a secondary revenue stream.”

Both Bklyner and Spirited Media’s sites have won wide praise for the news they’re publishing for their community audiences. But praise won’t pay reporters’ salaries.

At Zagare’s Bklyner, voluntary subscriptions – now nearing 2,000, or two-thirds toward her goal of 3,000 – are keeping stories, photos ,videos and reader comments from New York City’s most populous borough streaming onto her site’s vibrant pages. “We are on our way,” a jubilant Zagare told subscribers in a email she posted a few minutes before midnight New Year’s Day.

Facebook isn’t going away for local news providers, and it shouldn’t. Bklyner and Spirited Media’s sites in Philadelphia, Pittsburgh and Denver will continue to need Facebook to bring them raw traffic to the brimming top of the funnel that leads to subscriptions. But the news providers will use their own resources — beginning with their informed, often passionately delivered reports on what’s happening in their communities — to engage the fraction of traffic that chooses to make its way to the narrow part of the funnel and into the subscription revenue pot.

For the long-struggling local news industry, there couldn’t be a better way to enter the New Year.

Tom Grubisich (@TomGrubisich) has written “The New News” column for Street Fight since 2011. He is also working on a book about the history, present, and future of Charleston, S.C.