October 10, 2013

An early attempt to boost digital advertising at newspaper organizations by cross-selling local advertising with Yahoo will be attempting an update and relaunch over the next several months.

The goal remains to use the local sales force of 700 participating dailies to sell retail ads to an expanded audience including those who go to an aggregator like Yahoo as their gateway to finding news.

But much else has changed since the partnership started in 2008, Chris Hendricks, digital chief at McClatchy and Rusty Coats, the consortium’s executive director, told me in a phone interview:

  • The partnership is shedding the dated official name of The Newspaper Consortium for The Local Media Consortium.
  • Yahoo remains as a partner, but not an exclusive one. The consortium hopes to add other significant digital players by the end of the year, Hendricks and Coats said.
  • Also the local partner ranks, still heavy with newspaper organizations, now include some local broadcast websites.
  • With its expanded roster, the partnership can deliver up to 200 million monthly unique visitors and 1.7 billion page views, Hendricks and Coats said. That’s a far bigger reach than leading news sites like NYTimes.com, The Huffington Post or the Guardian.
  • The pricing model is changing. Up until now revenues have been split, reportedly 50-50, between Yahoo and the local newspaper partners. Going forward, Coats said, “National partners have local inventory that Consortium members buy at wholesale rates and sell at retail rates. This puts the upside in the seller’s control.”

The occasion for the changes is that five-year contracts are expiring, Hendricks said. Also technology improvements allow for an upgrade of what Coats and Hendricks call “the plumbing,” simplifying placements and billing.  Ad networks were in their infancy and programmatic buying had not started, Hendricks said, when the arrangement was launched.

When the concept was announced in late 2006, I headlined my report, “The Yahoo Partnership — Big Deal or No Big Deal?” The results have been neither a flop or a runaway success (though the consortium consistently declines to release revenue figures).

McClatchy did report for the second quarter of 2009 (during the worst of the print advertising swoon) that its retail digital-only ad sales were up 50 percent year to year thanks to the partnership.  Yahoo, Hendricks said, provided “plenty of support for training” local sales teams.  But other organizations that did not get that training had disappointing results.

Then, as now, some of the largest newspapers and chains are on the sidelines — Gannett, Tribune, Advance and The New York Times among them. But the structure remains appealing to independent organizations and smaller chains.

In the era of ad exchanges, Coats said, “a lot of middle men are sucking away the revenue.” So an industry-controlled consortium lets the participating organizations keep more of what they sell.

The arrangement is non-exclusive so papers can maintain other channels that are working for them. Digital First, which manages Journal Register and MediaNews papers, for instance will continue to operate its own exchange, Ad Taxi.

The win-win logic of the consortium remains intact, in my view. Yahoo and other digital giants have uniques by the millions but generally have been unable to build local sales forces. Newspaper sites, except for the very biggest, lack the traffic to attract certain advertisers and have especially suffered over the last several years as the huge volume of digital inventory drives down rates.

This particular initiative, Coats and Hendricks confirmed, is all about numbers. But it comes at a time when newspapers organizations are also exploring better targeting via so-called “big data,” and newer formats like sponsored content and video pre-rolls that command higher rates.

I am among those who have written frequently about banner blindness, the irritation of intrusive digital ads and the shortfall of digital ad gains compared to ongoing print losses.  However, it is probably worth noting that while digital advertising hasn’t fully met expectations it’s not nothing either — now accounting for 15 to 20 percent of advertising at top performing organizations.

Best case, the 2.0 version of the consortium could contribute to stronger growth over the next several years.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
Rick Edmonds

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