from NAA: Newspapers “network effect”
Monday, July 10th, 2006Marketingterms.com defines the “network effect” as “the phenomenon whereby a service becomes more valuable as more people use it, thereby encouraging ever-increasing numbers of adopters.” In other words, you may adopt a service initially because someone you know uses it; later, you may adopt a service because everyone uses it.The term was used in the early days of the Internet about such companies as Hotmail, which hit upon the right idea at the right time and got very big very, very quickly. The free e-mail service’s growth hinged on a combination of utility and the Web’s ability to ignite word-of-mouth marketing.
The same sort of thing has taken hold in the realm of national advertising online. A flood of dollars seems headed to the Web—nearly $4 billion in the first quarter—but marketers are opting for the easy availability of the four major portals to host their ad campaigns.
Online newspapers have largely missed out on this spending spree because they’re off this grid. As a class, they don’t share the interconnectedness and conformity of other buying networks, even though they appear to share a very similar, better-than-average user base (“Site Power Users: ‘Just Plain Better,’” May 2006).
Well, it’s time to change all that.
NAA has forged a new committee of champions to tackle the truly tough issues that seem to hold the newspaper industry back, even in the face of its dogged determination and innovation. It’s called the Marketing Advisory Committee, and it consists of some of the industry’s most talented strategists. Jason E. Klein, president and chief executive officer of the Newspaper National Network LP in New York City is among them (see related story, p. 27). The group has chosen to tackle three significant issues: expanding and enhancing the industry’s “value proposition” message, making newspapers easier for their customers to do business with, and establishing a common platform for online ad serving and transactions.
Obviously, it’s the third effort that warms our hearts in interactive media, and we thank Christian Hendricks, vice president of interactive media at The McClatchy Co. in Sacramento, for helping to light the fire. “There’s been a steadily increasing amount of national dollars spent on Google and Yahoo!, and, quite honestly, we want to get more than a trickle,” he explains.
Why do these networks succeed where newspapers struggle? Simply put, scale matters.
How big a newspaper network needs to be to harness its own “network effect” isn’t clear, “but we know that the larger the network, the better off we are,” Hendricks says. RealCities, a network of 110 sites “loosely held together by technology as well as business agreements,” enjoys revenues in the tens of millions of dollars annually, he says.
“If we can grow that network to several hundred sites, we’ll be in a better position to attract national ad dollars on the order of hundreds of millions of dollars.”
The idea of a common “platform” doesn’t mandate a common software or service provider, but it must at least mimic that ease of use, Hendricks says. Ad serving, targeting, registration and buying all need to be transparently simple to the buyer. “Efficiency matters a lot” to online ad buyers, and newspapers deserve to play a bigger role in the marketplace, he adds. NAA’s Marketing Advisory Committee “represents a great step forward for the industry to recognize that it’s time to act.”
Says John Iobst, NAA vice president of newspaper operations and research, “We’ve never been closer to having the solution to all this.” Converting to an AdsML workflow—a standard way of buying and fulfilling an ad in virtually any medium—is finally within the industry’s grasp.
In late May, the AdsML Consortium (www.adsml.org) reached a milestone in finishing a process for booking ads and describing ad content, putting it in the home stretch for standardizing the entire ad booking and fulfillment process. That’s no small feat, yet what remains may be equally daunting.
The newspaper industry must agree that the time for these initiatives is long overdue. Then, at last, the strategists and technologists can drive home the golden spike with one blow.
MELINDA GIPSON is NAA electronic media director.
E-mail: melinda.gipson@naa.org.
