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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.
There are longstanding examples of moves to sell inventory beyond a company’s sites, including careerbuilder.com, an employment-classified site that McClatchy jointly operates with Gannett and Tribune companies. But there can be difficulties. It isn’t easy to persuade traditional ad departments to sell inventory that is not their own. “The gravitational pull of print is very strong. As soon as you get away from distribution and content adjacency, the harder it gets,” Hendricks says. And ad sales on other sites represent only a small revenue stream so far. Hendricks says McClatchy sold about $15 million of Yahoo ads in 2010 and expects to increase that to as much as $19 million in 2011. To put that into perspective, as dismal as 2010 was for McClatchy, the company still sold a billion dollars of advertising that year.
One of the issues in selling others’ ad space is that a publisher must adjust to a variety of pricing schemes. For example, the Houston Chronicle tells advertisers that it can help them reach, say, local men between the ages of twenty-five to sixty-four on Facebook. But Facebook users would need to see an ad 2,500 times before the advertiser could be assured it would generate a single click, according to the Chronicle. That’s a key reason that the price of ads on Facebook is low: $1,500 for 1.875 million impressions on Houston’s rate card, or a CPM of just eighty cents, less than a tenth of what most news sites get. Others have calculated Facebook’s effective CPMs as even lower, below twenty cents. By comparison, for targeted ads on Yahoo Sports or Finance, the Chronicle expects to charge up to $4,400 per 200,000 impressions, for a CPM of $22.