Posted: Sep 28, 2009 11:47 AM
There has always been an understanding with local media companies that local eyeballs were their source of revenue. Account executives for the Nashville Tennessean, for example, wouldn't generally travel to Seattle to manage clients. Their clients are obviously in Nashville. Likewise, WBRZ-TV in Baton Rouge wouldn't generally be selling advertising to businesses in Austin, Texas. Local media is about local business, and local businesses are really only interested in local consumers.
The Web, of course, interferes with this notion, because Web distribution is global and not limited to the geography assigned to a license or fancy printing press. A local advertiser on a media company website can't be sure his ad is being seen by local eyeballs, unless he asks for that data from the company serving the ad, and media companies are not real eager to share that information. That's because a larger percentage than you might think of the page views and their accompanying ad impressions that are delivered on local news and information sites come from outside the local market. While many media company managers are completely unaware of this dirty little secret, many know full well its potential ramifications.
I attended a meeting a few years ago at the offices of a third-party website provider during which the GM of a top-20 market expressed this very concern. Local news on his website was made available to Yahoo News, which fed out-of-town eyeballs to his site. One month, he said, during a big national story from his market, 70 percent of the traffic to his site came from out-of-the-market. Seven out of every ten page views that month were irrelevant to his advertisers.
This is a big problem, if we're ever to become a viable advertising platform for local businesses.
The same thing happens when a local story "goes viral." Most media companies make it easy for people to refer their stories to Digg or Fark, big user-referral and rating sites capable of sending millions of people to a story that makes it to their home page and stays there for a while. High fives usually follow "getting Farked," because the event can boost traffic statistics incredibly. The problem, of course, is that those people aren't local, and local media companies aren't prepared to monetize that traffic without hosing their local advertisers. This will not continue for long, because as the sophistication of the local advertiser grows, so will their unwillingness to participate in anything that doesn't directly benefit them.
And even worse is the illusion that such events create in the minds of the people running the websites. We are fooling ourselves to count such traffic, and we would be well advised to look at ONLY local traffic instead of overall numbers that are inflated by out-of-town guests.
There's another factor that must be considered. All those remote visitors come at a real dollar cost, and this is especially true when they come to watch a video that has gone viral. Bandwidth overage charges for a single story can run into the tens of thousands of dollars in some cases, and while the ad for Joe's Automart gets a lot of traffic, nobody has asked Joe if he really wants to advertise to viewers from Taiwan.
I've occasionally debated with media company executives about this. A local video story goes viral, and I suggest they might want to put it on their YouTube channel and embed that version of the video on their own site. This feels like heresy to them, but it's honest and it's smart. Put a quality version of the story on YouTube with your branding all over it, and let YouTube handle the bandwidth charges. How does this hurt the local media company? It doesn't, and it actually saves the bandwidth costs while letting account executives deal with making money via local users. It will boost the value of the YouTube channel and give the station the same street cred with users everywhere — perhaps even more — than if they'd forced people to view the story on their own website, complete with the ad from Joe's Automart.
It would be nice if we had a few national accounts in our back pocket to use when such things happened, but the reality is that we don't. Besides, we really need to be spending more energy and resources in enabling commerce locally than trying to stunt our way to page view growth.
At AR&D, we profoundly believe that online revenue growth is a local opportunity for media companies, and this is why Steve and I are always talking about local control for local media. Third-party website providers — and we put company-operated digital divisions in that category — make the bulk of their revenue by selling their network of sites to national advertisers. In this world, Digg and Fark are best friends, for the location of the eyeballs being counted is mostly irrelevant. This puts the network at enmity with its nodes, for the node cares deeply about the location of those eyeballs, and sooner or later local media companies will be required to give an accounting for the audience to which they are serving local ads. This day of reckoning will not be pleasant, and we believe smart companies should be anticipating its arrival and behaving accordingly.
Why not even be the first in your market to tout the fact that you are selling only local eyeballs?
Google, Yahoo, and a host of other companies are aggressively pursuing local online advertising dollars, and we're mostly just sitting by and letting this happen. We cannot or, as we have been saying for many years, we will find ourselves creating expensive content without the ability to pay for it.
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