Centro's Real Cities Signals Online-Only Ad Push, Fueled by Technology
Today’s announcement that Centro is taking over the Real Cities
Network isn’t really an exclamation point. It’s more like a period,
marking movement between eras. Centro has brought local news websites
significantly more revenue over the past several years. Real Cities, on
the other hand, was a vestige of Knight Ridder (KR Digital,
specifically, in this case) and one of spare parts that McClatchy
acquired when it bought the KR papers.
In essence, Centro — which has become an even more important
revenue source as it brings online-only national advertising to local
sites — eliminates some of the noise of the local marketplace in
taking over Real Cities. Real Cities repped about 1800 websites in its
network. Most of them are also working with Centro, which targets
local sites of all kinds — daily newspaper, broadcast, alt weeklies +
— in delivering local and regional audiences to advertisers. Centro
does gain relationships with advertisers, maybe more than 100 new ones,
considering that many of them were duplicated.
"It’s a scale play," says Centro CEO Shawn Riegsecker.
There is still noise to be sure — lots of networks and exchanges
out there, and the Tribune-Gannett-Hearst-led QuadrantOne still trying
to find its footing. But today’s announcement sets up 2009 as an
intriguing year, focusing acutely on online-only advertising. On the
one hand, we’ve got the newspaper consortium focusing on the adoption
of the Yahoo ad platform (starting in September and rolling into at
least 1Q next year). On another, we have a new combined Centro/Real Cities. Shawn
Riegsecker says his company is growing at a 45% YOY level, even with
major declines in General Motors and ATT spending, caused by economic
and structural shifts.
Online-only growth is what newspaper companies need.
Tribune reported quarterly earnings yesterday, and said digital
revenues had dropped 4% YOY. That’s because of classified upsells of
course. They produced now-seen-to-be-illusory 25-35% annual growth
rates in good times, and now they are dragging online revenue — the
old bright spot in newspaper revenue reports — down into
negative territory. Tribune was the fourth company, after Lee, Belo and
Scripps to go negative in the second quarter in digital revenue, with
those above the line gasping for positive air.
McClatchy proudly announced in its earning call that it was approaching
50% in the level of online revenue that was online-only — not upsells.
Gary Pruitt’s gang isn’t alone. 2008 has seen a profound mindshift,
accompanied by much hiring and staff re-training, all aimed at making
this transition. Unfortunately, it’s another case in which the
newspaper industry is reacting late, after things have turned, well,
officially negative. But it’s the right move.
We can all see that McClatchy’s move is another in a series of the
Pruitt Strategy, enunciated clearly as emerging (!) out of the current
mess as a "smaller, more efficient company". He pulled off the sale of
the Star Tribune at what turned out to be a good time, got out of Shop
Local (long a non-performer), is busy having other companies print his papers (Boise, Bellingham) and now is getting out of the Real Cities Network game.
Here, we can see a survival strategy getting into place. Focus on
what you are good at: local content production and local sales.
And….importantly use other people’s technology. That’s the other
clear message from the Centro takeover of Real Cities: ad technology is
key.
I was there at the founding of Real Cities, some time about 1998. We
envisioned it as a whole newspaper industry solution — a true,
cost-efficient, single-platform based content and ad management/sales
network that would allow dailies to compete efficiently against the
burgeoning portals. Echoes of the failed New Century Network of course
hung in the air, and we should have known how star-crossed our
initiative would be when Tony Ridder over-ruled the original
salmon-and-red logo design for green and blue, the beginning of KR’s
ill-conceived foray into "branding." But we didn’t, of course. We knew
a network was needed, and we thought, well, why not.
Very long story shorter, the aims of the new network skinnied and
skinnied. It emerged as an ad rep network, with vaguer long-term hopes.
It met with some success, but never had much in the way of ad
technology as ad technologies have come to rule the day. Riegsecker, a
KR alum (Ohio.com), saw a future and saw that it was based a lot on
technology, as a way to serve advertiser targeting needs and interests.
It took Centro awhile to build the technology — allowing a better
matching of advertiser geo targeting need and local site inventory —
and that’s helped him win the game. Such technology for instance
increases the delivery rate for ads; underdelivery of 10% or more is
not uncommon in the news trade and eats away at revenues. Technology is
one of the key reasons, I
believe, why it’s Centro taking over Real Cities, rather than the other
way around.
Now, for the bonus, 2009 question, how long before the Yahoo ad
platform technology and the Centro ad technology can do a handshake,
benefiting newspaper websites — many of which are affiliated both with
Yahoo and
Centro. Recall that Lem Lloyd, who deserves the credit for growing Real
Cities into a successful ad network, is now running the newspaper
consortium business for Yahoo. Now that points to potential synergy, a synergy
that could further fuel online-only ad growth, and not a minute too
soon.