In our culture, when a salesperson doesn't like the term he or she has to deal with, a new one is often created as a substitute. This is a common practice in the automobile industry, where the guy in the slick clothes would much rather sell you a "dealer demonstrator" than a "used" car. After all, it's higher on the food chain, right? There's also "pre-owned," "like new" and "almost new," but they're still — regardless of the softer language — just plain, old used cars.
This is practiced in all areas of buying and selling, but most often when the product being sold is, well, lesser than the sales guy would like it to be. Wouldn't you rather buy from a "scratch and dent" sale that from one of damaged goods? And of course, a trained salesperson would rather move you to a brand new washer and dryer than burden you with that dented model.
So it is in the television world, and especially where salespeople are forced to sell the Internet. What TV salesperson can get excited about commissions on a five-dollar online cost-per-thousand (CPM) rate, when they could be spending their time selling $500 CPMs? Thus was born the "convergence advertising" model — a concept that blends on-air and online ads into what appears to be a win-win for TV stations.
Here's how it works: A station's Website has a section on, let's say, health. This section provides the latest in health news, links and stories from the station's health reporter. The station puts together a deal to sell "sponsorships" of the section to health care providers in the community, but the deal also contains on-air ads. Hence, the station gets to charge whatever it likes, and the pitch to the sponsors is that it's a TV buy built around an Internet element. The on-air ads are intended to drive traffic to the health section, so everybody appears to win.
It's hard to disagree with the logic of using an Internet promotion to drive TV sales — especially in these days of sharp business downturns — but the concept of convergence advertising is, at best, a bridge between television advertising and Internet advertising. Stations that use these tools to create the notion that they are into Internet advertising are fooling themselves, because convergence advertising isn't Internet advertising — it's TV advertising wrapped in a URL. Moreover, those stations who engage in this type of advertising exclusively are less inclined to look beyond their dying business model and dip their toes in the pool of pure Internet revenue.
This is a very dangerous position, because it keeps local television in a continued state of denial and ignorance. As long as stations believe that convergence advertising is the holy grail of Internet revenue, there is no incentive to learn of the new world. Moreover, this model keeps stations locked into the portal Website concept and the belief that their brand transfers to the Web in the same way it does in the real world. These beliefs have been proven to be untrue, so by placing resources in bundles of convergence deals, stations continue to drift into the bog of missed opportunities instead of moving into the new reality.
For the past two years, Richard Sullivan has been tracking Internet sales efforts among TV stations as "The TV Guru." He publishes a weekly newsletter with case studies of Web sales programs in the local TV industry. The newsletter goes out to TV stations — and others — who wish to keep track of the business of making money off the Internet.
"I've not kept any particular stats on this," he says, "but as I review my 200 plus Case Histories, all but a very few of the contests, promotions, etc. that I report on have some sort of on-air element as well." He notes that, in many cases, the Internet component is in "support" of a larger on-air presence. "Most sponsored promotions," he adds, "have a corresponding on-air buy to create an overall convergence package. Rarely have I found a stand-alone Internet promotion."
But Sullivan also notes that stations are starting to build more interactive features into their online promotions. "For example," he notes, "contests increasingly require online entry. These entry forms include links back to the sponsor or sometimes sponsor coupons. More and more, sponsor links are provided, no doubt because more local businesses now maintain a web presence."
Gordon Borrell's company studies local online revenue for the newspaper industry, although he's increasingly including local online broadcast properties as well. He's quick to point out that while there's good money in convergence packages, "too many newspapers and TV stations view the Internet as a packaged sale, period, end of story."
For broadcasters, convergence ad packages present a two-sided coin, according to Borrell. On the one hand, they can and do pull dollars from newspaper, Yellow Pages or direct mail markets, but these deals keep local stations working with their same, limited group of advertisers. "In any market," he says, "the vast majority of businesses can't afford a broadcast-online combo buy, but they can afford online-only advertising. And they're buying it. So a TV station has an opportunity to use this new medium to grab new customers."
"Convergence packages are good," he continues, "but stations that rely solely on using the Internet to sell more broadcast advertising will wind up being more vulnerable to advertising downturns than those who use the Internet to insulate their station's revenue streams with a whole new set of customers."
The newspaper industry offers an excellent example of what can happen when media companies try to exist by blending their core distribution vehicle with the Web. Newspapers built Web-based classifieds, but only as an adjunct to the print version. Buying a classified newspaper ad a few years ago meant "you get the Internet with that." What was billed as adding value to a classified ad has blown up in the face of the industry, because smart entrepreneurs saw that the Internet was different. CraigsList now threatens to completely destroy what used to be a significant part of a newspaper's revenue. Where CraigsList isn't doing it, the Monster.com's and eBay's of the Web are piling on.
New England based newspaper consultant George Dratelis says the industry is currently in love with bundled deals that revolve around digitizing ads and creating a browse/search area in the marketplace. "There was considerable concern in the industry," he says, "about taking 'print ads' and posting them online, but the focus now has shifted from the visual to the deconstruction of the contents of the ad in order to make all advertising carried in the paper searchable."
As a result, Dratelis thinks much of the industry is still stuck in an effort to save its existing model rather than fully explore other options. "The business model has varied from upsells to package deals which are most prevalent now," he says. "The key issue remains the fact that the advertiser gets an Internet component to their ad buy without fully being sold on the value of the Internet piece itself."
So what should local TV stations be doing? The problem isn't revenue; it's audience. Fix the problem and the revenue will take care of itself.
The future begins with understanding and accepting that a local station is more than just a local station; it's a local media company, or better yet, a local multimedia company. This may seem like splitting semantic hairs, but it's actually the new model for any local media business. If the television station's business model — which is based on a mass marketing core competency — is all that drives the company, it will ultimately find itself gasping for air like a fish at the bottom of a pond that's slowly draining. Any local media company's business model will be advertiser-driven, but that's where the similarity between the old and the new ends.
Tim Hanlon, Senior Vice President/Director, Emerging Contacts for Starcom MediaVest Group — and one of most most forward-thinking people in the advertising world — looks at the new.
"The news department at NBC5 Chicago(WMAQ-TV) shouldn't think of themselves just as four-times-a-day newscasts but as a *24-hour news service* across multiple touchpoints: linear, on-demand, online, wireless, digital multicast — whatever. The target audiences, then, are less about Nielsen ratings, but the total exposure package via ratings, VOD sessions, tuning data, click data — whatever.
"Separating stuff into traditional delivery buckets probably becomes futile over time, especially as younger news consumers — with Internet/on-demand/consumer control-type expectations — look for news differently than their parents or grandparents."
But why stop there? Media companies — especially at the local level — also need to look at diversifying in order to grow revenues, and the Internet provides a fertile field for non-traditional revenue models. Paid local search is a great example. Stations can acquire a software license and outsource sales to build and operate a viable local paid search site. The longer the ownership, the greater the multiples, so such a project can be very profitable. But the real secret to its success lies in the television station's ability to promote the business using its core competency — mass marketing reach. This places a different kind of value on ad availabilities and gives a local multimedia company with a television "wing" a considerable competitive advantage over, let's say, a newspaper.
Reliance on convergence ad models poses a significant inertia barrier to progress. At best, they are a bridge to tomorrow, but even that can be a dangerous assumption. For the idea of a bridge is illusionary. There is no standing still when it comes to the sweeping changes around us. We're either on one side or the other.
We're either inventing new names for the same old used cars, or we're adding a line of boats to the inventory.