Pursuing New Revenue

If newspapers are to survive and thrive in the digital age, they need to reposition themselves as multi-platform mediums, able to reach readers 24/7, anytime, anywhere.   Moving beyond the print-only world is key to pursuing the new revenue opportunities that the Internet has unleashed.

There are many questions confronting the bold publisher who seeks to push the boundaries.  For example: When should a community newspaper start charging readers to access online editions?  How much should it charge?  How can newspapers revamp their sales processes so advertisers see these local publications as credible digital players?  Should newspapers set up in-house digital advertising agencies to better serve their clients?

In this section, the editor and the general manager of the Rutland Herald share their experiences setting up a pay wall for readers and revamping an old stand-by, the advertising rate card.  A veteran advertising sales executive, who worked with students on the Saving Community Journalism project, talks about how newspapers can regain pricing leverage.  And finally, the former publisher of the Santa Rosa Press Democrat discusses his paper’s success in establishing an in-house digital advertising agency.

Revenue from readers

How do newspapers get readers to pay for online news after years of providing it free of charge?  That is a question that has vexed and puzzled publishers for the last decade. With mobile access to news surging – thanks to the tablet and smart phone – Poynter Institute’s Rick Edmonds believes it is critical that newspapers figure out how to charge readers for the value they are delivering in their online editions.

In the last two years, several hundred newspapers have installed “pay walls” around their online editions.  There are several versions, and the verdict is still out on which method is best option  – the “hard” pay wall, favored by the Wall Street Journal, or the “leaky” version, recently adopted by the New York Times, and three newspapers featured in Saving Community Journalism.

In 2010, the Pulitzer Prize-winning Rutland Herald was one of the first community newspapers in the country to install an online pay wall.  The Poynter Institute has produced a case study on the Herald’s efforts, which can be accessed at http://www.poynter.org/latest-news/top-stories/222073/how-two-small-family-owned-newspapers-in-vermont-had-success-with-a-paywall/.

Editor Rob Mitchell is the third generation of this family to work at the Herald, and its sister paper, the Barre-Montpelier Times Argus.   Since joining the paper in 2008, he has served in a variety of roles, including special projects manager, state editor and digital media manager.  He has led efforts to develop tablet and mobile versions of the paper, and to implement the pay wall.  Here are his thoughts:

What motivated you to consider a pay wall?

In 2009, our online audience was growing steadily, while our print subscriber base was steadily shrinking. We were also dealing with the recession and the collapse of classified advertising revenue. And the revenue per visitor to our sites was just ridiculously low compared to a print subscriber. We were also getting print cancellations with the reason that the subscriber “can get it for free online anyway, so why pay?” It was kind of seeing the writing on the wall. For a paper our size, we just could not see a future where a free online audience would ever be able – on a revenue-per-audience member basis – to support the news and journalism that we see as our core mission.

Why did you choose to go with a “hard” pay wall vs. a leaky one?

A ‘“hard” paywall is kind of like the Apple iTunes model: There are certain things you pay for, and certain things that are free. We make you pay for the premium stuff. A “leaky” paywall would be like Apple saying “We”ll give you five or 10 songs for free every month, and hope that you’ll eventually want 20 songs a month, so you’ll sign up to pay us.” To us a hard paywall just seemed the right way to go on principle. Our niche is producing news that no one else really can or will, for a geographic audience that is our local community. If we’re going to say that it’s valuable – and as valuable as the print product, then we need to put our money where our mouth is.

There was limited research at that time showing the varying habits of readers – some visit a lot, regularly, while the majority are “drive-bys” who come and go at a whim – which a lot of other organizations have used to justify a “leaky” model. In our thinking, that was aimed at what I call “the Tyranny of the Page View.” The leaky model will certainly help keep your page views up. But it seemed that everyone was going after page views, when the real goal is revenue. For a newspaper our size, we could triple or quadruple our page views and still not bring in enough banner advertising revenue to make much of a dent in our bottom line. Instead, we went for building a community, connected by geography and interest, which is a premium advertising audience.

One other bit of evidence that tipped the scale in favor of a ““hard” paywall for us was the search terms that brought people to our site. More than 75 percent of searches that brought visitors to our site pre-paywall were variations on the spelling of our newspaper titles (and there were some really bad misspellings). That told us that it was our brand, not necessarily the news content, that was bringing readers to us, and thus we would not be losing a great deal of search traffic due to a paywall.

What material did you leave outside the paywall, and why?

Initially, we left very little outside the paywall – only obituaries at the start. But based on feedback from the community, we moved opinion outside the wall within a few months, and then breaking news. That came from the realization – which seems obvious now – that a newspaper is about much more than just stories on screens. We play a large role in defining and shaping our community and community response to big issues, and opinion – as well as breaking news – are a major part of that.

Implementation of a new strategy never unfolds exactly as we plan. What surprised you – positive or negative? How did you recover, or take advantage of an unforeseen opportunity?

The first month after the paywall went up was pretty intense, both negative and positive. We fielded hundreds of calls and hundreds of emails from customers in the first few days. There was media attention – we were the first newspapers in our region to go this way, and it seemed everyone wanted to weigh in on the decision. I think the biggest surprise, philosophically, was the evidence of how the industry decision to go free online had undervalued what we do by so much. I had many debates with people who had paid for a subscription for years, but seemed to think that all the value was in that ink-decorated paper, not in the actual work of the reporters, editors and advertising and design staffs. We also had feedback from people – a minority, to be honest, but they were like, “What took you so long?” and “I’ve been waiting to pay for online.”’

The biggest unforeseen opportunity in my mind is the customer database we’ve built over the years. The registration list – people who’ve purchased or tested some version of online subscription – dwarfs our print subscriber list. And these are people who opted in, which is extremely valuable. We didn’t really see that coming. In 2009, Facebook and social media was getting really big, but was still kind of an unknown. Whereas customer behavior around print has always been a kind of vague metric, we now have a lot of data on how people behave with our digital subscriptions.

What do you know now that you wish you had known when you were making the decision?

I wish we’d been better-prepared to sell the premium nature of the online audience we’ve built. If we’d known what we were building, we might have been able to monetize it better. Almost four years in, we’re getting there, but we still haven’t done everything we could.

I think the advice I would give to anyone considering this is to really do the legwork on your own, and don’t get distracted by what everyone is saying you should focus on – like page views. Does something like page view numbers really matter if what you’re trying to do is build a revenue model for the future? Know what you’re about, and don’t be afraid to put a price – a value – on what we do. Know that if you invest in that value – news and journalism, and really giving a damn about your local community – people are going to want it and want to support you.

New Revenue from Advertisers

Publishers are dealing with two major advertising challenges.  First, the digital edition of most newspapers is often treated by the advertising sales representatives as a “stepchild” to the more profitable print edition.  As a result, it is often sold as an afterthought.  Second, there’s the digital rate problem.  At most newspapers, online advertising is sold at only a small fraction of what a print ad is sold.

Click here to view an interview with Publisher Bruce Kyse on how he fostered a new sales approach in the advertising department of the Santa Rosa Press Democrat. 

In this section, we’ll consider the perspective and advice of three veteran advertising sales executives.  They’ll discuss how newspapers can introduce a new rate card, foster a new mindset in the advertising sales staff, and set up an in-house digital agency to better serve their client needs.

Introducing a new rate card

Catherine Nelson, general manager of the Rutland Herald, is a veteran advertising sales executive who knows what local businesses need from their community newspapers. After beginning her career in retail sales at the Herald’s sister paper, the Barre-Montpelier Times-Argus, she has worked as publisher of multiple daily and weekly newspapers, including those owned by Harte Hanks Newspapers, Worcester Community Newspapers and the Advocate Group in western Massachusetts.  After a stint as a newspaper consultant for numerous community newspapers in the United States and Canada, as well as alternative publications such as the Bay Guardian of San Francisco, she joined the Lee Enterprises executive team before returning home to join Herald management in 2006.

Over the years, she gained a reputation for knowing how to price advertising so that newspapers delivered true value to the advertiser.  That starts, she says, with putting together a rate card that makes sense – both to the reps selling the ads and the local businesses that are purchasing them. “Most newspapers only use nine rates with any frequency,” she says. Yet, many community newspapers have a “rate card” that spans several pages, lists a couple of hundred rates, and is difficult to decipher.   Nelson has revamped the Herald’s rate card so it now fits on one page.  In the example below, she lists the top five things publishers should keep in mind when introducing a new rate card.  Then, she puts on her advertising sales hat and explains how a sales rep could use the card.

Click here to hear Catherine Nelson explain why most newspapers need to totally revamp their rate cards. 

Catherine Nelson’s Top Five List: How to Introduce a New Rate Card

1. Keep it simple. Simple is better. Make the card easy to read; make the rate progressions logical, but also do your research on which rates are used the most. Show the benefit of higher volume and frequency. Have only ONE card that has the core of what you do. With only one piece of paper, your sales reps will not lose a lot of time searching around for the right rate.
2. Play to your strengths. Get your main product lines front and center. Whether it’s your print and online edition, or print and niche and online, make sure that each option displays well on the unified rate card. Don’t worry about, or don’t even bother with, the little-used, or outmoded rates. If you really need them, you’ll find them.
3. Strongly encourage purchase of multiple products. Instead of just volume and frequency discount, encourage and incentivize your advertisers to use multiple product lines. This both helps you, and helps the advertiser. Research has repeatedly shown that consumers are more likely to respond to advertising displayed in multiple formats.
4. Tie sales compensation to the new rate card.  Salespeople will sell what makes them the most money, but they have to be confident in the product to sell it. We didn’t make changes in just the rates. We tied it to the introduction of  “consultative, packaged selling” at the same time.
5. Provide the sales team with training so the reps know how to use the new card. Packaged selling is a lot more useful to advertisers than selling one more three-inch-by-five inch ad. We made a short movie about the changes. It featured the core change agents and some barefoot waterskiing, literally. We then had a two-day off-site training session that was led by a group of five salespeople. We used role-playing and exercises to give salespeople hands-on experience with both the new card and the new way of selling. We had a ton of fun doing it.

Catherine Nelson explains how to use the rate card

Our rate card works best when used in concert with packaged selling. It should be in the background of the presentation to the client. The process starts with an assessment of the client’s needs, which the salesperson uses to develop three packages:

A - Premium level

B - Midlevel, which is a step back from the premium

C - Basic level of frequency, volume and product line

The salesperson starts with a general idea of how much the client will spend, and his or her goals, and then builds in the product lines to meet both requirements.  If the client needs to keep a niche product in, but it’s too expensive, then the client can go up in frequency and down in volume for a lower rate and constant overall cost. Need to extend reach? Add in a niche online product at low volume to extend the multi-platform discount.   Here’s an example of a real business in the area:

Company: Local retailer, specializing in biking, skiing and fitness apparel and gear.

Budget: Spent $7,500 last year with us; looking to stay the same or slightly more in coming year.

Goals: Need to increase visibility at key times of the year to move dated inventory and to promo incoming models

Target audience:  Looking to reach moms in the local county and a few towns outside the county

Other:  Has a new web site, which has low visibility

Using this card, I can quickly put together three packages for the client, ranging from $15,000 for the premium level to $8,000 for the basic level.  The midlevel will run $10,500.   Without having to use a calculator or rifle through pages of rates, the sales rep can focus on helping the client meet his or her goals and budget.

Fostering a new mindset

Nancy Adler has spent more than 30 years in sales and marketing positions in news organizations such as CNBC, MSNBC, Crain’s New York Business and Dow Jones. She is currently head of Global Marketing and Communications at Institutional Shareholder Services.  Her specialty is creating integrated marketing solutions that drive cross-platform revenue.  From 2010 to 2013, she consulted on the Saving Community Journalism project, helping newspapers come up with solutions to the most pressing advertising problems.  In fall 2012, as she was wrapping up her consultation, she sat down with Victoria Stillwell, one of the 200 students who also collaborated the project.  Stillwell is currently a reporter for Bloomberg News, based in Washington, D.C., covering economic news.

How can newspapers regain their pricing leverage?

Now, more than ever, there are just so many different ways to communicate, particularly on the digital side of the business, which offers a sense of immediacy and depth at a moment’s notice. So if you are a newspaper publisher, your efforts have to take that into account. Either you really get with the program and develop your digital assets in a strategic way, or you are going to lose share of the advertising dollars.

However, given the proliferation of digital options available to your advertisers, it’s become critical for newspapers to think about positioning and selling in more of a bundled and integrated way.  You need to think strategically how you’re positioning both your print and digital editions.  Since many digital editions are still embryonic (compared to the print edition) and don’t have critical mass standing along, most publishers of community newspapers need to sell the value of combining both print and digital.  Think of the digital edition as both reinforcing the message for people who may have seen the ad in the print edition, as well as extending the reach of the ad to those in the community who may not read your print edition.

Is newspaper advertising really effective?

Now, more than ever, marketers are looking to create a sense of engagement with customers.   Newspapers have a unique ability to engage people living in a geographic community and get them talking about those things that are most important to them – schools, sports, community events.  They can do this by creating content for both the print and digital editions around these topics, and by encouraging conversation with the paper’s editors and reporters, as well as with other readers, through all the digital tools that are available from online contests to social media.  It’s the interest that readers have in “community news” of all sorts that will sell products and services for local advertisers.

Part of the challenge is really educating the sales teams on the value of what they are selling. Most newspaper advertising sales staffs have been focused on selling one way – one particular form of media – and they are very comfortable doing that. But to be competitive, sales staff need to understand the mechanics of how advertising in various mediums work.  And, since most newspapers’ sites are very nascent, they need to understand why it is in the best interests of both the advertiser and the newspaper to sell a “sponsorship” of content that appears in both the print and digital editions.

Sponsorship of content has been around for a long time – on PBS, in magazines – just not in newspapers.  But if newspapers create communities of readers built around special interests – such as sports or parenting, for example – there’s tremendous value for the advertisers who want to reach an engaged, targeted audience.

Could you give an example of how a sponsorship might work for an advertiser and the newspaper?

As a result of market and reader research, we identified several different “special interest” communities of people who lived in Columbus County in rural eastern North Carolina.  Some residents were reading the print edition of the Whiteville News Reporter, some were reading the website, Whiteville.com, and some weren’t regular readers of either edition.

In many rural areas, preps sports – Friday night lights, if you will – is a passion. So, first, we focused on creating a community page for both the print and online editions that focused on prep sports during the school year and participatory sports during the summer. We named the page – or section – Sports of All Sorts.

The local McDonald’s had been advertising in the print edition for several months, adjacent to a column that featured small profiles on local high school athletes.  By expanding the feature online and by associating it with other prep sports content, we were able to create an integrated print and digital sponsorship for McDonald’s.  Each week, they were listed as sponsors of the “Athletes of the Week” column.  Two other advertisers bought sponsorships of other special features – a Realtor signed on to sponsor the sports calendar, which ran in both editions, and a local tire dealer signed on to sponsor the online sports contest of the week.  Yet another local merchant signed on as sponsor of the Sports of All Sorts franchise.  Each advertiser got an advertisement adjacent to the feature or page they were sponsoring.  Some of the advertisers ran different ads in the print than in the online.

The advertisers were pleased because they were associated with content that people in the community were passionate about and read religiously.   And by grouping all the features together, they felt they got greater share of the reader’s mind.  Readers were also delighted and engaged with the content.  On the Tuesday, when Sports of All Sorts appeared in the print edition, unique visitors to whiteville.com tripled.

So it was really an enormous success and, importantly, it showed the News Reporter sales staff that they could sell in an integrated, bundle sponsorship, and that it was of more value to the advertiser than selling the print or online editions separately.  So really, it was a win-win for McDonald’s and a win for the advertising staff as well.

What do you see as the biggest obstacle or challenge facing newspaper sales staffs today?

Local newspapers really need to plan for the future, which is a challenge because the current revenue base is still very much attached to the print model. So the challenge is really optimizing the revenue from print, while realizing your future is digital and transitioning your newspaper to a cross-platform medium so you can offer the advertisers more value than any other local competitor – whether it is a digital start-up or a broadcaster or a billboard company or a free shopper.

There’s also the challenge of educating local advertisers, who are not as sophisticated as national advertisers, to the value of cross-media advertising.  But, if the sales teams believe in that value, and of the value of the engaged audience they are delivering, then they’ll be able to confidently educate the advertiser.
In-House Agency

Setting up an in-house digital advertising agency

The Santa Rosa Press Democrat was one of the first papers in the country to establish an in-house digital agency.  In 2013, the Pew Research Center singled out the Press Democrat, along with three other papers, for their advertising revenue success.  Former publisher Bruce Kyse talks about how he views the digital advertising revolution.

Many newspapers have moved away from digital and print specialists competing for the same ad dollars. Some papers still maintain separate sales teams. What do you believe are the advantages of one format over the other? 

Digital marketing is changing quickly and increasing in complexity. So there is no question that most midsize and metro papers need to have digital specialists who can explain the evolving digital marketing landscape to other sales reps and clients.  This is especially true if papers are developing digital agencies. On the other hand, there is a value in selling advertising across multiple platforms and to be effective client managers and ad reps need to understand and sell the value proposition of multi-platform campaigns.  Every sales rep needs to be able to sell the cumulative value of print, digital display, search optimization, mobile and retargeting.

How should newspapers revise their approach to sales, goals and compensation as they move into multimedia sales?

Newspapers need to think about a complete renovation of the advertising department. At the Press Democrat, we started by revising our compensation system to reward cross-platform sales. In the past, newspapers relied heavily on revenue-based commissions. That doesn’t work when you’re expecting the sales team to sell digital advertising at a fraction of the cost of print. So the paper set specific digital revenue goals for every rep and paid them based on their ability to meet both “total revenue” and “digital revenue” goals. You have to hit both goals to receive a commission payout.

The paper also restructured the accounts into three tiers: 1) transactional, or one-time product-based sales handle by a call center, 2) optimized accounts, which require ongoing relationships with outside reps, 3) strategic or multi-platform key accounts, which require the most attention from the top sales reps. To eliminate sandbagging, the paper did away with year-over-year goals as a basis for commission.

We also eliminated the historical practice of sales reps owning accounts. The newspaper assigned accounts based on category, performance history and expectations. If a salesperson fails to develop an account, the account is assigned to another sales rep. The newspaper essentially took ownership of the accounts.

The Press Democrat was one of the first newspapers to invest in an in-house digital agency. Within a year you had more than 60 clients signed up for a full array of digital services. Why do you think it was successful, and do you think the digital agency is a viable strategy for all newspapers? 

We made decisions that paid off quickly – focusing on customer service and content development, offering a full array of essential services, establishing clear and measureable processes, and finding the right balance of staff and outsourced expertise.  The agency is not designed to be the low-cost option in the market; instead, we offered multiple levels of pre-packaged and custom options that could be easily explained and measured for clients who can afford quality services. Finally, we constructed a showroom for the agency, a slick Apple store-like space where prospective customers could see programmers, content editors, and SEO and social media specialists working for local businesses.

Every industry forecast for the next few years shows local marketing dollars moving to digital services like SEO, Social media and mobile. Although it might not be a zero-sum game, local print advertising has been dropping on average of five to eight percent a year. Local businesses are placing more eggs in the digital basket and newspapers have the opportunity to provide a useful and lucrative service.  I think local digital agencies can work for most daily newspapers with more than 30,000 circulation. The payback for smaller dailies and weeklies might take longer. There’s also the potential for small papers – especially those with common ownership – to develop a combined local and group agency.

That must have required a change of culture for the ad department.

We knew we had to invest to help our sales reps develop their skills, so we instituted a comprehensive four-tier training course. The reps had little more than a year to get certified on all levels.  We changed the sales goals and commission plan to stress digital sales. And we posted individual and team sales performance publicly on the walls of the ad department. It was a hard transition for some and several reps left the company before completing the program. But at the end of the process, we had a highly trained digital and print sales team.

The shift to a digital requires a change in perception of advertisers as well. Advertisers trust newspapers with print marketing, but they don’t have the same level of confidence with digital. 

You can’t fake your way to success, especially with the onslaught of digital “pure play” competitors. Newspapers need to convince advertisers that we understand digital marketing, and then deliver the goods. That means your sales reps and digital specialists need to be steeped in the digital culture and understand the customer’s needs.  It also requires relevant, frequent reporting and excellent customer service.  For example, with digital advertising, campaigns will often run one or two months. The best performing newspapers provide ongoing optimization of campaigns, making sure that they are displaying the right creative and a “call for action” that drives results. Newspapers need to be focused on measured results and take responsibility to optimize campaigns. It’s the kind of service that will differentiate a newspaper from “pure-play” digital competitors.