The San Francisco Chronicle, once imperiled, is profitable — and growing its digital business
[caption id="attachment_387528" align="alignright" width="740"] The San Francisco Chronicle building (Photo by Julian Dunn via Flickr)[/caption]
When newspapers took a nosedive in the late 2000s, it appeared as if the San Francisco Chronicle might be one of the industry's biggest casualties. The paper reportedly was bleeding at least $50 million per year from its parent Hearst, a situation worsened by protracted labor negotiations, declining print revenue and a big newsroom payroll.
A lot has changed since then. Hearst withdrew its threat to close or sell the newspaper after taking steps to rein in spending. The Chronicle has a new editor in chief, Audrey Cooper, and a new publisher, Jeff Johnson. And, since 2013, the Chronicle no longer operates in the red.
So, what happened? How did the Chronicle stop hemorrhaging money and turn into a profitable enterprise? Much of it has to do with cost-saving decisions made in the depths of the Great Recession, namely cutting staff, shuttering its printing plant and renegotiating labor contracts. The Chronicle also owes its financial revival to a series of new initiatives designed to replace the traditional mainstay for newspapers: print display advertising, which continues to decline.
"If you're going to grow the top line, you've gotta replace those dollars with other services, primarily digital ones," Johnson said. "That is the key to having a healthy business over the long run."
For the Chronicle, that has meant turning to readers for support, as it did with a membership program launched last year in a bid to boost subscriber revenue. The paper has also experimented with crowdfunding, asking readers to fund specific reporting projects or initiatives.
But there's another money-making venture underway in the Chronicle's building, one that has little to do with the newspaper's journalism. Less than a year ago, Hearst launched 46Mile, a business on a different floor from the Chronicle's newsroom that bills itself as a "full service integrated marketing and media agency." Stated another way, 46Mile works with large companies in the Bay Area to plan and execute their business strategies. This means consultation on everything from their client's brand identity (read: logos, color palette, other insignia) to its plan for finding and reaching customers.
46 Mile piggybacks on the Chronicle's relationship with the region's advertisers, many of whom have been taking out ads in the paper for years, said Chris Raniere, the president and founder of 46Mile. The result is a rent-free marketing outfit with a receptive client list, he said.
"Put the two things together: Hearst has all of the resources that you need to develop a marketing strategy," he said. "They've got all the research, they've got the analytics tools and they've got the ad tech to execute it. Pair that with a customer base that trusts and loves the Chronicle, you come up with a nice little niche business that can provide Madison Avenue-type marketing consultancy and advertising agency services at a palatable price for a large regional brand."
The strategy isn't confined to San Francisco. Hearst has three such agencies: One at the Houston Chronicle, called Amuse Digital, and one based at the company's headquarters in New York City, Tower Digital Agency. The company is also opening marketing agencies in San Antonio, Texas and Albany, New York. Together, these marketing agencies represent Hearst's entrée to big, sophisticated companies who want more than traditional advertising.
It might be difficult to picture news companies, whose newsrooms cultivate an aversion to public relations and spin, as leading purveyors of marketing services. But the reality is that some of the biggest media companies in the United States have adopted some form of marketing to goose their bottom lines. TEGNA, the broadcasting company that was previously called Gannett, brings in business through G/O Digital, a firm that touts "a simple suite of digital marketing solutions" for local businesses. Propel Marketing, a marketing services company based in Massachusetts, is a subsidiary of the large and acquisitive newspaper company Gatehouse Media. Tribune Publishing, which owns dailies across the country, also has its own marketing services arm.
Why the shift toward marketing? Business has proved brisk in the face of waning print advertising dollars industry-wide. Revenue from digital agency and marketing services grew 43 percent in 2013, according to the Newspaper Association of America. During that same period, digital-only advertising revenue grew by 14 percent.
Like nearly every news organization, the Chronicle is also pushing to increase its digital advertising revenues. To that end, it has become one of a few regional newspapers that have invested in native advertising. Within the last year, the Chronicle launched Story Studio, a creative agency and advertising platform that operates out of the newspaper's San Francisco offices and serves multiple properties across Hearst Newspapers. Since its debut, Story Studio has featured ads from national advertisers like Nestlé and smaller businesses like San Francisco's Exploratorium museum.
Hearst says its cocktail of marketing services, native advertising and other digital offerings is working in each of its local markets. Digital revenue at Hearst Newspapers has grown by an average of 14 percent every year for the last four years, said Mark Aldam, president of Hearst Newspapers. So far this year, digital revenue is up by 16 percent, he said. A Hearst spokesperson said Hearst Newspapers is expected to finish up its fourth consecutive year of profitability.
In San Francisco, the numbers are encouraging. The Chronicle's digital revenue is growing at a rate of about 15 percent over 2014, Johnson said. He hopes to grow digital revenue streams by 15 to 20 percent each year with help from 46Mile, Story Studio and other digital services.
It all points to a advertising and marketing environment industry-wide in which media companies are offering clients a range of services designed to fulfill customized demands rather than just straightforward display advertising. One of the upsides to this approach: companies are less vulnerable to decreases in any one revenue category when they cultivate multiple sources of income.
"As more and more national advertising gets fragmented, we have less of that advertising in our business model," Aldam said. "We have to collect more locally. And to do that, we need more digital solutions at every level of the market."