Most ads expire after thirty days. Even with such a short lifespan, there were more than 206,000 listings on a typical day in March 2011, in categories ranging from goats to muzzleloaders, from paintball equipment to bands seeking members.
Gilbert came to Salt Lake City in late 2009 after a career that included a professorship at Harvard Business School, where he worked closely with Clayton Christensen, author of The Innovator’s Dilemma, a well-known book about disruptive change. The two of them collaborated on the “Newspaper Next” project, a 2006 study sponsored by the American Press Institute to encourage innovation. Gilbert was hired by Deseret Management Corp.’s president and chief executive officer, Mark Willes, who had a troubled reign as CEO of Times Mirror (1995-2000) and publisher of the Los Angeles Times (1997-1999).
One of Gilbert’s main goals was reflective of a tenet of Christensen’s philosophy: “Business units don’t evolve; corporations do.” So Gilbert separated the digital sales force to enable it to take more risks. He said that KSL.com had been “run through the mainline channel—the TV. The [ad] sellers would have an afterthought to also sell web. They’d throw it in if you also bought TV.” The new company “created a profit-sharing relationship with the legacy organization. They’d benefit from our growth—but they didn’t control it.”
KSL.com’s revenue grew 75 percent from 2009 to 2010, executives say, though they don’t spell out numbers. Gilbert says his company will continue to push on both the cost and the revenue sides of the equation: “News is expensive,” he says, and audience loyalty is key. “You can’t get two clicks and expect to pay off on that investment.”
For decades, there has been a connection between the journalism that news organizations provide and the advertisements that generate most of their revenue. Whether it’s a glossy spread that runs before the table of contents in a fashion magazine, or the anchorman’s “more after this message” assurance on the local Eyewitness News, ads and content have always been closely linked in the stream that appears before the consumer.
That linkage is breaking down, and news organizations are scrambling to replace it with something else. That may mean selling ads on sites they don’t own or control. “Creating content doesn’t ensure a well-sized audience,” says Chris Hendricks, vice president of interactive media at newspaper chain McClatchy Co. “We’re accepting of the fact that the two may be disengaged.” He then adds something one wouldn’t have heard a few years ago from a media executive: “The longstanding premise of content and advertising being inextricably linked has clearly fallen apart.”
McClatchy and other companies are turning toward selling advertising space on other sites, including Facebook and Yahoo. “It’s almost like we are a sales and distribution company that decided we’re going to fund journalism,” says Hendricks.
Salespeople at McClatchy’s thirty daily newspapers, as well as those at many other news organizations, sell ads on Yahoo as part of their pitch to local advertisers. For a worldwide company like Yahoo, “it’s very difficult and expensive to set up a local sales force of size,” Hendricks says. In the 1990s, Microsoft tried and failed to crack the market with a venture called Sidewalk, which was designed to produce city guides and sell local ads. Hendricks notes that Yahoo’s rates for local ads tend to be higher than for national ads—but Yahoo needed people who knew the communities and businesses. “So we became their local sales force selling their inventory.”
Because Yahoo has such broad reach, the relationship opens a big market for local news organizations. “The typical paper has 15 percent penetration in the local market,” Hendricks says, speaking of online operations. “When we partner with Yahoo, it takes us up to 80 percent.” And because many Yahoo ads are “behaviorally targeted”—meaning they are more closely geared to readers’ interests, based on web usage habits, geography, or demographics—the rates are much higher. But those ads need a lot of viewers to ensure that the subsections of the audience are big enough to interest advertisers. “It’s almost impossible to sell behaviorally targeted ads with 15 percent penetration,” Hendricks says. “With Yahoo’s scale you can.” McClatchy averages an $18 cost per thousand views for targeted ads, Hendricks says. That’s about twice the average for its usual display ads, though it has to share the proceeds with Yahoo.