Top 10 business mistakes that newspapers must avoid as they go online-only

I’d like to welcome the Seattle Post-Intelligencer to the world of pureplay, online-only local Internet sites. They have a heckuva a jumpstart with their level of web traffic which any local site would be thrilled to have. Unfortunately, there are many other items that they must put in place to succeed. To their credit, they have taken some good first steps. The first and painful step was reducing headcount which reflects the reality that revenues will be lower for awhile. However, no business can cost cut your way to a successful business. The second laudable step was outlining how they plan to position themselves as a digital marketing agency with their advertisers selling everything from Yahoo display ads to paid search from all the major search engines.

Nonetheless, this is all moot if they don’t develop a viable revenue model to go along with it, something they have no apparent experience with since the Seattle Times had done all of their advertising sales as part of their JOA. The painful truth is that 99% of the local Internet plays have proven how NOT to develop a sustainable model. Some newspapers have claimed their online properties are profitable but this is a suspect claim since they weren’t burdened with the costs borne by the print product. In other words, most local online plays are subsidized by an offline counterpart which the P-I no longer has.

One of my observations from attending the New Business Models for News conference hosted by CUNY and run by Jeff Jarvis (of Buzzmachine & What Would Google Do? fame) and David Cohn (Spot.us) was that virtually all of the new business model discussion was about ways to lower production costs or new ways to fund journalism. While those items help, it’s clear the only path to long-term economic viability is to directly address the revenue piece of the equation.

Having spent the last 13 years off and on working on local Internet media, I’ve made my share of mistakes and have learned many lessons along the way. I’ve applied those to the site that I own and run (SunValleyOnline.com) and have managed to build a modestly profitable business. I hope the P-I has success so I’m sharing what I believe are the 10 most common mistakes that have prevented most local media sites from having success.

The following are the list of things the P-I, and other online-only newspapers, should avoid that most other local websites haven’t avoided:

1. Many local websites assume that since they’ve been in the business for a long time that they don’t need to conduct any research with their customers and non-customers. When we did research, we learned things that changed how we positioned our website to our advertisers as well as it informed our editorial direction. We also gained terrific insights into how much we did/didn’t overlap with our competition.

2. While most of us in the local publishing business think our site is available to everyone, the P-I should avoid the one-size-fits-all mentality. It’s a mistake to have your sales team start calling on as many advertisers as possible without regard to vertical market, psychographic attributes, etc. A well-honed value proposition for a particular segment is more work but worth it.

3. Until we did research, we had no ability to quantify the value of our audience. Just because one is the market leader (in terms of traffic) you still need to articulate a return-on-investment calculation to a prospect. Just as important, it’s important to worry about calibrating expectations with your advertiser about your advertising. Most small businesses need help and can have unrealistic expectations. If you don’t set expectations properly, the advertisers will “one and done” — i.e., they won’t renew as they may have had wildly out of proportion expectations.

4. Most newspaper sites clutter up their pages with as many ads as possible. After all, if there are more ads on the page, doesn’t that mean more ad revenue? [Hint: No] Many of these sites also use tiny static ads. There has been ample research on ad effectiveness of various types of banner ads. Apply that insight. While banner ads are the mainstream “solution” today, I’m fully convinced that new models of matching buyers and sellers will emerge. Google’s AdWords has been the “killer app” for online advertising but there’ll be others. Our motto is to test, analyze, refine, test, analyze, refine. I have little doubt that we’ll look back 10 years from now and laugh at what we considered to be state of the art.

5. Most media sales organizations aren’t tightly defining each step of the sales process with the corresponding likelihood of closing the deal. Too many also don’t have a systematic Win/Loss analysis process. While there are thousands of businesses in Seattle, it’s a path to failure to think you can just churn through advertisers.

6. Most local media sites simply create a rate card and when it’s time to ask for the order, toss it over the transom. The thinking is “A rate card is just a rate card. No need to use it as a strategic selling tool.” In reality, it has a lot to do with driving long-term retention of an advertiser as well as creating scarcity during the initial sales process. If they understand the rate card and you remind them on a monthly basis of how you are delivering against your agreement, advertiser retention rates will climb.

7. There’s a myth that since advertising is a “relationship” business it’s necessary to hire expensive shoe-leather salespeople as that’s the way it’s always been done. Many don’t have a grasp of how one builds a world-class Inside Sales organization and assume that an Inside Sales organization wouldn’t work for media sales. Unfortunately, they forget the fact that they are trying to extend beyond the normal 10% penetration of local businesses that newspapers have and that this means less revenue per account. That demands a lower cost model. Just because you are hiring an experienced media sales person with lots of field experience doesn’t mean that they’ll know how to create a low cost customer acquisition team/model. This is a radically different skill set.

8. Unfortunately when many local media organizations hire their online sales people, they don’t worry about making the distinction between “hunters” (i.e., sales people adept at developing new relationships) and “farmers” (i.e., account manager types that like to develop long-term customer relationships). Just because some sales people have an impressive roster of past clients from their offline sales experience it doesn’t mean they will know how to build a new book of business.

9. The P-I is fortunate that they have a buyer’s market when it comes to hiring but that doesn’t automatically mean they’ll hire the sales talent with the greatest potential. I’ve seen growing sales organizations hire unseasoned but high potential sales people and have great success. Having the right job descriptions with accompanying compensation and quota models is critical. It’s also vital to have a structured and ongoing process for developing the sales team’s sales and marketing skills. The P-I needs to have much more than an initial training curriculum and then “turn them loose” to make some rain. High performing sales teams train all the time.

10. The P-I needs to do more than just provide the sales team with a salesforce automation tool so they can use it to manage their pipelines. It can be a strategic tool for the business on a daily, weekly, monthly and quarterly basis not only for the sales team but also the executive team. We often see a tool such as Salesforce.com be under-utilized.

There are many astute and experienced readers and I hope you add your thoughts so we can tap the collective intelligence as no one I know purports to have all the answers in this evolving area. It’s an exciting (and challenging) time for those of us in local media. I wish the P-I all the best.

About Dave Chase

I am the owner/publisher of http://www.sunvalleyonline.com and co-founder of www.avado.com. Avado's mission is empower the healthcare partnership.

Comments

  1. 76.217.205.79 says:

    Hi Dave,

    This is a really great top ten list. Excellent analysis of the pitfalls that newspapers face these days. I think that they really have to focus on developing their own websites to start to combat the trend of people moving online to get their information. You can post this to our site http://www.toptentopten.com/ and then link back to your site. We are looking for top ten lists and our users can track back to your site. The coolest feature is you can let other people vote on the rankings of your list.

    Vince

  2. Perry Gaskill says:

    Dave,

    This is well written, and the effort it took to put it together is appreciated. I’ve been spending some time with Nielsen numbers and the pattern that seems to be emerging goes something like this:

    For a rough prediction of page views within a given coverage locale, take the population and divide by four for unique visitors. Each of those visitors is going to show up about twice per week, visit slightly more than two pages, and spend about one minute per page.

    The key problem isn’t sites attracting traffic, it’s that visitors aren’t hanging around. I’ve yet to see anyone adequately explain that lack of stickiness, but my guess is that the two prime reasons are lack of unique quality content and mediocre site design. Which raises the dilemma of not being able to provide good content without ad revenue, and not being able to generate ad revenue without good content.

    Setting that aside, I understand the points you’re making but hope you would take the time in a future post to expand on specific areas such as:

    2. “It’s a mistake to have your sales team start calling on as many advertisers as possible without regard to vertical market, psychographic attributes, etc.” I know I’m missing something here, but what this seems to be saying is pick the low-hanging fruit first and stick to market segments, such as Real Estate, where sales can justify spending time to build expertise. Which makes sense except it ignores when advertisers are also readers, and therefore there may be a whole other viral marketing aspect that comes into play. Or is this a loopback into psychographic attributes?

    7. “There’s a myth that since advertising is a “relationship” business it’s necessary to hire expensive shoe-leather salespeople as that’s the way it’s always been done.” I understand what you’re saying here, and Jonathan Weber at New West is a proponent of the same idea, but it somehow just doesn’t feel right based on a typical advertiser’s mindset. Advertisers want individual service. They want preferred placement and deep discounts. They want a pony for Christmas.

    It wouldn’t be too much of a stretch of the imagination to write a telemarketing script tomorrow, send it to a call center in India, and start carpet bombing a local ad market at the lowest possible price point. But is it a good idea? It seems to me that it’s one thing to suggest building “a world-class Inside Sales organization” and another to explain how to separate the wheat from the chaff.

    For what it’s worth, I agree with you that groupware and/or CRM tools can be very useful, but have never been particularly impressed with Salesforce.com. It strikes me as a proprietary behemouth which is sorta-kinda going to work the way you want, but not really very well without expensive custom development in an oddball programming language. I’m also leery of SaaS models for customer data. A better alternative, a least for sales in my opinion, is an open source solution such as SugarCRM which is mature, nimble, modular, and has an active developer community. One of its more interesting capabilities, for example, is the ability to integrate with an open source Asterisk PBX phone system using VoIP.

    Just my two cents…

    Perry

  3. The list could be longer, but these are top ten mistakes that can be made. Fortunately the newspapers rarely are doing this kind of mistakes.

  4. Perry – Let me respond to a couple of your points. Perhaps I can do a longer post on them per your suggestion but thought I’d give you a few responses to your questions.

    1. You commented on my statement. “It’s a mistake to have your sales team start calling on as many advertisers as possible without regard to vertical market, psychographic attributes, etc.”. Your point on readers being advertisers is interesting but tough to execute from a sales targeting standpoint. The essence of my comment is focusing on what we define as the HOT (high odds target) Opportunity Profile. This is a blend of psychographic and demographic attributes to illuminates what orgs your offering is the best fit for. My consulting firm has used this approach in everything from online media to energy efficiency systems and it is incredibly helpful at focusing marketing, sales, value proposition development, rhythm of business, etc.

    2. A world-class Inside sales organization is (and should be) congruent with individualized service. You also commented on CRM systems such as Salesforce.com & Sugar. We’re agnostic on the CRM choice but we have had great success tuning Salesforce to the specific sales model we implement. It is that well-oiled CRM that aids in providing great service throughout the customer lifecycle. [It’s also a great management tool.]

    You highlight the great misconception that I have observed talking to newspaper people about Inside Sales. They generally confuse it with hiring “script readers”. I can assure you terrible results are the outcome of script readers (plenty have tried). What we deploy couldn’t be more different than a call center filled with script readers. In contrast, a key portion of our 13 phase Sales Jumpstart is putting in an extensive training program that continues well after we leave. We are seeing sales into the low six figures done purely over the phone and have seen it work great in several sectors from online media to energy efficiency systems to lead gen for higher ed to SaaS. At the risk of this turning into a self-promotional piece, we’re seeing 50% or greater increases in sales metrics in every situation. Go to my firms blog for specifics – http://www.altusalliance.com/blog/2009/01/altus-clients-prospering-in-the-new-year/. That was from January. There are two more posts on that blog from earlier this week of clients having record sales months in March (one of them was online media). We are now putting our fees at risk as it’s more lucrative for us to take less up front and then share in the upside.

    The only surprise I’ve had is that the local media that is struggling with revenues isn’t being more innovative on revenue generation. All the focus seems on cost cutting which will only get one so far. The revenue is out there with the right approach.

  5. One of the biggest newspapers publishers mistakes in that case is using old busness models and ad planning.