Newspapers can compete with Internet 'interlopers'
Newspaper publishers know how to panic. I often get phone calls and e-mails from friends and customers worried about the latest threat to the community newspaper business.
“What should we do about Patch?”
“There’s some company in town selling a deal of the day. What should we do?”
“Americantowns.com is scraping our news and soliciting content from the chamber and our churches. What should we do?”
“There’s a new company in town selling something called SEO. How should we counter?”
“Somebody is going around selling SEA to our merchants. How should we respond?”
“Some salespeople are in town selling mobile advertising, and the chamber is partnering with them? What should we do?”
“Groupon is selling in our town, and our merchants are buying. What can we do?”
My first answer to these questions is: “Calm down—the sky is not falling. Community newspapers can deal with many of these competitors. Just figure out what they’re selling—and sell it yourself at better prices and with more promotion.”
The first thing to understand is why so many online competitors are coming to small town America—to your town.
Until recently, the vast amount of online advertising was national. But now the experts are claiming that within the next five years, about half of all online advertising will be local. Borrell Associates predicts nearly half of about $60 billion in online advertising will be sold to local merchants by 2013. This is advertising money that newspapers need to go after.
One of the biggest pots of advertising is money formerly spent on Yellow Pages advertising—about $12 billion a year. Pretty much everyone agrees that print Yellow Pages are fast becoming history. So there are huge efforts by media companies to harvest Yellow Page dollars.
The big Internet companies believe they can show substantial growth by going after local online advertising dollars. Google (specifically Google Places, Google Offers, and Google AdWords) and Facebook. These are real threats because consumers spend many hours consuming social media (mostly Facebook) and searching the Internet (mostly Google searches).
Local publishers need not jump off rooftops. They need to understand each of these new competitors and develop strategies to respond.
Let’s take Groupon for an example.
Groupon is reported to be the company that reached $1 billion in sales faster than any company in history. All types of spin-offs have started up trying to mimic Groupon, and the Boston Globe predicts Groupon and other online coupon look-a likes will total $5 billion in sales this year.
Are Groupon and the look-a likes unbeatable?
Columnist Ben Kunz, director of strategic planning at Mediassociates, recently dissented the Groupon business model.
Kunz wrote, “Groupon charges a lot—businesses often pay 50 percent of all revenue associated with their special offer to the service …. So, if you run a massage spa and want to give consumers a ‘50 percent off’ Groupon offer, you’d cut your normal $100 rubdown price to $50—and then pay Groupon half the remainder, or $25 …. In effect, you’ve given away 75 percent of your total revenues. Yikes …. No company can stay in business with repeated marketing that gives away 75 percent of its sales.”
Kunz concludes: “With hefty fees, business one-offs, keen competitors and customers looking for deals everywhere, you have to wonder how long will Groupon’s billions last.” (See his full column at: www.digidaydaily.com/stories/hypebusters-groupon-039-s-flawed-model/.)
The lesson local publishers need to learn is that each competitor that comes to town has weaknesses that can be exploited. Community newspapers can offer online deals-of-the-day with lower fees. (Community newspapers have long been in the coupon business.)
Patch.com is trying to get into the local advertising business by hiring one local reporter (with a stringer budget) and an ad rep selling banner ads, directory listings and other online products. Surely, good community newspapers can compete against this product.
Local newspapers have the same or better opportunity as anyone else to go after the $12 billion in Yellow Pages advertising. Publishers just need to decide to get into the business—possibly pairing online directories with search and social marketing advertising.
More and more advertising is moving online, and more online advertising is being sold on a local basis.
Newspapers of all sizes have excellent potential to compete for this advertising. No need to panic. Just figure out what the new competitors are doing—and do it better. © Marc Wilson 2011
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