As Seen In MediaWeek
Reprinted with Permission - May 22, 2000
Headline News
by Tony Case
With newspa pers catering to national advertisers as never before, the category is producing record-setting revenue
It seems incredible. But Colleen Kelly recalls a time not too long ago when newspapers actually tried to dissuade their clients from using the medium, at least when it came to buying color advertisement. It’s hard to imagine at a time when virtually every big daily, including even the once-proudly black-and-white New York Times has gone the colorized way of USA Today. But it used to be that when a client wanted to run a four-color spread, newspapers balked, doing "everything in their power to talk you out of it," remembers Kelly, senior vp/media planning director at Deutsch LA, whose print clients include Mitsubishi Motors America, Bank of America and IKEA North America.
"They would say it was cost-prohibitive, that you could only take an ad on page two the third Wednesday of every month," she says. "They could hardly make it work ¤ and when they did do color, it was poorly done."
Kelly’s account is illustrative of the negativity-laden modus operandi that drove many newspapers as recently as a few years back. Speaking about the New York Times, Sean Cunningham, executive vp/media directory at Lowe Lintas & Partners, recounted that "a decade or so ago, it seemed the standard answer for most of our inquiries above and beyond the standard selling space and practice was 'NO,’ taped up on a big sign in the ad department. It’s simply not the case anymore."
The Times was hardly alone in its arrogance. The consensus seems to be that dealing with the advertising powers that be across America’s dailies used to be nothing short of a nightmare ¤ so it’s not a surprise that media planners stayed away from them at all costs.
"Newspapers have always felt they were the king of their fiefdom," says Jack Grandcolas, vp/West coast sales for New York-based Newspaper National Network, which places advertising in dailies nationwide and has been a leading factor in the medium’s national ad surge.
An advertiser looking to do business with newspapers ran into an array of problems ¤ and not just when it came to bad color reproduction. "If a national advertiser called up and asked for a rate, the attitude was we’ll charge what we want," Grandcolas says. "They priced themselves out of the ballpark and forced advertisers to look at other media which were more efficient for their needs."
Planning a multi-market print campaign ¤ and thus, being forced to deal with dozens of individual newspapers, all with their own rates and guidelines ¤ proved a most-cumbersome task. It wasn’t unusual for an advertiser, in the wake of a campaign, to get back "47 different invoices, all incorrect," recalled on exec. "Media departments would spend hours upon hours trying to match the differences." (A famous Booz-Allen study a decade ago didn’t help matters much. The researchers found that it cost agencies ¤ already struggling to hold down expenses ¤ three to five times more to plan and place a newspaper campaign than to initiate appeals through other media.)
Hardly a pitch for using newspapers. But the publishers were forced to get their act together.
In 1999, while overall advertising grew an estimated 10 percent year-over-year and total newspaper advertising ¤ including classified, retail and national ¤ added 5.4 percent, to $46.3 billion, national ad revenues alone for the dailies soared an astonishing 17.7 percent to $6.7 billion. It was the biggest gain in a quarter-century.
The picture stands in stunning contrast to the early '90s, when newspapers suffered a bruising recession and national ads slumped.
The current good times for national are expected to continue, although at a slower pace. The investment banking firm Veronis, Suhler & Associates projected national will grow 10 percent this year. Not just dailies are benefiting from the national explosion. Sacramento-based Alternative Weekly Network, which represents such papers as the Village Voice, Boston Phoenix and San Francisco Bay Guardian, reported that last year its billings rose 34 percent to $27.1 million, following increases of 50 percent in 1998 and 111 percent in 1997.
Not surprisingly, AWN’s fastest-growing category last year was dot-com. The firm brought in some 70 new Internet-related advertisers. In fact, Internet-related advertising has been a major source of new business for all newspapers. For the first three quarters of last year, newspapers grew the category by a whopping 296 percent, besting the gains across all media of 291 percent, according to Competitive Media Reporting.
Publishers are reaping record national dollars across such categories as dot-com, telecommunications, financial services and travel. There are many reasons for the explosion: greater advertising spending overall, newspapers’ mass reach during a time of rampant fragmentation in other media and improved production capabilities (much to Colleen Kelly’s happiness, they seemed to have worked out most of the color-processing kinks). But certainly one of the most significant ingredients in the national growth has been the dramatic shift in newspapers’ attitudes, about themselves and about their advertisers.
Gone are the "king of their fiefdom" days. Those involved in getting more national business into newspapers say it’s been nothing short of a sea change from the "no-can-do" position of old to an aggressive, customer-focused strategy. "I think newspapers realized that good, quality performance in all aspects is important, and I think they’re less and less arrogant. It’s fewer and fewer of them that are oblivious to what the customer wants," observes NNN president/gm Nicholas Cannistraro.
Although it can’t take all the credit for newspapers’ national advertising bonanza, NNN’s contribution also cannot be discounted. In a report on the industry, Merrill Lynch pointed out that "recent efforts by the {Newspaper Association of America, the trade organization that operates the NNN} to organize the industry to attract national advertising in newspapers have been met with measurable success." Indeed, even amid the ad growth newspapers and all media are experiencing, the NNN’s results are especially impressive. The firm, founded six years ago by the country’s biggest publishers to lure national advertisers to a medium that was virtually nowhere on their radar screens and to make dealing with the dailies a more efficient process, instituted a streamlined "one order/one bill" system agencies had long clamored for. The results were easy to see in 1999: NNN enjoyed a 65 percent jump in revenue, taking in $154.6 million. The NNN has seen big double-digit gains every year since it was founded, in fact.
Besides P&G and Mitsubishi, NNN counts among its clients Johnson & Johnson, Kraft Foods, Bristol Myers Squibb, Anheuser-Busch and Kellogg’s, to name just a few. NNN serves advertisers and agencies across seven categories: automotive, beverages, computers, cosmetics/toiletries, drugs/remedies, food and household products. The NNN set out after those categories because they put less than 5 percent of their budgets in newspapers.
But long before the network was conceived, NNN’s Cannistraro was playing a major role in trying to motivate newspapers to more aggressively chase national business. A former account executive with Young & Rubicam and later vp/marketing with Bristol-Myers Corp. and product manager with Gillette Co., the salesman was recruited by the Washington Post in 1982 to, as he puts it, "bring marketing thinking" to the paper. Amazingly, at that time in the newspaper business, the concept of "putting your head in the mind of the consumer" was a radical concept, he recalls.
Cannistraro says he felt, at times, like a "voice in the wilderness." In 1993, he joined the NAA, where he was senior vp/chief marketing officer, and later helped to form the NNN under the direction of then-NAA president Cathy Black, who now heads Hearst Magazines. Recalls NNN’s Grandcolas: Black "conducted focus groups with agencies and advertisers and asked, 'What is it that keeps you from using us?’ The laundry list was a long one." (Black declined to be interviewed.)
The NNN and individual papers have so successfully reaped new business in the last few years in part because they have effectively pitched themselves as the last remaining mass medium, as network and cable television and magazines have become more and more fragmented. Newspapers have also been selling themselves increasingly as a better value than the networks, whose ad rates have skyrocketed even as their audiences have dwindled. It’s arguments such as these which have brought nontraditional print users to old-fashioned ink on paper.
Media buyers clearly are buying the mass-reach appeal of newspapers. "There’s been such a fragmentation of all media that it’s getting harder and harder to find media that will give you significant reach," says Dave Rowe, senior vp/media director at EURO RSCG/DSW Partners, Salt Lake City, which counts tech advertisers such as Intel and Knight Ridder Interactive among its clients. "Even though there’s been some erosion in readership, newspapers offer unparalleled reach with a single insertion."
Although the newspaper industry overall has suffered declining circulation in recent years, for the six months ended March 31 total weekday circ actually gained a slight 0.2 percent compared to a year earlier, according to an NAA analysis of the most recent Audit Bureau of Circulations figures. Sunday circ during the same period declined 0.6 percent. Even as newspapers and other individual media outlets have dealt with audience erosion, Rowe touts the dailies’ "unparalleled reach. With a single insertion, you can reach 20 to 30 percent of the households in a market ¤ and with combined newspapers, you can get 50 percent coverage." Rowe says that while advertisers traditionally have viewed newspapers as a retail medium, they’re seeing it more as a branding vehicle as well, one with a highly favorable demographic. "When you look at the profile of newspaper readers, they’re a professional, managerial, upscale kind of profile, which is obviously appealing to advertisers," he says.
Newspapers have long fought perception that they are expensive versus other media. According to a 1999 study conducted by the MacManus Group, the estimated cost-per-thousand (CPM) for a quarter-page newspaper ad, reaching the age group 25-54 in the top 50 markets was $23.79. For Sunday papers, the price was $20.44. Media Dynamics, in its TV Dimensions 2000 report, figured top 50-market newspaper CPM at $21.11 for men and $20.60 for women for a one-third page ad. By comparison, Media Dynamics placed average prime-time network TV CPM at $21.50 for men and $16.75 for women for a 30-second spot. According to the same study, general-interest-consumer magazines were estimated at $7.45 for men and $5.25 for women for a full-page ad, and a 30-second radio spot was priced at $8.30 for men and $7.25 for women.
Modernized production and a new appreciation for the creative are other major reasons the medium has attracted more business. Case in point: An award winning Saatchi & Saatchi campaign for P&G’s Tide laundry detergent, which this magazine chose as its Newspaper Plan of the Year in 1999. The campaign would have been unthinkable just a few years ago, as it prominently featured the brand’s famous orange-and-yellow bull’s eye logo. Saatchi’s vp/associate media director Rob Reifenheiser pointed out at the time that had newspapers not been able to precisely reproduce Tide’s brightly colored trademark logo, the campaign would have been a no-go. (Since that time, P&G, which had never used newspapers to any great degree for its national campaigns, has utilized the medium for 17 brands).
The newspaper industry cozied up to the creative community in a big way three years ago when it reestablished for the first time in a decade the Athena Awards, which carry a $100,000 grand prize ¤ "a lot of money, even for a creative director," notes NNN’s Cannistraro. "We can’t do enough of that stuff." The newspaper business, unlike the magazine industry, is hardly known for its elaborate parties. But last year’s Athena’s were a star-studded event, emceed by entertainer Sandra Bernhard and held at Manhattan’s trendy supper Club. A team from Goody, Silverstein & Partners, San Francisco, took the grand prize for its clever series of half-page ads for Hewlett-Packard.
But for all the good news on the national front, it would be wrong to paint newspapers’ current position with a broad, rosy stroke. While service and production quality are largely seen as improved, problems persist, especially as they relate to the pesky rate issue. During the annual American Association of Advertising Agencies (AAAA) confab earlier this year, ad execs gathered for a gripe session on "differential" rates, whereby newspapers charge national advertisers more than their local customers for the same space. AAAA president/CEO O. Burtch Drake called the practice "the biggest barrier" to getting national advertisers into the medium. Others see rate as less of an issue, however. Jay Zitz, president/CEO of the New York-based national rep firm Newspapers First, told publishers gathered for the NAA’s annual convention in New York this month that for newer advertisers at least, "Rate is not as much of an issue as often as we would think it is." New users of the medium are more interested in results that newspapers can bring, maintained Zitz, whose company represents more than 40 dailies, including the Baltimore Sun, Miami Herald, Philadelphia Inquirer and San Jose Mercury News. "If we can move their business, rate becomes less of an issue."
Paul Silverman, media director for Campbell Soup, seconds the notion that rate takes a back seat to effectiveness. "National advertisers are looking to move product. I know that when I run in {the newspaper insert} Parade magazine on Sunday, I sell more soup on Monday, and I think that’s a very strong case for the reach of newspapers, and I think that’s helped to open some eyes," he says.
Another major issue facing publishers is the overwhelmingly negative perception of newspapers on the part of many younger media buyers. "If you look at the typical media department, they are very young, relatively untrained people who came up with the MTV generation and know very little about print," Zitz says. "They go to magazine parties a lot, but that’s about the extent of their knowledge in terms of the total print scene. They’re very heavy into broadcast." Zitz’s firm has initiated training programs to show those buyers the power of print and "give them a sense of what, creatively, can happen with newspapers," he says.
Indeed, while NNN’s efforts on behalf of the industry certainly are praiseworthy, it would be shortsighted to overlook the push of individual newspapers and devoted national rep firms such as Newspapers First and Sacramento-based Newspaper Network ¤ which sell advertising for select groups of newspapers, as opposed to NNN, which represents all U.S. dailies and can take out ads in any paper ¤ in growing national. The New York Times recorded a 16.5 percent year-over-year ad revenue gain for the month of April, the most substantial growth coming from such sectors as e-commerce, technology, media and financial services. And then there’s E.W. Scripps’ Rocky Mountain News. When the RMN’s rep firm, Sawyer-Ferguson-Walker, folded last year, the paper, rather than join up with another ad rep, formed its own network, establishing sales offices in nine major markets including New York, Los Angeles and Chicago.
The system is highly cost-efficient, reports RMN vp/marketing Linda Sease, when one considers the fees and commissions papers pay their reps. More to the point, the in-house operation works because "we know ourselves," Sease says. "The bottom line is, we can sell ourselves better than anybody else can sell us."
Tony Case covers the newspaper industry for Mediaweek. He is based in New York.