News Orgs Starting to Compete More with Marketers for Dollars, Audiences

In marketing, executives talk of spending “above the line” and “below the line.” Above the line is traditional advertising — ads placed in publications and on TV, radio, Web sites and the like. Below the line relates to other ways that a product, brand or company message might reach a consumer, such as through public relations and corporate communications.

Traditionally, the budget to place ads on news Web sites, as for news publications and shows, has come from the above-the-line budget, which tended to remain roughly at a constant percentage relative to sales. Inasmuch as a news organization had to compete for ads, it was competing against others who were also selling similar ad space.

Recently, though, an accelerating trend has led to new challenges for those looking to support their digital media through advertising: Marketers are increasingly taking what used to be above-the-line dollars and placing them into the media they’re producing themselves. They are using marketing funds to attract their own audiences, rather than advertising to others’.

PepsiCo, which spends many millions of dollars on marketing every year, is just one example. During Internet Week in New York, I helped lead a project for which we hired nine “social communicators” (some of whom were traditional journalists) and built out a suite of blogs and social media tools, including a Twitter feed, a YouTube channel and a proprietary app, to cover the week’s events and, PepsiCo hoped, reach an audience of influential people in digital media and marketing. PepsiCo has done similar projects for the SXSW festival and said it is planning more in the future.

Bonin Bough, PepsiCo’s global director of digital and social media, told me at the recent “Media and Moneyconference that when “moving from [advertising] impressions to connections” with customers, the company needs to shift from “just buying audience to building audience over time.”

The implication, he said, was not that his or other big companies that need to sell a huge amount would ever stop “buying audience” from “smart content creators.” But, he said, “we are going to shift the mix of dollars from what might be a hundred percent paid advertising to something less traditional.”

Monsanto, General Motors, Sony Pictures and many others are doing the same, spending money to produce their own video channels, launching dedicated content Web sites, producing Facebook fan pages and more.

While the proportion of dollars spent on all things non-traditional now seems relatively small, the long-term trend could be troubling for news publishers. Any of them counting on ad dollars had better be prepared to do battle not just with similar content producers but also with the companies’ media producers who are fighting for the same budget.

I believe the trend will extend to local merchants, too. What happens, for example, when a local business that might have spent a few thousand dollars a month to attract customers via local circulars or news blogs instead decides to spend some or all of that money on its own digital media, attract its own audience, and glean all that data for itself?

This is not just conjecture. Students at Baruch College, where I teach, won a $30,000 entrepreneurial prize last year for a plan I briefly advised to help local businesses build their own Web sites and take others’ ads on them.

News organizations may even find themselves competing with ad agencies that have traditionally produced the ads placed in traditional media. At the Ad:Tech conference this month, Sir Martin Sorrell, CEO of global advertising behemoth WPP, listed his company as the world’s fourth-largest “information services” provider, behind news organizations Bloomberg and Reuters, and Nielsen. That he’s mentioning his company in the same breath as global news agencies offers a window into his thinking about how his company is positioned.

The net effect on news sites may be that they need to become more creative to attract and keep advertisers. Tina Brown, editor-in-chief of The Daily Beast, has bristled at the idea that just anyone can create content that will attract a loyal following, but has also talked about “integrating” advertising on her news Web site in new and creative ways. Competing news site True/Slant is working on something it’s calling Ad Slant. Set to launch in December, the feature will allow advertisers to post and aggregate content into the same areas as editorial contributors, said Steve McNally, True/Slant’s chief technical officer.

McNally told me the advertisers’ content will be clearly differentiated and labeled, but some have called the plan a deceptive move toward passing off advertorial matter as editorial. This column, however, is not about the journalistic merits but rather the business reality of a new world in which publishers and those who rely on them for their compensation can no longer count on regular old display advertising to support them.

As Tina Sharkey, chairman and global president of BabyCenter, said last June, it’s all a jumble. “Marketers are publishers, publishers are marketers, brands are agencies, agencies are brands. … It’s like ‘Who’s on First.’”

This is not to say, of course, that traditional advertising is going to disappear completely, or that someone who does a good job of getting an audience to their property can’t find a way to support it. In fact, the opposite is probably true: If you build it, and enough of the right audience comes, chances are you can make at least something of a business out of it.

But you may have to be as creative and dogged in your pursuit of dollars as you and your staff are in pursuit of any hard-to-get story. And you may have to bend your ideas of what’s acceptable to make it work so that you can compete with advertisers who are now willing and able to create their own content and garner audiences for themselves.

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