Can Gannett and McClatchy’s joint venture reinvigorate national advertising?

At root, the debate over whether Google and Facebook should pay for news is about how their duopoly destroyed the value of digital advertising and then kept most of the revenues for themselves.

News, which is expensive, can’t survive on the pennies brought in by Google’s programmatic ads. That’s why there’s been so much emphasis in recent years on reader revenue — an emphasis that, at least in a few places, is starting to pay off.

Still, it would surely be a positive if news organizations could develop a revenue stream other than digital subscriptions. When readers are empowered, they expect their preferences and prejudices to be catered to. You need a balance. That’s why it’s interesting to see Axios’ recent report that Gannett and McClatchy will combine forces to sell national advertising for their hundreds of local and regional papers.

Can Gannett and McClatchy’s efforts drive up the price of digital ads? That’s the real issue, and without that their effort is not going to have much of an effect. Of course, it also does nothing to boost ad sales at the local level, which have been on the decline for years. Yes, local businesses have gravitated to Facebook just like everyone else. But local newspapers aren’t exactly known for being aggressive and creative about selling to the local hair salons, pizza restaurants and funeral homes, either. It can be done. Just ask Howard Owens, publisher of The Batavian in western New York state.

The partnership shows why I differentiate between Gannett and Alden Global Capital, even though their nuke-the-newsroom approach to the bottom line looks very much the same on the ground. Alden, by all appearances, is trying to squeeze as much money as it can out of the newspapers it’s killing and then get out. Gannett, on the other hand, is hoping to build a community news chain that can be sustainable in the long run.

Gannett’s biggest mistake, carried over from its predecessor company, GateHouse Media, is that its executives think they can build for the future while failing to provide enough journalism to retain readers. No matter how smart your business model, it’s not going to work if all you’re offering your audience is a shell.

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One thought on “Can Gannett and McClatchy’s joint venture reinvigorate national advertising?

  1. MagellanNH

    I love this plan because it’s a good test of publishers’ idea that Google and Facebook are destroying the value of digital content. What’s your ballpark guess at the extra ad revenue % publishers could get with this approach? 20% more? 40%? More than that?

    Google claims they get a cut of 32% of ad revenue for the standard “AdSense for Content” product that any small website owner can use to monetize their traffic. Google doesn’t disclose the revenue split for their “bulk” AdSense products used by major publications. My assumption has always been that the negotiated bulk rate would be much better than 32%.
    https://support.google.com/adsense/answer/180195?hl=en

    Given that ad prices on both Google and Facebook are set through an auction between advertisers, outside of taking maybe a dozen or two percentage points of cut more than they deserve, I don’t see how facebook and google are really destroying the value of digital content. I’ve always assumed it was the glut of digital content that destroyed the value of digital content. Before the Internet, the only ways a local small business could connect with their market was with either a paid yellow pages listing or by advertising in the local newspaper. Now they have a million choices to reach that same market. I don’t see this as Google or Facebooks fault. It’s the whole Internet’s fault.

    I may be wrong about this, but I get the sense that part of your argument is that in addition to Google getting a bigger cut on ads than they deserve, somehow they are causing advertisers to bid less for ads on news sites than the advertisers think they’re worth. But that doesn’t make sense to me. If ads on a given news website were underpriced by Google’s auction, advertisers could/would remedy that by targeting their ads to these underpriced but coveted websites (Google Ads lets you be very specific with your targeting. You can set up a display ad to run on just one specific website or even a specific youtube video. As I understand it, it’s very granular).

    So in the end, it looks like a theoretical best case 20-25% revenue increase for publishers if they could cut out the Google middleman. That’s assuming no costs at all for publishers selling the ads themselves. That doesn’t seem like enough to change publisher economics much.

    What do I have this wrong with this line of thinking?

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