After some brutal years, local online advertising & digital investments are roaring back with a vengeance. Yet after substantial resource infusions, local news sites and most hyper-local initiatives are still stuck in the proverbial financial mud. What gives?

We think we’ve found the problem and the solution to the local online revenue issue. Both are simple and supported by historical evidence.

The early days of Newspaper giants such as James Gordon Bennett, E.W. Scripps and Joseph Pulitzer offered many clues that confirmed one of our earliest theories. (Hat tip to Howard Owens at The Batavian.com) These men were first and foremost, entrepreneurs and risk takers. They clearly understood the need for immediate cash flow. They experimented with new technologies of the day, slaughtered a few sacred cows, and did whatever possible to quickly build a Newspaper model that was self-sustaining, scalable, and NOT primarily supported by subscribers.

Recently, we were approached by a group of investors looking to conduct a study on potential opportunities in the local online space. Of course they wanted intelligence on websites that showed significant editorial or traffic gains, and trends in local advertiser spend. But more importantly, they wanted a deeper look into the eco-system, projects & trajectories that could be considered un-discovered gems of ‘value creation’. In other words, projects of community interest that were combined with content, functionality, management teams & revenue potential that were worthy of investment.

A majority of sites we’ve studied, structure their web business model from a primarily editorial & technical perspective. Some argue that it’s putting the cart before the horse. They combine technology & journalism to build readership traffic, which then presumably attracts advertisers. Advertiser support for these efforts were limited or non-existant.

Most sites seem to be captained by executives with similar characteristics. They have come up through the newsroom, editorial/programming departments, or they have been imported from an Internet pure-play company. Some of the sites we studied, had a cadre of advisors and consultants that were intellectually seasoned and arguably first rate. Some had a board of directors chock full of academics, journalists, futurists and research consultancies.

Yet, it was rare that we found a site or online division being run by an executive with a significant sales, entrepreneurial, bootstrapping, or business management background. This was the 800lb guerilla in the room.

For part 2 & 3 of this report, please email us for details.

As we strongly urge: when your newsroom, programming & marketing folk understand basic online business models……they’re more likely to help create profitable websites.

When a local business understands basic Web marketing, they start investing in it. That’s why WEB 101 Seminars are the quickest & most effective way to grow your online advertiser base.

1. Immediate Web revenue on the books
2. Real world sales training for your reps
3. Works better than a cold call
4. Superior, qualified lead aggregator

Watch the short clip above, from a recent seminar I did with the Baltimore Sun.

Warning: If you have responsibility of managing the station website and you think web sales is un-appealing, or just not worth the time and effort……you may not want the GM to read this!

Radio is first and foremost a business   Radio purists, Broadcast vets, Wall Street and even hardcore music geeks can usually agree on this simple fact. They know all too well that without profit to pay the bills, there’s no programming excellence. But when it comes to the Radio station website, why aren’t they run in the same financially disciplined way?

Think about it. When a Radio GM wakes up each morning, what’s likely on their mind? What songs to add? A morning show bit or celebrity gossip to post on the station site? While these are important to the overall success of a station, it’s really not the stuff that keeps the GM up at night. Rather, it’s the sales and profitability issue that probably makes them toss and turn a bit.

For Radio’s digital initiatives to dramatically drive more cash to the bottom line, they simply need to be operated under the same strict financial, programming and operational pressures of their on-air brethren. It’s really that simple, and there’s no two ways about it.

With mandatory web budgets the norm for 2010, it’s no longer possible to ignore this 800lb gorilla in the room. The good news is that most of the following solutions are hiding in plain sight and can be easily implemented by most traditional Radio execs.

Internet Business 101 for Programming & Marketing  When PD’s, DJ’s, marketing execs, & webmasters understand basic online sales models, they create more advertiser-friendly digital opportunities, while developing greater loyalty with listeners. Just as sellers are trained, these non-sales departments need to also be well-versed in digital media & online revenue models. Programming knows how we make money with on-air, now they need the same understanding of our online revenue strategy.

Let me tread here cautiously, since as a former on-air and programming guy, I understand that I could ruffle a few feathers with the following. There’s too much, inherent risk when programming and marketing departments have virtual free reign in managing the online effort. Understandably and with all due respect, sales and revenue isn’t the top priority at this point, for Radio’s creative crew. Their job is all about audience, and they execute on this with great skill. That being said……just as a GM wouldn’t allow DJ talent to pick their own music, or allow the PD to push all the stop sets till after midnight, the GM needs to ensure that business-focused web rules and standards are properly set and adhered to.

TIP: Provide non-sellers with relevant background and regular training in how local businesses are spending their web dollars, the emerging online competition to Radio, and what issues the station sales reps are encountering in the field.

Manage your Online Inventory like On-Air  Nobody sells your product & audience better than your own team. Like on-air, local and direct selling of web is preferred over allowing outside middlemen to re-sell or commoditize your unsold inventory.

TIP: If more than 33% of your unsold web inventory regularly goes to 3rd party ad networks, then you have a online sales & inventory crisis that needs immediate attention.Here’s why: would you ever rely on pay-per-call or PSA’s to fill your unsold spot inventory, month after month in morning drive? Of course not, so why do it online?

Running GANS ( Garbage Ad Networks) and 3rd party ad nets on your homepage not only makes the site look cheap, it screams “we have no local advertiser support!” This is even more damaging when it’s the first thing a local advertiser notices when considering a web campaign with your station. Much like Radio, these prospects want to see if other local advertisers are already working with you, so they immediately check out your site. Make sure they see their competitors there, looking great.

TIP: Just like we do in Radio, put pressure on your premium web inventory and keep raising rate. Consider offering short term, pre-emptable and standby rates, as well as end-of-month deals to squeeze as much direct revenue out of your unsold web inventory. Do this before dumping it on the open market at downright ugly cpm’s, and making some out-of-towner, rich off of your local efforts.

Know thy Enemy  We thought that simply streaming our terrestrial signal would allow us to carve out a winning online position. Unfortunately, we’re now in a world where Pandora is running local ads, i-Pods hold infinite amounts of music, and freshly minted sites are going straight after our local advertiser base. Even the best Radio stations with compelling sites need to stay sharp against this growing cadre of online-only media looking to move into the local marketplace.

TIP:  Make sure you’re team is keenly aware of all competitors invading your local space, and how to effectively sell against them. Remember, it’s no longer just the media properties across the street. Now it’s Reach Local, Pandora, Service Magic, Yodle, and many others. Many of these players are also building local sales forces. This growing army of well-trained reps are talking to your clients right now, offering them a portfolio of attractively priced, digital marketing solutions….and they’re buying.

Training Management comes First  Regular staff web-training is important for traditional sales, but it’s HYPER-critical for digital & cross-platform selling. Taking it one step further, some smart operators are having their upper management trained first, complete with custom curriculum. We really like that idea. When you think about it, how can one effectively lead and manage a new effort…when they’re not 100% fluent with the subject matter?

TIP: Here are some web-training objectives for upper management: Understanding new competition, compensation/hiring issues, rate card, forecasting/inventory yield management, overcoming common objections, managers leading by example (not from behind desk), and leveraging web to increase overall Radio share, as well as taking share from TV, Newspaper, and direct marketing budgets.

There is Good News in all of this  Ignore the above best practices at your own peril. They’re incredibly tough to refute since they’re the exact sales and business tactics that Radio has successfully employed for decades.

Radio execs have 99% of the needed skill set, experience & resources necessary for digital & cross-platform success. All of their well-honed skills are easily transferable with regular training, direction and determination. As with any growing business, we just need to apply good ole’ sales 101, along with some boot-strap entrepreneurialism…..just like we do with our Radio stations every day.

We can blog, debate, research, and discuss all day long….but until there’s a growing pile of Internet cash on the books, it’s just wishful thinking.

CUNY New Business Models for News: Jan. 2010

2010: Talking is replaced by doing.

If you’re still struggling to grow local web revenue share, and you still use  low cpm ad networks, bet on this: bossman will be breathing down your neck more often.

The days of boasting about pageviews, saving  journalism, cool design and technology are over. Now, it’s all about profitability. Just like a TV station or Newspaper is run.

I was interviewed by Shields Bialasik &  HyperLocal101  about this critical issue. I also contributed the following list to the CUNY, New Business Models for News project.  

These profit-focused charactersitics were collected over the past year during my client travels. They sum up the 7 common, identifiable, proven habits of local websites that are building profitable, online businesses.

• Profitability first, then operations, followed by editorial/content.
• Run site as a start-up business.
• Think like an entrepreneur…NOT just a manager or journalist.
• Borrow tactics from online revenue leaders.

2.       Running Extra-Lean w/Content & Platforms

• Aggressively strip out & reduce hard costs/expenses.
• Ditch legacy tactics that are on decline.
• Aggregation & curation. Do what you do best, point to the rest.
• Open source platforms, software & applications.
• Outsource content creation:  feeds, bloggers & indie-journos.
• Data as editorial/content. Local news as commodity loss-leader.

3.       Advertiser & Sponsor Friendly

• Enabling  local commerce is priority #1.
• Small business education via Web 101 seminars.
• Impactful  ad units & sponsorships.
• Self-serve & outbound tele-sales.
• Removal of GAN’s; garbage ad networks.
• Ability to show quantifiable ROI.
• Advertising as content.

4.       Non-Traditional Revenue Streams 

• Rev-share, transaction fees & e-commerce.
• Free-miums & up-sells.
• Offline initiatives & live events.
• Marketing services for small business.

5.       Training , Management & Compensation Overhaul

• Comprehensive & regular training of staff.
• Private, custom web-training for high level execs.
• Mandatory budgets with bonus & penalty.
• Managers lead by example, not from behind desk.

6.       Seed, Syndicate, Socialize & Mobilize

• More than just a destination site strategy.
• Leverage & monetize content anywhere & everywhere.
• Encourage formation, and leveraging of affinity groups.

7.         Database Mining & Video Adoption

• Financial and editorial appreciation of well-defined databases.
• Sales-based uses of video; online infomercials & ad-vertorial.

These guys never pulled punches. Some say their uncensored talks with employees were politically incorrect. Others believe these two entrepreneurs are just saying what most in mainstream media would like to say and do….but can’t or won’t.

Click the slide show above to hear some compelling out-takes from Randy’s talk with the staff of the Allentown Morning Call a while back. It still rings true today. It’s one of the best summaries of  how traditional media will dramatically change, even more, in 2010.

I spent alot of time with the Tribune properties over the past 2 years. Everything that Randy says in this video is taken seriously at the local level. I saw it for myself firsthand, working very closely with Tribune’s publisher in Pennsylvania: Tim Kennedy.

It was called: The  New Business Models for News  conference.

I was invited to do a session focused on helping hyper-local web publishers, build realistic business models in order to grow revenue. Here’s the actual presentation: