4 strategies for news companies as mobile ads displace desktop exposure

There is fresh evidence that the migration of news readers to smart phones continues at a breakneck pace. Surely an ad bonanza for news providers will follow?

Unfortunately, maybe not.

Even without high-profile killer competitors like Monster, Craigslist and Google, news organizations are facing a potential disconnect with the growing base of smart phone advertising. Shoppers in stores, coupon clippers and online bargain hunters may find what they are looking for in visits altogether separate from checking the news.

David Payne, chief digital officer at Gannett, said in a recent interview with MediaPost, that USA Today now has "more people using our mobile products on a daily basis than looking at the newspaper." So far so good, but transferring that to revenue growth will be trickier, Payne said, especially since tablets and smart phones are so different from each other, with phones shaping up as "a facilitator of m-commerce."

The International Newsmedia Marketing Association (INMA) published a white paper in June highlighting the mobile publishing strategies of 15 news organizations, eight American and seven abroad. The lead finding was a consensus that by 2015 more news will be consumed on mobile devices than on desktops or in print.

But while the organizations have detailed and varied plans for capturing mobile audience, the path to advertising success is far sketchier. The report concludes only that "multimedia solution packages for advertisers will be crucial" and sales staffs should be pushing mobile hard.

As I monitor publicly-traded news company financial reports, statistics on mobile traffic increases are now a staple. However, I have yet to hear mobile advertising revenue quantified, or even a growth rate mentioned. Randy Bennett and Dena Levitz, who monitor digital matters for the Newspaper Association of America, agreed in an e-mail exchange: There is not enough mobile advertising yet for it to be significant financially.

Gordon Borrell, a leading analyst and forecaster of digital ad spending, had a particularly downbeat view. On the one hand, Borrell sees local mobile ad spending rising 65 percent this year from $2.6 billion in 2011 to $4.3 billion. And he expects that sharp rate of growth to continue through 2016, when "88 percent of all local advertising will be served up on a mobile device," as advertising on desktops declines precipitously. (See charts below.)

But, Borrell added in an e-mail:

The bad news is that advertisers aren’t interested in being around local news – either on the web or on smart phones. Less and less they’re buying mass eyeballs, and more and more they’re buying either audiences or results. The 'audiences' tend to be an engaged, lean-forward audience looking for something of value, like a digital camera, a job, a home, a car, or an Italian restaurant.

My opinion is beginning to solidify about the future of news in digital format. It looks a lot like NPR. Sponsored or supported by non-profits. That's the only viable business model. There’s not enough money in digital media to support news-gathering organizations, unless of course it’s a mere extension of the print or TV news operation, in which case the digital extension becomes an additional news expense.

This all sounds like a re-run of round one of digital disappointment for news organizations: ads "unbundled" from content, "pure plays" dominating the action, and rates depressed by a huge available inventory.

How news organizations can capitalize on the mobile shift

However, I see several strategies this time aimed at avoiding the simplistic and failed strategy that ads would predictably follow audience to digital news platforms. Here are four.

First, the trend toward all-access bundled subscriptions, including the Gannett papers and many others, positions readers to pay wherever they choose to consume news. That assures some revenue support if mobile advertising, especially on smart phones, never materializes or is only a partial success.

Second, news organizations are positioned to play from their strength -- coupons and circulars. In September 2011, after more than a year of development, the Associated Press and 40 collaborating newspapers launched iCircular, an abridged virtual version of still popular print inserts.

As it happens, iCircular is announcing an expansion this week -- an affiliation with TownNews.com, an agency that includes 1,500 smaller daily, weekly and shopper clients.

iCircular General manager and COO Jeff Litvack told me in a phone interview that the beta phase of the project is nearly over, and the results have been encouraging.

"The big question," he said, "was if we build it, will they come? Is this something consumers will be interested in? The answer is absolutely yes."

"We're finding a click-through rate of 6 percent," Litvack said, and that is 10 times the industry norm of 0.6 percent. Another surprising finding: The original design included a "featured retailer" of the day in a conspicuous top-of-the-page position. That bonus push actually suppressed response; readers, conditioned to ignore banners, did not linger or click.

Circulars are viewed as informational, Litvack said, and the iCirculars are displayed as a section on the contents page. So a user familiar with the site might check sports scores on one visit and come back for shopping information on another.

Of course, there are challenges. During the beta run, 20 participating retailers have not been charged. That will begin in phase two, but the revenue potential is not yet confirmed.

Some large papers and ownership groups have circular/coupon/shopping products of their own and are not participating. Many big retailers like Best Buy and Target have sophisticated in-house sites and mobile apps. Plus there are freestanding start-ups like Verve, which provides technology free in return for a share of ad proceeds, or like shopkick, which offers discounts and rewards to shoppers who are geo-located inside a store.

Third, news organizations can rely on technology solutions. Newspapers as tech experts? It may not sound like a logical fit, but it becomes a possibility as the companies add more tech specialists to their staffs and spend heavily on the functionality of their news apps.

The INMA report spotlights a "mobile first" effort at Spokane's Spokesman-Review that struck me as on target. It already has different platforms and rates for local and national advertisers. A design team has emphasized features that load the ads quickly, display them attractively and are organized to be particularly useful to the shopper.

At an event this month, sponsored by Fortune magazine, Washington Post CEO Don Graham promised "two dramatic iterations of our mobile site" in the next six months and talked at length about the importance of a growing team of technologists to the company's future.

Graham's son-in-law, Tim O'Shaughnessy, CEO of Living Social, was sharing the stage and offered an example of the kind of problem a media company could make big money solving for a retailer:

We did an internal research study, and we looked at a bunch of small businesses ... We found that less than 1 percent of them had a mobile-enabled website. So, if you're the local baker, whatever, you go to their site on your iPhone and it's got some Flash there that doesn't show up, it's a miserable experience, not optimized for what you're trying to do.

Now, if you go and look at what percentage of searches for those companies are coming from a mobile device, it's between about 15 and 40 percent depending on the category ... It's a huge inefficiency; it's a huge area that's going to be monetized over the next couple of years when people start to figure out what's a good mousetrap in order to connect those.

Fourth, news organizations can sell bundled ad packages. Just as all-access subscriber packages are currently the rage, news companies are now scrambling to make mobile, tablet and smart phones, all parts of a comprehensive buy (INMA's recommended solution). If print -- inserts particularly -- retains its appeal for some years to come (as Borrell, for instance, predicts it will), the right packages, sold the right way could develop into a winning offering.

I have a measure of optimism that news organizations are going into the mobile era with eyes wide open to the difficulty and scope of the revenue challenge.  Once again, though, it is a race against time and they must take on earlier entrants, often better capitalized.

The urgent focus on monetizing mobile is as it should be. Another failure for news organizations could easily be catastrophic.


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