Posts Tagged ‘Gordon Borrell’

The Jeff Jarvis Interview

Friday, January 8th, 2010

I had a discussion with author and CUNY professor Jeff Jarvis recently and was struck by his passion about hyperlocal journalism on the Web – something I’ve never felt had a sustainable business model.  You can see the interview on our YouTube Channel.

Jeff’s passion reminded me of a book I sent last year to Borrell Associates employees.  It was titled, “It’s Not What You Sell, It’s What You Stand For.” The book describes companies that not only have great products and services, but also a purpose.  Our purpose:  to save that noble enterprise called journalism.  As corny as it may sound, it’s what we believe we are doing.  We’re helping local media companies survive financially so they can continue to serve and protect their communities.

Jeff shares that purpose, though I must admit he wins the prize for being more passionate about it.

Jeff Jarvis discusses hyperlocal site profitability

Jeff Jarvis discusses hyperlocal site profitability

Jeff heads up the Interactive Journalism Program at the City University of New York.  I spoke with him in New York a few weeks ago as we prepared for his keynote address at our conference next month.  (We just posted a list of attending companies – we’ve got quite a diverse crowd interested in this topic.)   Jeff has always expressed a great clarity and strong opinion on the topic of journalism.  When I asked, “Why are you so passionate about this?” his response was, “Because I believe in journalism. Because I care about journalism.  I teach journalism.  I want journalism to not just survive, but to prosper and grow in the new world. And I believe it can.”

I believe it can, too.  But I don’t believe that it can survive on the Web without a viable business model.   And if it doesn’t, and if more newspapers shut down or local broadcast TV stations cease their newscasts because they’re too expensive to produce, the bright light of good journalism will get dimmer and perhaps become so intertwined with commercial messages as to become powerless.

Is the Web a viable replacement?  Can it — as Jeff says — not only survive on the Web, but prosper and grow?  I think so.  And I think the Web might be an even more powerful educator and equalizer in society.

But it won’t get there unless we make it financially viable.  Jeff’s panel at our conference includes some people who are generating enough revenue to not only keep the sites running and pay editors and journalists, but also turn a profit.  We’ll be posting a video interview on our YouTube channel next week with one of them — a remarkable story from Fisher Broadcasting seeing financial success with dozens of hyperlocal sites in Seattle.

These are the people with a purpose, and I’m very eager to see them succeed.

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Google-Yelp … Nope!

Friday, December 18th, 2009

Google’s rumored $500 million offer to buy Yelp, a site offering consumer reviews, drives home my longstanding belief that the major portals — Google, Microsoft and Yahoo — are becoming the national networks in search of local affiliates like an NBC, CBS, ABC and Fox.

But while the deal apparently fell through over the weekend, I don’t think this it would have been a game changer because Yelp misses a key element: Local salespeople, or at least trusted ones. Just Google “Yelp salespeople” and you’ll understand the stickiness of this situation.

Our conference in February features an entire afternoon exploring these evolving portal-local media relationships. “Partnering with the Portals” features key executives from Google, Microsoft and Yahoo! who are in charge of developing relationships with local media.

Fasted Growing Local Online Marketing Companies of 2009

Fastest Growing Local Online Advertising Companies of 2009

Yelp is indeed a marketplace force. Its numbers weren’t previously made public until last week’s speculation of it being a $50 million company in 2009. While its estimated growth rate — if true — would put Yelp in the Top 5 fastest-growing local online advertising companies in 2009 at 66% growth (see chart), it still doesn’t make our list of the largest.  Craigslist, for instance, has twice the revenues as Yelp.  With a Google deal for Yelp, that might change.

However, I view very few things as “game changers,” and despite its potential magnitude I don’t think this would have made the list. Google has had a tough time making itself look local. Acquiring Yelp would have tied together two very important ends: Google and individual consumers. Real people.

But what they’re missing is an army of real salespeople. Local advertising is sold, not bought, which is to say that SMBs really do need a local sales force to hold their hands. They may go online after midnight and buy AdWords with credit cards, but eventually stop buying because they don’t have enough time to manage the account or understand whether it’s actually working.

It takes a local sales force, and it will take a different type of partnership for Google to really become a local advertising powerhouse. It’ll need to acquire a company with a fairly large local and reputable sales force.

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Posted in Conference, Media, Social Networking, local advertising | 4 Comments »

5 Things to Watch–and Act On

Monday, December 14th, 2009

We have issued our Top 5 recommendations for local online advertising in 2010. They’re pretty straightforward:  Identify and copy the fastest growers, start partnering with other companies, offer “promotions” services to advertisers, monitor but be cautious about mobile, and dive into video advertising. But I thought I’d also offers some predictions for 2010 that might startle you.

First, I’m excited to announce that we have a new list of speakers we’ll be announcing this week for our Feb. 8-9 conference in New York. In the spirit of identifying and copying the fastest-growing local online advertising companies, we’ve gone to the trouble of identifying them for you — and getting their top executives to stand up at our conference and tell you why they’ve become the new darlings of Main Street.  We’ve also secured speakers from companies like Fisher Broadcasting, which has launched 43 hyperlocal sites in Seattle that are fast becoming profitable, as well as leading revenue producers in email, video, promotions and paid search.  Wait ’til you see the final agenda.

OK, on to the startling things.  I believe that 2010 will see a clear divide between the local media companies that are crossing the gorge and those being left behind.  Positive growth in Internet revenues will be the delineator.  Those who continue to see declines will clearly have tied their Internet operations too closely to their legacy media companies or will have formulated products that don’t resonate with Main Street advertisers.  Other predictions:

Largest Local Online Advertising Companies, 2009

Largest Local Online Advertising Companies, 2009

1.  Newspapers rebound.  Look for a 2-4% increase in newspaper ad revenues next year.  Smaller papers might fare better.  Those who make the digital transition will see up to 20% of their total ad revenues coming from the Internet next year.  The Yahoo-newspaper partnerships will generate $200 million to $300 million in geo-targeted banner sales.

2.  Local Internet advertising grows 5-9% next year, making it harder than ever for many companies to ride whatever tide is left.

3.  Mobile advertising skyrockets (on a small base), but local ad buys remain short-term and experimental.

4.  Cable companies dive deeper into local Internet sales.  Look for acquisitions and partnerships like we saw with the Yellow Pages in the early to mid-1990s.

5.  Yellow Pages continue a precipitous decline, high single digits but perhaps double digits for some.  Meanwhile, their Internet revenues will grow to comprise one-fifth of ad revenues.

Predictions are no more than educated guesses, so I really didn’t want to spend too much time on speculation.  The recommendations are key to what I think you should be watching.  The largest local online advertising companies are interesting to observe, but the fastest-growing ones above $25 million in revenue are the ones worth studying — and copying.

I hope you can make it to our conference.  We’re going to spend a lot of time dissecting these companies and learning why local advertisers have become so enamored of what they’re offering.

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The Hands of Radio Listeners

Tuesday, December 1st, 2009

Tuesday’s article in The Wall Street Journal about radio’s online efforts painted a perplexing picture of an industry that’s accustomed to targeting, but hasn’t figured out the most targeted medium of all – the Internet.

What’s worse, the target that the radio industry is hitting online is incredibly valuable.

With the help of Ken Dardis at Audio Graphics, we’ve been surveying the massive online “listening” audience” for the past year and have found some incredible things.  I’ll describe these results at next week’s Radio Forecasting Summit at the Harvard Club in New York.  Here’s a preview of some statistics about the estimated 42 million online radio listeners:

  • 42% of them said they bought something as a result of seeing an advertisement on the Web for a local business.
  • 53% of them use online coupons, and half of them use an online coupon at least once a month.
  • 33% of them use the Internet exclusively to look up information about local businesses, and 47% of them use both the Internet and the phone book.

If I were a local advertiser, I’d be very interested in this audience.  Engagement is high, and these listeners have a propensity to search for information about local businesses on the Internet.  Those are some powerful statistics that run the opposite of less-engaged mass broadcast audiences.  (Think of hands on keyboards versus hands on steering wheels.)

Online Radio Listeners and Advertising Survey

Online Radio Listeners and Advertising Survey

So why isn’t the radio industry doing better?  While some will say they are, the facts are pretty clear:  Radio stations will get about $230 million from local online ad sales this year.  Most of it will come from slapping banners on their CallLetter.com Web sites or inserting a $5 CPM commercial in their Internet audio streams.  Meanwhile, the yellow pages industry, which is roughly half the size of the entire radio industry ($10 billion in yellow pages ad revenue, compared with radio’s $19 billion in local and national network radio sales), will get more than six times as much online revenue – about $1.5 billion.    Even the TV guys are getting more than four times as much as radio, which is remarkable considering the fact that there are about half as many local TV salespeople pounding the streets compared with radio salespeople.

Here is one of the problems:  There are 250 million people listening to terrestrial radio, yet only 3 to 5 percent of them are listening to their audio streams on the Internet. To radio GMs, the audience is too small to mess with.   But as I’ve outlined, this audience is probably the distilled portion – the ones most engaged and most likely to purchase something.

I see encouraging signs that the industry is beginning to learn that it’s niche, not mass, that’s making the money on the Internet.  Once they start paying bigger attention to smaller numbers – and realize the value of their hands-on audience – they have a chance of seeing better returns from their Internet ventures.

* Joint survey of 973 online listeners in Dec. 2008-April 2009 via Audio Graphics and Borrell Associates Inc.

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The Lady in the Sweat Suit

Saturday, November 7th, 2009

I was in a 7-Eleven last week and watched a middle-aged woman in a sweat suit pay $1.50 for the Sunday newspaper, then walk outside and dump half of it in the trashcan. Care to guess what part she dumped?

Like 37% of newspaper readers (according to Scarborough Research), she’s interested in the advertising. Her $1.50 was likely to have bought her at least $5 in coupons that she’ll redeem at the grocery store, Rite Aid or Wal-Mart. Smart purchase.

While most of the newspaper industry frets over giving away its precious news content, its most vulnerable franchise is produced by the advertising department. Newspapers should thank their lucky stars that the woman in the sweat suit did what she did. She could have stayed at home and gone to SalesCircular.com or one of the many other sites that would have given her the same thing. If she were in Long Island, she might get her coupons from www.yourli.com, an incredibly useful and popular site run by a group of radio stations. If she were in Bakersfield, Calif., she might go to www.shopkern.com, a shopping and coupon site run by KERO-TV.

I hope publishers learn soon that their most important content isn’t its local news.  It’s advertising. The issue was underscored last week when the president of the Newspaper Association of America sent a e-mail warning that J.C. Penney’s and Sears were threatening to pull their circulars because of lower circulation and the industry’s inability to reach younger demos. Circulars, he said, account for half of all newspaper retail advertising.

Local-allocation

I wouldn’t count newspapers out. Despite layoffs, bankruptcies circulation scandals and thinning classified sections, they are still king when it comes to local advertising. The crown is tarnished, but at the end of the day newspapers still control the largest slice of the $143 billion local ad pie, 26%. The next-closest share: Interactive at 14%. Then broadcast TV at 12%, then Direct Mail at 11%. Advertisers know about the lady in the sweat suit, and they’re eager to meet her on Saturdays and Sundays when she’s got her wallet and credit cards ready.  Newspapers remain the No. 1 source for coupons, representing 50% of all coupon sources.  The Internet represents 11%, but is certainly growing.

Newspapers are vulnerable, but their managers aren’t dumb. Gannett owns ShopLocal.com, an Internet distribution mechanism for its print circulars now plugged into all its newspaper and TV sites. The Suburban Newspapers of America this fall launched www.zip2save.com and is signing up smaller newspapers across the country. It’s modeled after www.flyerland.ca, a highly successful site created by Metroland Newspapers in Canada.

The debate over charging for news content is silly. Rupert Murdoch may be carrying the battle flag, but the legions of publishers following him over the hill appear to be heading into the sunset.  Charging for online access may slow the erosion in print circulation, but it’s never going to lead the industry to riches. Understanding the behavior of the lady in the sweat suit will.

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Radio lags, but shouldn’t

Saturday, October 24th, 2009

I’m puzzled by the radio industry. As I wrote in a recent Inside Radio column, it has the greatest potential and the weakest realization of the Internet’s possibilities.

Our most recent assessment of the radio industry’s efforts shows that it is on track to get $231 million from local online ad sales this year, up 5% from 2008. Sounds like a lot, until you consider that competitors in the TV, newspaper, yellow pages space are getting more than $1 billion each from local online sales.

Despite radio’s potential, I don’t see the industry achieving more than a 2% share of online advertising anytime soon. Our forecast calls for radio to see a slight uptick next year in interactive sales, growing 15% to $265 million. (This is just for local radio stations; if you add online sales from national radio sites like CBSRadio.com and ESPNRadio.com, the overall total comes to about $380 million this year.)

Radio Stations Local Online Revenue 2003-2012

Radio Stations Local Online Revenue 2003-2012

The “potential” comes from the fact that radio has the second-largest number of feet-on-the-street sellers of local advertising – about 18,000 in all. Newspapers have the most at 31,000, and yellow pages the third-largest sales force at about 14,000. But the radio industry also has something that no other local media competitor has: The only daily produced local entertainment program, and a deep understanding of social networking. Think of the strong affinities that form around music genres such as country, classical, adult contemporary, hip-hop, sports talk, politics, and hard rock.

Isn’t the Internet about social networking? Aren’t advertisers turning to the Internet for ways to promote themselves and connect with “engaged” niche audiences like this?

Radio operators know this business model well. A few are indeed leading the way, like Long Island Radio Group’s money-saving and coupon site, www.yourli.com. The group has branched out beyond the CallLetter.com mindset and is using the Web to reach into the space once dominated by newspapers and direct mail. Radio One is also leading with sites like www.elev8.com and www.blackplanet.com.

I wish others would take the cue.

NOTE: If you’re interested in hearing more, I’ll be highlighting some of the top performers in the industry at the Radio Ink Forecast Summit Dec. 8 in New York. If you’re planning to attend and would like to meet, please let me know. We’ll also, we’ll be delving deeper into radio’s opportunity and highlighting a few of the industry’s most innovative stations during our own conference in February. Hope to see you there!

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The “Category Killer” Strategy

Monday, September 14th, 2009

Last week’s passing of Frank Batten, the founder of Landmark Communications, reminded me of a small insight he had about the Internet back in 1996 that rings true today.

Frank was participating in a meeting that I was leading as a vice president trying to navigate this new thing called the Internet. We were strategizing what we might do with our properties – The Weather Channel, Auto Trader, Antique Trader magazine, TV stations and daily newspapers. The discussion led to all the extra money we might make at Auto Trader by charging dealers an extra $5 per listing. As we were rubbing our hands together, Frank gently weighed in.

There’s no barrier to entry on the Internet, he observed. No million-dollar printing press to prevent any fool from competing, no FCC license like you might find in TV or radio, no cable franchise to form a protective moat around your business. So in that scenario, the only strategic competitive advantage seems to be size. Frank wondered whether we might need to get big fast instead of limiting the number of listings to only those dealers who would accept the $5 fee. Placing all listings online, he suggested, might give us an immediate “category killer” for autos.

He was spot-on. Within 18 months, Autotrader.com was born. It immediately became a category killer. Today it is (by far) the No. 1 automotive Web site in listings and revenue, with more than 3 million vehicle listings and more than $600 million in revenue. While most automotive sites suffered horribly in 2008, Autotrader.com grew 20 percent and actually surpassed revenue from the Auto Trader books.

Frank’s strategy was a great one. It not only explains the success of sites such as Craigslist, which is generating more than $100 million off “free listings,” but also probably foretells the disappointment that awaits those who expect to find success as a “category killer” in local content by charging users to access it.

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The rumors of newspapers’ death

Thursday, August 6th, 2009

You might think it takes a great deal of chutzpah to say that newspapers will see a mild rebound over the next several years. But all it really takes is a close examination of the trends and cycles, and a deep understanding of the history of electronic media.

So here are our latest projections: Newspapers will be down this year, then they’ll start going back up. We expect a 2.4% rebound in newspaper advertising in 2010, and continued single-digit increases over the next several years. By 2014, newspaper ad revenues will be up about 8.7% over 2009 levels. While national newspaper advertising will do just fine, we foresee the greatest growth in local print – going from $8.9 billion this year to $10.1 billion, a 13.4% increase.

True, it all equates to more of a dead-cat bounce than anything else. And even at 2014 levels of just under $30 billion, newspaper advertising won’t be anything near the $55 billion we saw earlier this decade. Nor will it ever return to that level.

The fact is, newspapers reached their peak 91 years ago as two publishers battled over the presidency. On Nov. 2, 1920, in the first-ever radio news broadcast, KDKA delivered the results: Warren Harding beat James Cox. Electronic media was born, as was the business of writing obituaries for the newspaper industry.

The long history of electronic media has proven that there’s never a one-for-one exchange. People don’t go to the Web to “read a newspaper,” much the way they don’t turn on the TV set to watch “radio with pictures.” Radio forced newspapers in the 1920s to become more local. TV’s expansion into evening news in the 1960s forced afternoon newspapers out of business. The Internet sucked the life out of newspapers’ classified advertising and as the number of pages shrank, forced newspapers to find ways to become more interesting, more relative to their audiences.

The latest mediamorphosis of newspapers is almost complete. This once-fat, gray caterpillar that we knew as the “major daily newspaper” is turning into a smaller, more delicate, colorful local magazine, with fair prospects for growth. The smaller newspapers are firmly entrenched in their niche of providing rich local content that people seem to prefer in print – rather than screen – format. Our local newspaper, the Virginia Gazette in Williamsburg, is actually growing circulation and is thick with advertising supplements.

We may be dead wrong. The entire industry might die, and scores of papers might go belly-up over the next year. I’d like you to mark your calendar for today’s date, 2010, and see if that’s the case, or if we wound up being right.

I welcome your comments and debate on this issue.

Download the memo.

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You Need Online Reps to Drive Online Sales (Doh!)

Wednesday, July 29th, 2009

Whenever I make a presentation, one of the biggest laughs comes when I show a cartoon of a man explaining a plunging line on a flip chart. The caption reads, “The dip in sales seems to coincide with the decision to eliminate the sales staff.” We just completed a survey of 382 local ad sales managers that shows something just as dramatic. Sites with online-only sales reps make substantially more than those who rely exclusively on their seasoned print or broadcast sales staffs.

51335This revelation should come as no surprise to online managers. They’ve been telling us all along that print and broadcast reps “just don’t get it.” It’s not meant to impugn their intelligence; it’s just that those reps have their hands full trying to maintain existing customers. Online managers tell us regularly that they can drive revenues faster with a sales staff whom they can actually fire for not meeting sales goals. Our vice president of sales training, Bill Caudill, tells us that, after a training session, 30% of the reps “get it” and actually go out and sell online advertising. After three months, he says, half of them forget it.

More on the research. We asked front-line sales managers across the U.S. and Canada to take a 12-question survey about sales compensation, number of reps, online revenues, and related issues. We’ll publish the full results in mid-August. Respondents were split among those representing radio, TV, yellow pages, newspapers and Internet pure-play companies. Overall, 41% said they relied exclusively on “legacy media” reps to sell online advertising. Wow, what a mistake. I don’t think anyone can cite a single example of a sales staff selling two competing products and getting a significant share in both. It doesn’t happen, and no amount of digital pixie dust sprinkled over a print or broadcast sales staff will change that truism.

This, by the way, doesn’t mean that print or broadcast reps should NOT be selling online advertising. They should be trained to sell as much as they can. You don’t want to leave that money on the table. But relying exclusively or too heavily on legacy media reps is a quest to achieve mediocrity.

The most startling bit of information from the research is this: Of those with reps dedicated exclusively to selling online products, 46% of the sites were making $1 million or more. Of those that relied solely on their print or broadcast reps, 14% of the sites were making $1 million or more.

One more result from the survey: Of those who rely exclusively on legacy-media reps to sell online advertising, 49.7% said those reps exhibited an “average” or “poor” understanding of how interactive media could serve advertisers.

I rest my case.

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Posted in Media, Uncategorized, local advertising | 6 Comments »