“Local” is Losing to Outsiders

cofc2Long ago, my friend Bob Papper, he of the RTDNA/Hofstra University Annual Survey on the state of local radio and television news, said something in a meeting I attended long ago that really struck home. “Television,” he said, “didn’t hurt radio by taking away their listeners; TV hurt radio by taking away their money.” He was talking, of course, about advertising and how radio “money” was shifted to TV, which had a dramatic impact on the industry. This wise observation is something we all should be considering today, as digital innovative disruptions are similarly now impacting even television.

Local television stations are currently meeting bottom line needs largely through cable fees that may not last forever. Cable is under attack from many areas, most notably the ability of customers now to go directly to the studios, the networks, and others, for example, via services like Netflix, YouTube, Vimeo and Hulu. They can get their programming through digital technology in what is called OTT (over the top), and it threatens to hurt cable by taking away its money, too. This is the sort Darwinian evolution of human advancement, where nothing seems to last forever.

But it goes way beyond that. I’m reminded of the wonderful question asked many years ago by John Hagel of the Deloitte Center for the Edge in a most interesting essay. “What if there is no equilibrium?” He was speaking of a business environment in constant flux due to disruptions that come left and right. I like Hagel’s thinking on this, and the uncertainty within the West’s entire advertising hegemony is evidence that we really don’t know what to do.

So once again, one model is being shredded by another, and the real issue is money. And we’re talking LOTS of it. Chambers of Commerce need to be very concerned about this, for the revolution in advertising impacts local communities in ways that are insidious and potentially very damaging. Advertising dollars being spent by people in your communities are leaving those communities today in record numbers, and all the signs suggest it will continue rising. According to Borrell Associates, a company that studies LOCAL dollars spent online, the lion’s share of money spent by local advertisers online today goes to outside companies, many based in Silicon Valley. Most of that is money used that to be spent with local media companies.

“Digital advertising at the local level will grow, by our estimate, 42% this year. At that rate it would account for $2 out of every $5 spent by local advertisers. It’s grown to the level of dominance that newspapers enjoyed for years, until the late 1990s.”

But those dollars are not being taken in by local companies, as they were in the late 90s. Online “pure-plays,” and Borrell notes that there are “thousands of them,” are scooping up bigger and bigger shares of local dollars.

“In 2015, these independent companies will account for nearly three-fourths of all digital advertising, elbowing out local-media competitors who have tried for two decades to use their existing sales forces to also sell digital advertising.”

These outsiders pay no taxes. They employ no local residents. They do not contribute to the local community chest. They don’t go to churches, shop at local businesses, or send their kids to local schools. They don’t buy Girl Scout cookies or contribute to any club, service organization, fundraising or charitable effort. They don’t support the local ball clubs or go to the State Fair. They are outsiders threatening the parochial nature of most communities, big or small, across America.

The reason I use the term “insidious” in describing this is because the local businesses spending their money with Google, Amazon, Facebook or whomever are actually contributing to their own downfall. It’s the ultimate shell game. Look here, move there. These businesses can’t help it, because Google works, and it’s cheap. They make everything SO easy. But what good is that ad on Facebook, if it eventually leads to a broken economy where you live? One day, we will wake up and discover that everybody has gone, because the money drain on our communities will force them elsewhere. Think I’m exaggerating?

To paraphrase Ross Perot, “That sucking sound you hear is the lifeblood of your community being drawn by vampires a thousand miles away.”

Local media companies are really at fault here. As Borrell correctly notes, they are all playing in the wrong stadium when it comes to online advertising. It is highly sophisticated, elegant, and oh so complicated. They don’t understand it, think it’s the “same game” that they’ve always played, and insist that their brands will protect them. These are all insidious lies that now threaten the status quo in Anywhere, USA.

As the people at Block say, “Wake up America! It’s time to get your billions back!”

Comments

  1. Brilliant, as usual, Terry.

    I see a couple of challenges on the local level.

    1. Broadcast owners are nationalized. Their goal is a large footprint, expressed as a percentage of the U.S. audience, which allows them to reach national advertisers. They don’t care to reach the local hardware store–who wouldn’t buy them anyway. It wouldn’t make sense to pay to reach an entire market when what it needs is to reach an audience within a few miles of the store.

    2. Broadcast sales departments have no motivation to go after local businesses for their websites. Their logic is, why do I spend my time pursuing the client that’ll pay us pennies on the web, when I can go after a client who’ll pay hundreds of dollars for a spot on TV? That’s why they’re handing over hyperlocal business to the Googles of the world–and destroying their own future.

  2. local media companies are great at building digital businesses- they built facebook, twitter, and, now, snapchat.

    they thought these platforms were “free”, but they’ve cost them dearly.

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