Spotlight on Research

Can small community newspapers successfully launch digital ad agencies?

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Four Questions with JoAnn Sciarrino, Knight Chair in Digital Advertising and Marketing, UNC-Chapel Hill

One of a regular series of articles that highlights research in the academy and the profession on the emerging threat of news deserts or changes in media ownership.

What is the future of newspaper advertising departments in small, low-growth communities? Can the print sales reps at these newspapers become digital advertising experts? JoAnn Sciarrino, Knight Chair in Digital Advertising and Marketing at the University of North Carolina, explores these questions in a case study on The Whiteville News Reporter, a Pulitzer-Prize-Winning, twice-weekly paper with a print circulation of 10,000. The paper, which serves one of the poorest counties in North Carolina, was an early pioneer in the digital space, establishing a robust website and social media presence that connects with thousands of loyal users on a daily basis. But, like most other papers, it has struggled to increase digital advertising revenue to compensate for the loss of print advertising revenue.

Sciarrino noted that many large regional metro papers were establishing in-house digital advertising agencies that provided a range of services – such as website design and search engine optimization – to its local advertisers. Could such a set up boost digital advertising revenue for smaller papers? For more than a year and a half, Sciarrino worked with the leadership team at the News Reporter, training its four-person small sales staff of four. The lessons learned by the Whiteville team are instructive for other small-market news organizations.

A former executive with BBDO North America, Sciarrino has spent more than three decades helping such well-recognized brands as AT&T, Starbucks, Hyatt, and Procter and Gamble test and refine their digital advertising business models and strategies. She received her MBA in Decision Science from Emory University and pursues a broad research agenda that appears in the Journal of Marketing Theory and Practice, and Journal of Digital and Social Media, among others. She is also currently co-authoring a book on digital media entrepreneurship.

Click here to download the report: Inā€House Digital Ad Agencies in Community Newspapers: An Adaptive Approach to a Changing Business Environment

Visit our Media page to watch Charles Broadwell, former publisher of The Fayetteville Observer, and David Woronoff, publisher of The Pilot in Southern Pines, discuss launching digital ad agencies.

What are the revenue issues confronting legacy newspaper organizations today?

Advertising revenue has typically comprised two-thirds to three-quarters of overall revenue for community newspapers. Since 2000, print advertising revenue has fallen so dramatically that it is below the level recorded in 1950 – the first year it was tracked. And it is continuing to decline. In 2015, print advertising fell another 10 percent. While digital advertising now comprises approximately 15 to 25 percent of overall advertising revenue at most papers, it does not begin to make up for lost print advertising revenue (Pew Research Center, 2015).  According to a recent estimate by the Pew Research Center, newspapers lose 15 print ad dollars for every digital ad dollar they gain.

You state that "community newspapers are not doomed for failure and in fact, are uniquely positioned to take advantage of the evolving media landscape." Why?

There is a strategic management theory called the "resource-based-view" (RBV) that assumes each firm is actually a collection of unique resources that can be combined to form a competitive advantage.  At many local media organizations, we've found that it is possible to think of the community newspaper advertising department as a resource specifically positioned to contribute to a sustained competitive advantage on these four dimensions:

  • Value: The value of the advertising department to a community newspaper is evident in its potential to generate revenue from small businesses in the market. Despite sharp decreases in advertising revenue over the past 10 years, newspapers still generate twice the amount of revenue with print and online advertising as they do with print subscription and digital paywalls. Furthermore, the potential client or advertiser base of community newspapers is generally increasing. Total annual advertising spend by small businesses has been slowly increasing since 2009 (Frederick et al., 2014) and planned spend through 2020 is also expected to rise. Small business owners report that they will increase spending on social media, direct mail, display banner ads, online video, mobile advertising and advertising in community newspapers.
  • Rareness: Advertising department sales representatives from community newspapers are often the only advertising-related entity speaking routinely with local advertisers. Larger advertising agencies, for example, often do not have the resources available to penetrate smaller markets, such as those served by community newspapers.
  • Imperfect Imitability (difficult to imitate): The advertising departments at community newspapers are uniquely positioned to capitalize on this burgeoning advertising market, specifically due to their positive association with the newspaper's brand and the role that newspaper plays in the community. Despite a proliferation of media choices over the last decade, newspapers still retain the unique role of serving as a community bond for both readers and advertisers.
  • Lack of Substitutes: Local business owners and managers perceive that there are few substitutes for community newspaper advertising. Their longstanding association with the newspaper overall and its employees, the physical proximity of the newspaper to local businesses, and the knowledge that newspaper sales representatives have of the local community all contribute to this perception. Other recent research at UNC has found that local businesses not only have a "reservoir of goodwill for and loyalty to their community newspapers," but these businesses also tend to "'trust' newspaper sales people, more than those digital outlets who live out-of-town.

Therefore, traditional print advertising sales departments at community newspapers should be re-imagined as important strategic resources capable of lifting these papers out of their current revenue "crisis." Because of their value, rareness, imperfect imitability and lack of substitutes, I believe that advertising sales departments in community newspapers are well-positioned to take advantage of a changing marketplace in which advertisers increasingly want and need digital marketing tools and services that will allow them to more effectively reach their current and potential customers.  If local media organizations don't utilize the valuable resource they have in their advertising sales departments, then Google, Facebook and others will continue to erode their revenue.

You recommend that newspapers, even small weeklies and non-dailies, should set up an "in-house digital marketing agency." What sort of services does this "agency" offer that are different than those offered by a traditional or digital advertising agency?

The services that should be offered by community newspapers are the same as those offered by a traditional or digital marketing agency. However, a local media organization starting a digital agency should consider offering digital services in phases, with the least complex digital services offered in the early phase, such as assisting clients with search engine marketing and social media management. In subsequent phases, as the advertising staff's digital knowledge and experience increase, a newspaper can offer more complex digital services, such as website design, mobile applications and messaging, data management and interactive native advertising. Using a phased approach to digital services, instead of offering all services at once, allows faster staff and customer adoption.

What are the key lessons learned from your work with the News Reporter, a twice-weekly, 10,000 circulation paper in Whiteville, North Carolina?

The five key lessons learned from the News Reporter are:

Adopt a digital-first mindset:  The leadership team at the News Reporter meaningfully signaled to all its stakeholders that they had a digital-first mindset by building out a dedicated, physical space for NR Digital Media in the building, updating their own website, hiring a dedicated digital strategist and setting aside start-up funds for the digital agency.

Delete print-only rates from published rate cards and align commission structure: Ultimately, any talented sales person will revert back to selling the "cash cow" product (print advertising) versus a new and unfamiliar product (digital services), especially when the commission structure is more lucrative for the "cash cow." By deleting print-only rates and introducing print and digital packages onto the rate card, sales representatives will more easily overcome their "cash cow" preference and integrate digital into sales presentations. As a result, advertisers will have the opportunity to benefit from enhanced services.

Create an "everyone sells digital" culture: Sales representatives may begin to default to having the digital strategist sell digital services while they continue to sell print. The publisher for NR Digital Media introduced a four-pronged "everyone sells digital" approach including (1) continuous digital sales training and role playing with the leadership team; (2) leave-behind summary sheets of services offered for prospects and customers; (3) weekly sales activity reporting with an emphasis on digital-first active accounts; and (4) twice-monthly "ride-alongs" with the publisher and sales reps.

Offer influential prospective customers limited pro-bono services: Early on, when approaching prospects, the NR sales staff was repeatedly asked for local testimonials. To accelerate adoption and test fulfillment, a pre-determined group of key or influential prospects was offered pro-bono digital services to generate testimonials and build early digital sales momentum.

Develop sales reps into sales consultants: Print advertising sales are mostly transactional whereas digital advertising is mostly relational, which requires a consultative selling approach. With consultative selling, the salesperson becomes a consultant to his clients. The NR learned that the digital strategist and the leadership team needed to support the transition from transactional to consultative sales by offering continuous training and role playing. In addition, they emphasized team-based selling of all advertising services – both print and digital.

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