The Challenge Of Non-Local Newspaper Advertising

Newspaper brands like the NEW YORK Times, WASHINGTON Post, BOSTON Globe, etc. face a unique challenge in the online media age — how to value non-local readers.

I received this offer in the snail mail this week from the New York Times:

As I observed previously with my critique of the Washington Post’s circulation marketing, this marketing piece gives me, an avid reader of NYtimes.com, no explanation whatsoever as to the value of also receiving the New York Times in print (with the exception of receiving free access to some premium online services, which has nothing to do with the value of the print edition itself).

It appears the objective of this marketing pieces is strictly to convert people who already read the New York Times print edition or who are predisposed to read newspapers in print — and we all know this group of people is shrinking. For the six-month period ending March 31, 2008:

The New York Times lost more than 150,000 copies on Sunday. Circulation on that day fell a whopping 9.2% to 1,476,400. The paper’s daily circulation declined 3.8% to 1,077,256.

The New York Times is clear trying to bolster this declining print circulation by marketing to prospective non-local subscribers like me. The problem is that as a reader, I have little or no value to local New York City advertisers, especially classified advertisers.

This presents a quandary for “national” newspapers like the New York Times, particularly in light of the online readership of NYTimes.com.

According to Nielsen Online, NYTimes.com had 18,869,000 unique visitors in March 2008, up from 17,502,000 in October 2007, a 7.8% increase.

Nielsen’s numbers are estimates, but assuming they are directionally correct, think about the orders of magnitude we’re talking about here: 1 million vs. 18 million

You would think a media property with an audience of 18 million would be worth more than a media property with an audience of 1 million.

And yet it’s not. This is the ten percent problem.

I’m still more valuable to the New York Times as a print subscriber than and as an online reader because my advertising value is still so much higher in print — despite my not living in New York City.

Here’s the economic reality for national newspaper brands: Print readers are scarce. Online readers are a commodity.

Just look at the numbers: Washington Post Sunday print: 890,163; monthly online: 8,929,000 (almost exactly 10x); Boston Globe Sunday print: 525,959; online (boston.com): 4,184,000

But why aren’t these newspapers’ online businesses 10x larger than the print businesses instead of 10x smaller?

Here’s the bottom line business model problem: Unlike in print, newspapers create no unique value for advertisers online.

Newspapers had a monopoly over print advertising in a defined geographic area, which provided a lot pricing power for ads that were uniquely local and uniquely suited to print, e.g. classifieds.

Look carefully at the online advertising formats of most newspaper websites, and you’ll notice two things:

• Most are direct analogues of print advertising formats
• Most are the same as ad formats on thousands of other content sites

Take a look at the New York Times online ad formats. It seems like an impressive product list at first, but what it boils down to is a fancy list of display ad offerings.

And how many other places can you buy display ads on the web?

Just look at the name of their large rectangle display ad unit: Big Ad — you know, like that full page ad in the paper — you see it and think, wow, that’s a big ad. Problem is the BIG ad on the web site is a whole heck of a lot smaller than the big ad in the paper, despite being a whole heck of a lot more interactive and measurable.

Which gets to the problem of non-local readers.

In the market for local advertising on the web, newspapers are competing with other traditional local media companies, e.g. TV station, as well as with new web-native local publishers, and with search engines — this is a newly leveled and expanded competitive landscape, but still limited.

For non-local readers, on the other hand, newspapers are competing with hundreds, even thousands of other content sites.

That’s why the NYT’s 1 million print readers are more valuable than their 18 million online readers.

For example, here are the NYT print rates for the Technology category:

If you do the math, the cost of 1 page, or 126 column inches at the National Weekday rate of $1,233 is $155,358, to reach 1,077,256 weekday subscribers. That works out to a cost per thousand (CPM) of $144.

Compare that to the $15-40 CPMs that TechCrunch gets for displays. Imagine what TechCrunch’s business would look like if it could command $144 CPMs.

So given that the New York Times can charge 3-4 times as much to show me a technology-related ad in print than TechCrunch can charge online, is it any wonder that they are trying to convert me to a print subscriber?

The issue is even more acute because at least TechCrunch can prove that the ad was displayed, even if I didn’t pay attention to it. NYT can’t even prove that I didn’t throw the paper straight into the recycling bin.

It would seem this is a market anomaly that can’t last.

So what should newspapers with a national audience online do?

Well, one obvious choice is to stop trying to be both a local and national (and even global) media company. The problem is that for companies like the New York Times, the local newspaper supports the global news enterprise — but that state of affairs is in rapid decline.

Another choice is to produce a local print product that MORE people want to read, not fewer — the perceived infallibility of the current declining print product is a subject for another day.

There’s one other choice that you don’t often hear discussed: Find new ways to create value for advertisers online.

That’s what Google did. The value proposition of search advertising has no analogue in print or anywhere offline. That’s where the pricing power comes in.

Creating unique value for advertisers online could also help newspapers better compete for and better price local online advertising as well.

So how can newspapers and other news brands create unique value for advertisers on the web?

I’ll have to get back to you on that one.