A critical strategic goal for most local media companies is to learn how to grow digital revenue – rather than focusing most resources on managing traditional revenue streams. This is especially critical for newspapers, where print ad revenues have dropped markedly since 2006.
McClatchy’s Christian Hendricks
Among the newspaper companies, The McClatchy Co. has one of the most highly developed digital sales operations in the country. It has even created what it calls McClatchy University, a company-wide, self-directed online certification program that trains the staff at its 30 newspapers and McClatchy Interactive, which provides technology and product development company wide.
McClatchy’s digital approach can be distilled into seven essential concepts, which McClatchy executives have also begun to share with people outside the company as part of the American Press Institute’s national workshop series the Transformation Tour, produced in association with The Poynter Institute.
1. Structure matters less than commitment
Organizational commitment is more important than organizational structure, the company believes. Here, Christian A. Hendricks, vice president, interactive media, differs with another innovator, Clark Gilbert, the former Harvard Business School professor who heads The Deseret News and Deseret Digital Media. Gilbert argues that separate companies and competing sales forces are required to manage “dual transformation.” Hendricks believes a variety of organizational structures can work. There is no “one answer,” he says. Each organization can assess and take advantage of the strengths of its sales staff.
McClatchy, indeed, has used a variety of organizational structures in different places – from dedicated direct sellers to integrated teams where everyone sells everything.
The key is that a company be truly committed to digital. Hendricks has identified five elements of commitment, which he calls “pillars,” that he considers essential, and by enumerating them and training them across the company, the company believes it can ensure that commitment is sustained.
2. The five essential elements to sustain digital
The five elements that ensure commitment to digital sales are:
Focus: Companies that set clear objectives and expectations and effectively communicate them throughout the organization have a much better chance of getting buy-in at all levels. They also must be “owned,” or fully committed to, at the top of the company, Hendricks says. McClatchy also makes sure that there are consistent goals and action plans across the company and at each of its papers so that they can be consistently monitored and measured.
Commitment: Once goals are established and a strategic plan adopted, managers must commit themselves to aggressively executing the plan. It cannot be half-hearted. McClatchy enforces that commitment with the rest of the pillars.
Accountability: The next key is to make people accountable for meeting company revenue goals. To do this, McClatchy uses a variety of metrics to measure individual performance and success at each market. The company also relies on scorecards and sales tracking reports designed to help managers communicate expectations and goals, monitor and evaluate progress, and predict future performance. McClatchy also encourages competition among its markets to motivate performance. A 2012 All-Star Contest, for instance, rewarded top sales efforts for three company-wide products – banner ads, dealsaver (the company’s daily deal service) Cars.com (part of Classified Ventures), and overall online revenue goals. Sales representatives compete both individually and as part of a market tier for bonuses.
Compensation: How sales associates are paid for digital sales is an issue confronting newspapers across the country. Industry wide, revenue from digital products remains a fraction of the revenue generated by print. At McClatchy, it is higher than the industry average, close to a quarter of overall revenue. Typically, sales reps who sell print newspaper advertising are typically compensated at higher levels than their digital counterparts. Even though revenue is not equal, McClatchy tries to level the playing field by offering incentive programs for selling digital products. These programs are part of a sales plan for each digital product. Monetary incentives are used to drive results. McClatchy rewards both the newspapers and the individual sales representatives for performance that meets or exceeds overall digital revenue goals.
Viable solutions: No single “silver bullet” solution, McClatchy executives believe, will replace the revenue of print advertising. That idea is increasingly accepted across the industry now. McClatchy’s approach is to offer an extensive “suite” of products, all of which yield revenue. This portfolio of digital revenue sources creates what McClatchy calls “viable solutions.” In effect, its sales staff is not selling products. They are becoming digital marketing consultants for clients, the group formerly known as advertisers.
3. Quality journalism is the ultimate goal
For McClatchy, the overriding objective of growing revenue is to provide the resources to produce quality journalism. That is more than a business. It is also a social mission. And it is expensive, an investment that most competitors for revenue in the digital marketplace are not making. That is the challenge. At the same time, trust in that editorial brand, driven by quality, is also the asset that makes selling digital work, McClatchy believes.
But the journalism has to change and adapt to a digital marketplace. As it moves from the printed page to digital platforms, the journalism requires new skills and forms of presentation. The reporters and editors who once exclusively published newspapers, now may be asked to produce video or audio broadcasts, interpret data to generate maps, provide links to related stories appearing on other channels, and author versions of a story that are styled for social media such as Facebook and Twitter.
Business models, too, are evolving with these new capabilities. Different platforms require different sources of revenue to support expanding forms of journalism, some of which evolved from printed newspapers, others that developed for specific devices.
Hendricks says McClatchy goes beyond the digital duplication of the analog products such as classifieds and verticals that traditionally funded its journalism. McClatchy Interactive was created to provide technology and develop the products that produce the revenue that funds journalism at all levels, including Pulitzer Prize-winning stories.
4. Follow the reader
One concept behind selling digital is creating different kinds of journalistic products for the different times of day and the different places where people consume news. In other words, follow the audiences and adapt the style of the content to fit their behavior. Don’t expect them to adapt their behavior to fit your journalism.
To do that, McClatchy is developing different products for “before work,” “at work,” “on-the-go,” “evening/night” and also “weekends.” These “engagement platforms,” as Hendricks calls them, provide content and enable commerce throughout the day on the products that consumers are most likely to use at specific times.
For instance, before work, people might read content across a range a platforms, from print to e-editions to mobile. During the workday, digital products are more oriented to the desktop computer. On the go, the focus is on mobile, and the product is tailored to how people consume content on phones.
5. Many products, many revenue streams
The long lament of the digital age is that digital display advertising dollars will never replace the dollars from print advertising. This is the so-called digital-dimes-for-print-dollars equation. That is true, the McClatchy strategy agrees, only if you focus on conventional digital advertising. To counter that, the company has created an array of digital offerings to generate revenue growth that, in aggregate, it expects to exceed the revenue created from print advertising. The first component of that is revenue growth from advertising in the company’s digital newspapers.
The company is also trying to broaden its digital revenues with social shopping and e-commerce programs. It’s shopping and advertising service dealsaver saw its revenue rise 40.2% during the fourth quarter of 2012 compared to the same period the year before.
Another new McClatchy product, impressLocal, offers businesses a suite of digital marketing services such as website customization, search engine optimization and branding strategies to businesses. It has launched these services for now in in Kansas City and Fort Worth, Texas.
It also is a partner in Find n Save, an online shopping platform shared with seven media and publishing companies that operates in more than 250 markets. There are also other ventures, particularly in several digital classified operations.
6. Implementing a digital subscription model
After resisting a paid content strategy, McClatchy tested a metered online subscription system at the Modesto Bee’s Modbee.com in July 2011. The company-wide launch of the subscription package, known as Plus Program, uses a meter in which users can access a certain amount of content free each month before being asked to subscribe to access more. Existing home delivery subscribers are given full access to the digital content and rolled into a higher-priced bundled print and digital subscription when their newspaper subscription renews. Tablet apps will be added to the bundle in 2013.
Early results are promising. The company says that “a vast majority” of print subscribers signed up for the Plus Program at the end of last year, generating $1.2 million in 2012. McClatchy executives expect revenue from paywalls to exceed $20 million by the end of 2013.
7. Training and more training
Local digital advertising is projected to grow rapidly over the next few years. The market research firm BIA/Kelsey predicts that digital advertising in local markets will double to $42.5 billion in 2015 from $20.7 billion in 2010. Digital media, delivered to consumers through mobile, Internet or other electronic methods, will represent 23.6 percent of all local ad spending by 2015, BIA/Kelsey forecasts. And some of this will not be conventional advertising but transactional e-commerce.
It is also what sales professionals call a competitive media marketplace. Newspapers, in other words, no longer enjoy a monopoly over reaching audiences online for many of these products.
To compete here requires not only consistent training but ongoing training to stay current, the company believes. The key to that is its company wide interactive university.
More than 1,700 employees, including all print and online sales representatives and top executives, have been through the certification program. The training has included on consultative selling, online advertising basics, the changing media marketplace, emerging new technologies and digital tools, and selling advertising through network partnerships such as Yahoo!
McClatchy now offers more advanced selling tactics in response to a more crowded and competitive digital media marketplace. Among the skills: how to grow the account base beyond their existing contacts and go after a bigger share of share of the advertisers’ advertising and marketing spending.
The company can boast progress. In 2012, McClatchy reported, digital-only revenue grew by double digits in every quarter – and by 15% in the final quarter.
Hendricks also argues innovation is nothing new for newspapers.
“They launched the first collaborative news organization based on the disruptive technology of the time – the telegraph. That was the Associated Press more than 100 years ago. And we innovated after the introduction of radio and television. Now, we’re innovating in the digital era.”