The new Borrell Associates projections for the growth of programmatic ad revenue in local digital publishing are, in a word, big. It’s human nature to be hopeful about what’s new, especially if the emerging numbers on recent performance look promising, and programmatic’s do — but when you examine the details of Borrell’s survey of 102 ad managers, Borrell bullish projections do indeed look more realistic than wishful.
The headline number from the survey is Borrell’s projection that programmatic will more than double its share of total local digital ad revenue by 2020 – to 10% from 4.7%. That’s an additional $5 billion, which is not pocket change.
What was especially interesting to me was what local ad managers think about programmatic as it affects them, and what they are doing — and sometimes not doing — in response. These are executives who have to worry about keeping their in-house sales staffs happy and productive, but nonetheless, consider:
- Only 13% of publishers with at least $1 million in ad revenue don’t participate in programmatic.
- One fourth of those who participate get more than 30% of their revenue from programmatic.
- Only 1% said programmatic has led to smaller sales staffing.
- Publishers have a variety of concerns about the downside of programmatic, principally that it reduces the price per thousand impressions (CPMs), but none of those concerns captured a majority of those surveyed. (According to Borrell, the average CPM rate for programmatic ads among publishers surveyed is $3.88. Meanwhile, the publishers’ direct-sale rates can reach and exceed $10.)
“We’ve been sought by agencies that would have never purchased our sites and it allows us to take business from the bottom-feeding network,” is how one ad manager put it.
Businesses, in their quest for more efficient return on investment in their message spending, are seeking more and more information on customer behavior. They not only want to know not only people’s race or ethnicity and ZIP code addresses but also such details as whether they own a dog or cat and even – as the Borrell survey points out – the breed.
So digital sites that want to get into programmatic and at desirable CPM price points have to keep refining who their unique visitors are and how they spend their discretionary income to attract the right kind of business for their targeted display and video ads.
Most programmatic dollars go to the Yelps of local digital. But community news sites — especially newspapers — can capture some of the increased spending, and they are positioning themselves to do just that. The Local Media Consortium, which represents more than 1,200 print-digital publications, has set up a private ad exchange through its partnership with Google under which LMC members can offer their ad inventory for automated sales. The main idea behind the network is to establish a floor for CPMs. LMC is also helping members to develop better profiles of their users, but compiling in-depth information that includes those dog-and-cat breeds costs money that can only be justified by strong CPMs.
LMC’s chair is Chris Hendricks, who has been newly elevated to VP/interactive at the 29-newspaper McClatchy chain. So there can’t be much doubt that its “legacy” publishers will be prodded to develop activist programmatic strategies.
But what about “pure play” community news sites. There are thousands of them, and only a few, like Patch, are corporate-backed? I asked Gordon Borrell, chairman of Borrell Associates, how they — including the many smaller “one-offs” — could benefit from programmatic?
“There’s a freight train of national advertising headed toward local sites, but each site operator will need to invest in laying some tracks to access it,” said Borrell. “Think about it — for the first time, premium national advertising will be accessible to a little community-news site, which in the past might have settled for slop from Doubleclick or from AdSense’s penny-per-click junk ads. I suspect we’ll see at least a 25% difference in CPMs. Maybe four to six times that. But they’ll have to invest in systems that will allow them to deliver that ad to a specific person rather than just a site visitor. They’ll still get far higher rates from direct-sold banners and sponsorships, but there’s a bonanza of national advertising looking for a home in local markets with specific audiences – like anyone who’s searched for ‘Ford F-150’ and happens to be reading a story about a local Girl Scout troop.
“This will be tough to implement for the smallest of sites because it does require an investment on the order of tens of thousands of dollars that they might not have. But if they are currently getting, say, $10,000 a year from national or remnant advertising and can increase that 50% by participating in an audience-targeting program, they’ll get their money back in two years and double their money in four. That’s a compound annual growth rate of 19% on $10,000 which is pretty good.
“There’s a whole other side to this that community news-site operators should consider. That is, if they’re skilled in delivering specific audiences on their own sites, they can leverage that skill to sell banner exposure on other sites in the market. So instead of getting $1,500 from a local dentist, you might get $3,000 because you’re buying exposure on other sites for him.”
I also went to Kenny Katzgrau, co-founder of Broadstreet Ads, which manages ad operations for smaller, independent community sites, and got this quite different response:
“Programmatic advertising is huge for advertisers,” said Katzgrau. “I don’t think that means it’s going to be beneficial for publishers. In fact, I believe the fiscal landslide for most news publishers — those without clear differentiators — is going to continue.
“As Borrell notes, advertisers and agencies are interested in buying audiences. That means it doesn’t really matter which property a particular reader is browsing, NYTimes.com or ShadyClickbait.com. If the user’s profile fits the marketer’s target profile and a few other programmatic metrics are met, it’s generally a good ad buy.
“The national advertiser has massive, massive leverage. Programmatic gives them the means to make their ad buys so incredibly efficient in terms of performance that a minimum of ad dollars can be spent in that particular marketing channel. And it’s not like the amount of digital ad inventory is shrinking either — it’s growing by leaps and bounds every single day. The online publisher is getting pinched from both the buy and sell sides. So no, I wouldn’t say they should look to programmatic as a promising revenue source.
“I personally think the direction for news publishers, especially local news publishers, is to capitalize on relationship-based sales and the availability of high-performing creatives, like the ones well have available at Broadstreet. Make creatives so high-performing and valuable to the client that they become a better and more efficient buy than a low-cost programmatic buy.”
As I walk along King Street – the main commercial artery of Charleston, S.C. , where I live, I watch national retailers replacing family-owned establishments. The busiest corner now has a new Walgreen’s Drug Store and Chipotle. Down the street, there’s a new H & M clothing store. Further down King, Tellis Pharmacy, a landmark for 60 years. is no more. In other downtowns and major shopping centers across America, the trend is toward more national retailers, whether the location is a clothier, home furnishings, restaurant or other business category.
The customers for these merchants don’t live on Mars. They are in the same audiences that community news sites count among their unique visitors. Will the sites, whether they’re legacies or pure plays, corporate or independent, be ambitious enough to enter the $5 billion programmatic sweepstakes, and present their audiences as consumers of more than news?
Tom Grubisich (@TomGrubisich) writes “The New News” column for Street Fight. He is editorial director of the in-development hyperlocal news network Local America that rates communities on their performance across a broad spectrum of livability — Local America Charleston launched last year.