Local advertising is a volume business, not a margin business

by Jason Preston on July 31, 2008

The Wall Street Journal has an article today chronicling the difficulty that newspapers are experiencing as they try to capture the local ad market for their web pages.

The problem is twofold:

  1. Local advertisers don’t think of newspapers as a place for cheap, online ads
  2. Newspapers are trying to sell these ads with ad sales teams

The chart from the article, which I’ve shamelessly ganked and placed here in this post, tells the tale: over the past two years, literally everyone has become familiar with AdSense and abandoned the newspaper. After all, AdSense is the self-serve ad platform for the little guy.

Google only has ad sales teams for the big clients, the ones dropping hundreds of thousands of dollars (or making hundreds of thousands of dollars), and lets everyone else take care of themselves.

According to the Journal, newspapers are losing revenue as their former print clients are buying ads online (at lower prices).

This is true, but the pool of ad buyers increases dramatically as the price of the ads go down. Couple this with the fact that it costs almost literally nothing to serve each of those ads (one more page view has a marginal cost of “so little it might as well be zero”), and you see why it’s OK to encourage advertisers to migrate to your web system.

As they do, you train them to use your automated system (you have an automated web ad system, right?), and then you start charging them extra if they want hand holding.

The clients who are willing to sign ad contracts get to work with your ad teams. Spend time and money promoting your automated ad service. Volume is where the money is now.

To learn more about the economics of the publishing business online, check out the Online Publishing 2.0 series on Eat Sleep Publish, or subscribe to the RSS feed!

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1 Ryan 07.31.08 at 8:33 pm

What automated ad systems are out there that you have has success with?

I totally agree with your post. Our online focus has been the same advertisers that we target with the print product. Our sales staff knows how to sell the paper and know that is where they will make the most money so that is what is pushed. We are missing out on the thousands of small business owners that are operating on a tight budget.

2 Jason Preston 08.01.08 at 9:57 am

Automated ad systems I like (I’m talking about the buying process, not the results process): AdSense, Facebook, Feedbruner.

Yep, it’s classic long tail, and newspapers are stuck trying to downsell their existing ad clients instead of attracting entirely new customers.

3 PrintPlace 08.01.08 at 7:53 pm

This is a pretty good mini-course in keeping your marketing operations slim and simple. Do not waste money by providing services that are not really necessary.

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