November 6th, 2007

5 Newspaper Giants in Talks About Online Ad Network

By Michael Oneal
Chicago Tribune

Five of the nation’s top newspaper companies are taking steps to create a national online advertising network they hope will help them recapture ad revenue leaking away from their print products.

Sources close to the situation said Gannett Co., Tribune Co., Hearst Corp., Media News Group and Cox Newspapers may band together to form a common ad sales force that could offer national advertisers “one-stop shopping” for ad space on big-market Web sites across the nation.

The consortium, which would both overlap with and compete against another network set up last year by Yahoo Inc., would capture seven of the top 10 U.S. markets, one source said. The hope is that it would grow by attracting such other companies as the Washington Post Co. and McClatchy Co.

“The more the better,” said Leon Levitt, vice president of digital media at Cox.

Levitt and others stressed that talks between the existing parties are still in the early stages. But the cooperative effort is just the latest sign of the radical change sweeping through the newspaper industry as readers defect to the Internet for their daily digest of news, sports and entertainment.

Newspaper executives struggling to find ways to compete against their new online rivals are increasingly coming to the conclusion that they may be stronger in partnership than they can be alone. Companies are considering joint call centers, joint printing facilities, common delivery systems—anything to reduce costs and increase competitiveness, sources said.

“Relations between different newspaper companies have gotten easier as the adversity has gotten greater,” said one executive among the group looking to cooperate. “But it’s like Congress: You have to get a lot of people with competing agendas to agree.”

A case in point is the Yahoo partnership, a group of 19 newspaper chains, including Hearst, Media News and Cox. The online giant formed the group last year to bolster its HotJobs job-placement Web site. It also created opportunities to share content and cross-sell ads, creating a national ad network.

Gannett, Tribune take a pass

Notably absent from the Yahoo network were Gannett and Tribune, which co-own CareerBuilder.com, the nation’s largest job site and a HotJobs rival. Tribune Co. owns the Chicago Tribune, Los Angeles Times and other newspapers.

The two larger companies tried and failed to convince the others that, CareerBuilder and HotJobs aside, the industry should try to control its own destiny without giving Yahoo access to its valuable local advertising inventory.

Hearst, Media News and Cox, meanwhile, insisted that Yahoo’s technology would allow them to track how users behave on their site so they could serve them ads at times when they are most receptive. That sort of capability would be too expensive to reproduce by a bunch of old-line newspaper companies, they reasoned. Joining with Yahoo was the most efficient way to both sell ads and serve them.

Levitt and other executives among the Yahoo partners said the new talks with Gannett and Tribune don’t signal any fracture within the Yahoo group. But there is a recognition that the Yahoo relationship can’t solve all their problems.

Local strength

Newspaper companies have long believed that their advantage over national online networks like Yahoo, Google and AOL is that they have more compelling local content and more resonant local brands. Their major weakness has been that if a national advertiser wants to buy exposure in a series of local markets, it has to call up each newspaper company individually instead of calling one national powerhouse like Yahoo or Google.

The Yahoo partnership aimed to address this problem. Under the arrangement, the newspaper companies can offer advertisers space on Yahoo’s chain of highly popular Web sites. Yahoo salespeople, in turn, can sell space across a national network of newspaper sites. What’s missing is the ability for the newspaper companies to sell their own national ads across each other’s sites. That means they share national ad revenue with Yahoo, which may or may not be aggressive about selling their space.

Levitt said he’s thrilled with the Yahoo partnership. But he also recognizes that companies have to look out for their own interests. Yahoo has cut deals that could divert attention from selling ads on newspaper sites, such as a deal with Comcast Corp. to sell ads on Comcast.net.

A Yahoo spokesman said nobody was available to comment.

Sales team for newspaper sites

The new consortium would create a team of sales people that would focus exclusively on selling for newspaper sites. They also would give national advertisers a single point of contact with the industry. If during college basketball’s March Madness, for instance, Chevrolet wanted to buy the same spot on the sports page of a group of local newspaper sites, it could make that buy with one call to the network sales rep.

“Fundamentally, there is a need to make it easier to buy ad space on our Internet sites,” said one executive among the Yahoo partners. “Yahoo still has the best technology platform. But why shouldn’t the newspaper industry have its own [ad sales] firm? Don’t you want to get out and tell your own story?”

Sources said that if the plan comes together, the partners would each own a slice of a separate company that would employ dedicated sales people and would split up the revenue.

None of the companies involved with the proposed partnership would comment on the record about its details.

“We have ongoing discussions all the time with newspaper companies and online companies. We have a good relationship with all of them,” said Tim Landon, president of Tribune Interactive.

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