News Publishers' Business Model for Digital Success
The addition of digital agency services is something that every local media company should consider in 2012. - "The Local Digital Ad Agency: Emerging Opportunity for Innovative Media Companies," the Local Media Innovation Alliance, December 2011
To better serve local advertisers and compete for online advertising dollars, adding digital agency services is a major opportunity for news publishers, but achieving profitability is the real challenge.
Some newspapers are trying to build the internal capability and capacity to provide a range of digital production services. Many are discovering this is quite expensive operating overhead to carry and it just doesn't make economic sense. Publishers find it is extremely difficult to outlay new capital to fund the production resources needed, and to do it in such a way that yields positive operating margins.
Another important consideration is that SMB advertisers are highly price sensitive and the price points required to sell high volumes of online marketing services must be extremely competitive.
Despite these challenges, newspapers have had no choice but to plunge into digital services: display ads, iPad ads, websites, mobile, social and video services to balance declining revenues from print. They have to juggle two roles: that of news and content provider to their readers (whether via print or online media) and that of marketing agencies to their customers, providing both digital and print services and helping small-business owners find their way in online marketing.
Newspapers are unrivalled as providers of news and content, which puts them in a prime position to exploit digital revenue opportunities. But the model for digital revenue consists of drawing high volumes of relatively low-yield ads, very different from the high volume, relatively high-yield advertising of traditional newspapers. - "Million Dollar Strategies for Newspaper Companies," WAN-IFRA, June 2010
Production of digital services is more expensive than production of print ads. And newspapers traditionally do not have the expertise needed to provide all these digital services.