Local Media Companies Need to Evolve — And Do It Fast

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19th century engraving of a printing pressTo paraphrase Rumi: There’s a field beyond the wall of rightdoing and wrongdoing; I’ll meet you there.

Creative minds will recognize the poet’s description of the resting place for his soul, but this poem always comes to mind whenever I encounter black-and-white thinking. It describes the prison of such rule-bound and narrow reasoning, because surely there is more to life and its problems than that which provides only one way or the other. Black/white. right/wrong, yes/no, win/lose — you get the idea.

Local media companies who behave ONLY as local media companies online have, for many years, been chasing a path with no future. There is no way to approach the Web as only a media company without eventually hitting a revenue wall for two reasons.

One, display or interruptive advertising doesn’t function as it does in the analog world. It can’t, because what the Web offers — real time bidding for eyeballs that are highly targeted — is not good for a system raised on mass marketing. Banners have become commoditized, but they’re what are being sold by local media sales reps.

The second reason approaching the Web only as a media company has no future is that everybody — including advertisers — functions as a media company on the Web. Content that used to be scarce is now abundant, with a growing number of people making their own media. The numbers at YouTube, where most people upload their media, are absolutely staggering. A billion unique users a month. One hundred hours of video uploaded every minute. Over 6 billion hours of video are watched each month on YouTube—that’s almost an hour for every person on Earth, and 50% more than last year. And according to Nielsen, YouTube reaches more U.S. adults ages 18-34 than any cable network.

Content marketing is all the rage, with former advertisers leading the way in creating their own content, because, well, they can. Most of it shows up on YouTube, where very often 7 of the top 10 home page videos are, in fact, ads.

So local media’s traditional big-man-on-campus chest-thumping doesn’t mean the same thing  in digital that it does in the analog world. In fact, it’s downright laughable.

Borrell benchmarking report 2013In this year’s Borrell Associates benchmarking study (graph on the right), average market share reveals another danger of approaching the market only as a media company. A decade ago, according to the report, newspapers held the largest share — about 50%. The “pureplay” companies came on like a Pac Man, consuming more and more share until they claimed 51.9% in 2009. Since then pureplay share has shrunk every year as traditional media competitors more aggressively sold digital advertising. In 2012, pureplays gained 0.8 points of share. It’s hard to call that a resurgence, but it does point to the fact that they aren’t ready to give up the ghost in local markets.

If I’m a local television station, according to this diagram, I’m doing all that work for an 11.9% share of the market, split 3, 4, 5 or more ways, depending on how many TV stations there are in the market. This is the real danger of bolting every potential revenue solution onto the brand of my local media company. We’ve simply got to find ways to go beyond our brands, for each brand has a built-in revenue wall that we’ll hit much sooner than we think.

So what do we do when we hit the wall, when we regularly miss revenue targets, when long term projections keep slipping more and more? What do we do when we keep hiring more ad reps, only to discover that our revenue-per-rep begins to fall, when the evidence is undeniable that we’ve hit that wall?

Here are 5 recommendations that should occupy at least some of our planning time today:

  1. The first step towards any solution is to admit that we have a problem, so that’s as good a place to start as any. Our thinking needs to change; it has to get bigger if we’re to seriously compete with the likes of Google. As local advertising players, we have to start seeing ourselves as more than “just” a TV station or a newspaper or an information website. We’re in the advertising business, not the content business. This view frees us to explore business opportunities beyond how we’ve always made our money.
  2. Our number one priority is new value creation. As long as we’re busy looking for ways to bolt new ideas onto our old brands, we’ll never see the need to actually create something of entirely new value. I’d begin in the area of databases. What database could we build — using our unique position in the marketplace — that would provide new and lasting value, value that we could then turn into manageable growth downstream?
  3. How can we create value for consumers, without looking at them as just a local media company?
    • Consumer Empowerment – The Great Horizontal
    • The Shift to Real-Time Information Flows and Streams
    • Portability
    • The Web is a Disruptive Innovation, not a Sustaining Innovation
    • Value is Moving to the Edge in a Time of Challenge to the Core
    • The Rise of the Network
    • The Rapid Growth of Personal Branding
    • The Evolving User Paradigm
    • The Rise of Personal Media
  4. Resist the short-term good provided by those who would offer brand-extension revenue. I count in this something my colleague at Street Fight, Matt Sokoloff, wrote about last week, Why SMB Marketing Services Won’t Save Newspapers’ Bottom Line: “The fact is that most newspapers aren’t building new and innovative tools to provide SMB services. Instead they are white labeling offerings from other providers or are connecting their audiences to an existing service. They offer a simple way to buy online display on other ad networks (including Google); they help you manage your Facebook and Twitter posts; and they repackage email marketing tools, call tracking, and other tools that already exist from a variety of providers. It’s true that there are plenty of SMBs that are currently willing to pay a monthly fee to get all these tools in one place — but as technology makes these tools easy to use, being this kind of marketing middleman for the SMBs lacking savvy becomes less and less of a sustainable business.” I completely agree with Matt, although my reason is a bit different. In becoming an agency, of sorts, we’re spending our valuable time being sales reps for somebody’s else’s products, for which we receive only a tiny revenue share. This is not creating new value; it merely exploits our brands for their gain.
  5. It’s time for a strategic make-over. Instead of just looking for tactical differentiators between us and our analog competitors, we need to think strategically about our approach to the entire revenue pie. As I said, we’re much bigger than simply a TV station or a newspaper, and our competition is way beyond “just” the other media companies in town. We need a new plan — a strategic plan — that positions us accordingly and behind which our employees can throw their energy. I would be delighted to help you with this.

No one really knows if the lack of equilibrium that businesses feel today is a permanent fixture of the 21st Century or not. Regardless, though, I think the key is finding a place beyond that wall of which Rumi wrote so long ago. We’ll either hit the wall over-and-over or find our way beyond it, and the difference will be defined by those who don’t think in traditional, black and white, all or nothing ways.

We indeed live in interesting times, and whether you consider that a blessing or a curse depends in large part on how your executives respond.

Are they hanging for dear life and retirement just around the corner, or are they fully involved in the chaotic new business of media beyond the next few years?

TerryNaplesTerry Heaton is President of Reinvent21, a consulting company specializing in business reinvention for the 21st Century. He’s an internationally-recognized creative expert on all things web-related, especially as they relate to local media.