Publishers turn to digital business services to offset declining ad revenue
News publishers have had to develop a number of new digital capabilities in recent years, such as online advertising, social media, search-engine optimization, email marketing, video production, Web design and mobile app development.
After making those investments, most find their online sales comparatively meager compared to print ad revenue, which is still declining. In search of other income, some are using their new online skills and staff to provide paid client services.
These companies are finding that as businesses large and small discover the importance of their online presence -- such as developing an effective presence on Facebook or Twitter, or optimizing their sites to appear higher in search results -- demand for those services is booming. Media companies who have developed their own expertise in those areas can fill that need with new business-to-business products.
For example, Conde Nast, whose publications include Glamour and The New Yorker, is launching a marketing services division called “Ideactive.” It will offer services such as mobile app development, Web design and social media consulting in an effort to build revenue beyond traditional advertising.
The Ideactive team will have six dedicated staffers, including two new hires, Ad Age reports, and it will pull in resources from the rest of the company as needed.
The Ad Age article about Conde Nast described this trend well:
"Publishers have been increasingly trying to position themselves as partners to marketers, not only as vendors of ad space, and diversify their businesses in the process. Last year Hearst bought the search specialist iCrossing, for example, while Meredith bought the mobile agency Hyperfactory. A year ago a Conde Nast digital creative services unit said it would accept assignments from clients whether or not the ads were slated for Conde properties, creating ads for Kenneth Cole that appeared on YouTube and Facebook. ...Source Interlink Media, whose titles include Hot Rod and Snowboarder, acquired the digital-marketing and visual-effects studio Mind Over Eye."
Even a small newspaper, such as the 20,000-circulation Grand Island Independent in central Nebraska, is getting into this game. It created a service called giNetwork in which local businesses pay for The Independent’s Web editor to set up their Facebook pages and Twitter accounts. Their posts are aggregated on The Independent’s home page and on a dedicated giNetwork page.
The arrangement includes social media consulting and a regular email newsletter for the clients with tips and success stories, said Stephanie Romanski, Web editor and social media coordinator for The Independent.
Since launching in March 2010, the program now has about 40 clients that pay $99 a month for the service, Romanski said. That means the paper is collecting roughly $48,000 a year with very little overhead. The paper hopes to get 100 clients eventually, she said.
The program has been especially effective for local retailers and restaurants, Romanski said, because they offer discounts through their social media channels that drive customers to them.
Large publishers, such as Great Britain’s Trinity Mirror, also are capitalizing on this opportunity. The company that publishes the Daily Mirror and about 240 regional papers in the U.K. will offer advertisers online marketing services such as Web design, SEO, social media strategy and online public relations.
The Guardian talked with Trinity Mirror CEO Sly Bailey about the initiative:
"'If a company wants help with email marketing and a print ad in the Newcastle Chronicle then we should be able to offer that,' she said. 'It is very much the future of local media. Clients are demanding it and we want to be able to develop expertise in those areas.'
"Bailey said that several years ago Trinity Mirror acquired an agency based in Liverpool called Ripple Effect which offers services including digital design and build, search engine optimisation, email marketing, social media, online PR and Web analytics.
"She said that excluding display advertising, the typical trade customer spends about £200 on ads online and in print but many of those customers spent £12,000 to £15,000 on a variety of other services through Ripple Effect."
The main lesson for any news company is to examine what digital skills you have built up to a point of excellence and to talk to business partners about their needs. If you have or can create the digital expertise they want, this could be a promising path to new revenue.
Such new approaches to revenue may even be better than the advertising model, said Steve Buttry, who’s argued that newspapers should be developing a number of new services and products. (Disclosure: Buttry was my boss at TBD, where we worked on community engagement.)
“The truth is that advertising was always an imperfect solution for businesses: paying for mass audience when most of those customers would never use their products or services,” Buttry, now director of community engagement and social media for Journal Register Co., told me in an email. “Digital technology lets us help businesses in more meaningful ways, such as direct sales, search, lead generation and precise targeting.”
But John Morton, a newspaper industry analyst, was less optimistic about how much financial impact these new services can have.
"I doubt that offering this expertise for sale will be able to offset much of the secular shift of advertising away from newspapers, but of course every little bit helps," Morton told me in an email. "Newspapers still will have to find ways to capture a larger share of Internet advertising, for advertising is where the money is."
What potential do you think these types of services have in funding journalism? Do you know of other examples? Share your thoughts in the comments.