Professionalizing ad sales yields revenue gains for news startups

I wrote a study of best practices for advertising sales at news startups for the Tow-Knight Center for Entrepreneurial Journalism at CUNY. Here is a post I wrote summarizing key findings, originally published by Knight Digital Media Center at USC Annenberg.

A new report I wrote for the Tow-Knight Center for Entrepreneurial Journalism at CUNY underscores the value of professionalizing ad sales operations at news startups. The report details a number of practices that news startups have either developed or adopted from traditional media. In this post, I highlight three:

1. Professional sales staff

Hiring a sales rep or bringing on a partner to focus on revenue may prove critical to many operations. It is challenging – good sales people are in high demand and compensating them adequately is a stretch for small sites. But the inability to recruit and retain a good sales person may doom a site.

Ask David Boraks, who closed his two local news sites in North Carolina earlier this year.

“Finding a full-time sales person earlier would have made a difference,” Boraks said. “We tried. We couldn’t find the right person who could work for us for what we could pay They were six-figure persons. The other (sales) jobs around here are that. We can’t afford that.”

By contrast, multiple sites in the study, including Riverhead Local on Long Island, N.Y., and Noozhawk in Santa Barbara, Calif., reported revenue increases when they took steps to improve their sales operations.

2. Realistic rate structure

A rate structure has to reflect revenue requirements of the site and it should be consistent

Kim Clark, vice president for revenue development and partner at Noozhawk said a structure (outlined in a rate card) gives the sales rep has something to share with potential advertisers and set the value of the site. Without a rate structure, “everything is up for negotiation,” Clark said, which is time consuming and makes it harder to track and hit revenue targets.

Clark said the rates have to reflect revenue needs of the site. “You have to stick with an average rate that’s going to get you into the black. Sure, it’s great if you’re making a lot of sales. But at end of the day what does your profit margin look like?”

3. Avoid CPM pricing

Successful sites have developed a following that enables them to charge premium rates. Most favor multi-month contracts. That time frame means the ads have time to work in raising advertiser visibility in the community and it means sites are not constantly reselling inventory. 

Long-term contracts assure that “you’re not always reinventing the wheel” in reselling ad inventory, Clark said. “They are advertising long enough to see if it’s effective.”

Noozhawk, charges $1,450 a month for prominent display in high-traffic sections of the site and $165 to $600 a week for run of site advertising, depending on prominence and size. Third Door Media, with its audience of 1.4 million unique monthly visitors, charges $4,000 per week for daily advertising across its network, which includes multiple sites and newsletters. Search Engine Land also offers CPM pricing at rates ranging from $25 to $60 depending on size and placement.

By contrast, sites that rely mostly on CPM (cost per 1,000 impressions) or network rates, struggle.

Budget Savvy Bride, for example, averages $3 per CPM against an audience of 82,000 unique visitors. She Finds, a fashion site, has seen its rate through the Glam network fall as low as $2 against 1.5 million uniques..

Two pioneering online community news entrepreneurs move on

This post originally was published at Knight Digital Media Center @ USC Annenberg.

Two prominent online news entrepreneurs are moving on.

David Boraks, who operated two local news sites north of Charlotte, N.C., ceased publication June 1. Susan Mernit, who heads Oakland Local in California’s Bay Area, is looking for someone to take over the site or it will cease publication June 15.

Both decisions underscore the commitment it takes to operate a local news start up as well as the challenges publishers face in many markets. Both operations have long been both highly entrepreneurial and highly vulnerable on the revenue side.

Boraks said he concluded he needed to expand his operation to cover two additional towns and the entire Lake Norman area to build a sustainable business. He and longtime business manager, Lyndsay Kibiloski, also concluded that they had neither the time or the energy to do that.

Mernit, meanwhile, co-founded and is CEO of Hack the Hood, a highly successful program that teaches young people tech and marketing skills . Mernit says working both jobs in unsustainable and she wants to focus full-time on Hack the Hood

Market challenges

Boraks founded in 2006 and launched in a nearby town in 2011.  He reported revenue in the range of $101,000-250,000 in 2014.

The publications operated with a couple of critical challenges:

  • Operating in a highly competitive market where potential advertisers have lots of options, including print publications and Facebook ads, most of them offering less expensive options than he could.
  • Inability to recruit a full-time ad sales rep until 2014. The site struggled financially as part-timers proved ineffective.

“We couldn’t find the right person who could work for us for what we could pay They were six-figure persons. The other jobs around here are that. We can’t afford that,” Boraks said in an interview. A full-time sales rep did significantly increase revenue in 2014, but sales and reader donations slumped during the past winter.

In a farewell post, Boraks noted that traffic to the sites was at an all-time high with more than 100,000 monthly unique visitors, making it the largest publication north of Charlotte.

“We are very proud of what we built. We proved there is an audience for news on the web,” Boraks said. “But we did not get all the way to sustaining it.”

Boraks plans to continue to work as an announcer on a local radio station and look for his next opportunity.

New venture

Oakland Local, meanwhile, has also taken a hit on revenue, as co-founder and editor Susan Mernit has made Hack the Hood her primary focus. The project trains young people to do tech and social media, and they in turn help local businesses improve their web presence. In just a couple of years, it has grown to a $1.2 million operation.

“I’m proud, six years is a big accomplishment,” Mernit said in an interview.

Oakland Local, launched in 2009, is seeking new management and recently posted a request for proposals to take over the site. Oakland Local operates as a nonprofit. But it has been entrepreneurial in seeking non-philanthropic revenue, including advertising, in an economically challenged market.

Mernit said she hopes individuals or an organization that can focus on revenue development as well as editorial will come forward soon. The site will continue to publish until June 15. The RFP says applicants must commit to raise $75,000-$150,000 to operate the site.

Which narrative?

Some will add these developments to a narrative of failure. (Here’s one example from a blogger I respect, and my response questioning his numbers.)

I spend a lot of time looking at news start ups to see if they should be added to my database of promising sites, Michele’s List. I interview them about their business practices and I survey them about their revenue.

I see a narrative of experimentation, innovation, and, yes, disappointment. I see progress on many fronts, stagnation on others. I see a narrative of learning, and this was in evidence this weekend as I followed #lion15, the Twitter feed of a meeting of online publishers in Philadelphia, sharing best practices with their peers.

Boraks and Mernit have been an important part of this narrative. They blazed trails in a dynamic, challenging field. They launched in the great unknown of independent, “born on the web” local news sites. They demonstrated to more reluctant journalist founders that adopting business practices can produce financial results even though a stable revenue model was elusive their highly challenging local markets. They consistently shared what they were learning with other publishers. They deserve our thanks as they move on..