August 22, 2014 Last Updated 9:58 am

Backgrounder: Local Media Consortium deal with Yahoo, an old idea finally realized

The Local Media Consortium, a consortium of local newspaper and broadcast companies, announced a deal with Yahoo to provide digital advertising solutions to their local businesses. In short, the local newspapers, starved for digital readers on their own websites, can now sell advertising that reaches Yahoo readers.

“Yahoo can help drive results for local advertisers and publishers with a unique, unified approach to digital advertising that helps them bring together powerful tools including display and native advertising effectively,” said Eric Aledort, Head of Media, Global Partnerships at Yahoo. “We’re thrilled to help more local advertisers build integrated, cross-channel campaigns that engage their audiences and deliver impact.”

LMC-logoMembers of the Local Media Consortium include Cox Media, Digital First Media, Freedom Communications, Lee Enterprises, McClatchy, and many other newspaper groups.

For me, this is an old idea finally getting a tryout. About a decade ago, after leaving Reed Business Information, I worked for a couple Chicago area start-ups. As I’ve said before, Chicago start-ups can be fairly comical compared to start-ups on the east and west coast.

There was the online video company that wanted to create lots of channels for everything from pets to magic, and to do this wanted to partner with established brands. The problem was that they would control the channels and tell those brands what the content would be. The answer the company got back was “who are you?” and the company failed in its efforts, turning eventually to doing video production work for others.

Another start-up was the publishing company that launched using a phone room and blackmail strategy: call companies up to ask for ads that would appear inside feature stories about companies that do business with them. The sales pitch was simple: buy an ad or that company will hate you for not supporting their feature story. To do this, the publisher built a large phone room that called hundreds of companies each day using a strict script. Folio: even featured the CEO of the company on its cover and a major PE firm backed the company (before wisely selling out). The problem: each month the magazines start out with $0 in advertising since there would be no contracts, only ads sold through the blackmail strategy, and eventually you end up calling the same companies you swindled once before. The company is still around, but has had to change names a few times (I wonder why?).

Another company I “consulted” for and was even given a title of vice president was a start-up that said it wanted to get local media companies to sell inventory onto Yahoo and other websites. This one sounded more promising.

The concept was simple: old media companies were failing online, but had local sales teams that had good relationships with local advertisers; Yahoo and other national online brands had massive readership, but could not reach down to local advertisers – they also had, at the time, lots of unsold ad inventory.

This start-up would approach local media companies and say that if they worked with us they could begin selling ads on Yahoo and other sites to their local businesses. Those ads would appear on those sites when readers that aligned with the advertisers would access the websites, targeted via their IP addresses.

My job would be to talk to local newspapers about the concept. The founder’s job would be to talk to Yahoo and others about the inventory. Someone else’s job involved the technology to make this all happen (I have no idea who that was).

Today, local advertisers can buy online advertising that is geographically targeted through Google. But a decade ago this was not as common, so the start-up seemed like a good idea. The downside, which was obvious to me having a background in print media, was getting those local media companies excited by the concept and then training the local sales people to sell into Yahoo and the other sites. There was (and is) a lot of pressure on those teams to sell higher priced print advertising – would they now start selling digital ads onto third party sites?

One common objection was that the newspapers, who were household names, did not trust a Chicago start-up to actually have relationships with websites such as Yahoo. But over and over again I was assured that those calls had been made and Yahoo, CNN and other online properties were very eager to work with us.

You can probably guess the punchline here, right? The founder of the company had never talked to Yahoo but was hoping that we would have enough local media properties lined up so that when he finally got the nerve to pick up the phone he could say that we had lots of ads to offer Yahoo. The whole thing immediately fell apart.

Now, we have the Local Media Consortium working with Yahoo directly – a much better way to work this, no need for some kid in Chicago with an idea but no guts to create the ad network.

But if you think this collaboration will work smoothly you don’t understand these media companies. Even the press release for the deal was confusing. Two-thirds of the press release talks about how the local media companies have the ad relationships with local businesses and how Yahoo will drive the traffic. But at the bottom of the press release is talk of how the members of the Local Media Consortium have all this web traffic and can drive page views. Where exactly is the advertising going to appear? On Yahoo? or the local websites? (Probably both, but only the traffic on Yahoo is of value here, otherwise there would be no need for the media companies to reach out to Yahoo.)

The deal has been struck, but the problems that I knew about a decade ago still remain: getting those local ad people to sell into Yahoo rather than trying to make their print ad quotas.

There is another problem: a decade ago the ad sales teams at newspapers were pretty powerful. But newspaper owners have been cutting staff as fast as they can. The self-defeating strategy has accelerated the decline in advertising revenue, leading to more layoffs.

On the bright side, and there is one: today’s sales teams are far more digitally savvy than those from a decade ago. On the down side: those teams would rather sell into Facebook or Google than Yahoo.

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