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Centro - News: Newspapers Set To Jointly Sell Ads on Web Sites - Centro in the News

Newspapers Set To Jointly Sell Ads on Web Sites

Gannett, McClatchy And Tribune to Form Nationwide Network Yahoo’s Competing Effort

January 10, 2007; Page A1

The nation’s three largest newspaper publishers are gearing up to sell advertising jointly on their newspapers’ Web sites, believing their survival depends on seizing new online revenue.

Gannett Co., McClatchy Co. and Tribune Co. are planning to offer advertisers one-stop shopping for display ads on Internet sites. The goal is to attract big advertisers such as car makers and phone companies that want to reach a nationwide online audience but don’t want the hassle of negotiating ad deals with each company or newspaper.


  • The News: Gannett, McClatchy and Tribune are preparing to team up to offer national advertisers a one-stop shop for online ads.
  • The Background: Local newspapers have had trouble winning national ads. Cooperative efforts haven’t gone far.
  • What’s Next: Other newspaper groups are working with Yahoo in online ads, raising fears about a divided industry.

The joint effort, code-named “Open Network,” marks a big new bid to win back advertisers that are defecting in droves to the Web. Currently, national advertisers buy the bulk of their online display ads—banners and boxes—from big portals such as Yahoo Inc., Time Warner Inc.’s AOL or Microsoft Corp.’s MSN. Yahoo has announced plans to work with seven other newspaper publishers to build a similar one-stop-shopping spot for advertisers. Google Inc. has also reaped a bonanza with advertising links that appear next to search results.

The three newspaper companies, known in the industry as GMT, are likely to each contribute 10% of their online-advertising space to the network, according to people familiar with the situation. They hope to announce something early this year, although the deal isn’t finalized and could still fall apart.

The venture is designed to help the chains tackle a vexing problem: They have long had trouble attracting national advertisers. In their print editions, this is largely because of price. Newspapers can jack up ad prices for local retailers that have few other ways to reach a hometown audience. But national advertisers often find it cheaper to buy a TV spot or magazine ad than to buy space in dozens of newspapers. National advertisers also account for about 75% of advertising on the Internet, according to PricewaterhouseCoopers.

Efforts by the chains to coordinate their print-advertising sales have shown little success, partly because individual papers weren’t enthusiastic about standardizing ad sizes or giving up control of their relationships with advertisers. But with the industry under severe stress, that reluctance to band together may change.

“Traditionally print newspaper companies have not worked well together to sell national ads in print,” says Jack Williams, president of Gannett Digital. “We intend to sell Internet advertising differently.” Tribune and McClatchy declined to comment.

The nascent effort faces a challenge from a rival group of newspapers led by Hearst Corp. and MediaNews Group Inc. that own more than 100 newspapers. Known in the industry as the “Seven Amigos,” this group has teamed up with Yahoo to sell online recruiting classifieds, and is finalizing a deal to develop its own national ad-sales network. Both sides concede that it would be better for the newspaper industry to have a single effort, but they have competing efforts in online classified ads, making cooperation in display advertising difficult.

Circulation is declining at major papers across the country as readers increasingly find news online and elsewhere. While newspapers are selling more online ads, the growth isn’t fast enough to make up for setbacks in print. During the first nine months of 2006, Internet ad revenues including search ads rose 35% to $12.1 billion, according to PricewaterhouseCoopers data compiled for the Interactive Advertising Bureau. During that same period, the local newspaper industry’s ad revenues slipped 4% to $17.5 billion, according to TNS Media Intelligence.

Last year, investors frustrated with the poor performance of newspaper stocks forced Knight Ridder Inc. to sell itself to McClatchy. This year, Tribune is expected to sell off portions of its business to satisfy restless shareholders.

Newspaper chains such as Gannett built themselves in the 1970s through 1990s, often buying family-owned papers and investing in labor-saving technologies that boosted profits. As two-paper cities disappeared, many of the chain papers gained an effective monopoly as the only vehicle for reaching big and affluent local audiences. That served them well with local advertisers such as retailers and car dealerships, and allowed them to support the costs of journalists and printing plants.

The newspaper industry has tried to sell national ads before. In 1994, the industry set up a national sales arm, the Newspaper National Network, to sell ads in certain categories that newspapers weren’t successfully selling. Most chains also attempt to sell national ads across their properties. Gannett has a team in Chicago that helps big advertisers buy in multiple Gannett papers. However, even with the national newspaper USA Today in its portfolio, national advertising represented only about 16% of Gannett’s newspaper advertising revenues during the first 11 months of 2006.

Late last year, more than 50 newspapers began testing a program allowing advertisers to buy print ads automatically through Google’s Web site. That effort is targeted at small advertisers that wouldn’t be likely to get attention from a newspaper salesperson.

Now, as circulation declines and readers move to the Internet, the chains realize they need to do more.

An early Internet joint venture was, a Web site for classified jobs advertising. Tribune and Knight Ridder bought CareerBuilder in 2000, when it was an also-ran behind and Yahoo HotJobs. Gannett joined the venture two years later and the trio built CareerBuilder into the No. 1 online recruiting Web site, with 16.7 million unique visitors in November, according to comScore Media Metrix.

CareerBuilder’s success has also driven a wedge in the newspaper industry. CareerBuilder has raised the cut of revenue it takes when its newspaper partners deliver ads to the site or when it delivers an ad to a newspaper, according to people familiar with the arrangements. In the past year, several newspapers defected from CareerBuilder to, including the Philadelphia Inquirer, St. Petersburg (Fla.) Times and Akron (Ohio) Beacon Journal.

In a September meeting, MediaNews Chief Executive Dean Singleton complained about CareerBuilder’s renegotiated terms and reluctance to take on big new equity partners to Gannett Chief Executive Craig Dubow, according to a person close to the situation. Mr. Dubow refused to loosen the terms, this person says.

So Mr. Singleton threw his weight behind negotiations with Yahoo HotJobs, a competitor to CareerBuilder. In November, Mr. Singleton announced a deal with Yahoo HotJobs, along with Belo Corp., Cox Newspapers Inc., Hearst Newspapers, Journal Register Co., Lee Enterprises Inc., and E.W. Scripps Co.

The “Seven Amigos” also signed a letter of intent to expand the relationship with Yahoo to include a national ad-sales network similar to the one being formed by Gannett, McClatchy and Tribune. Since then, two other newspaper groups have joined the Yahoo consortium: Media General Inc. and Morris Communications Co.

The expanded Yahoo deal is likely to require the newspapers in the consortium to use Yahoo search on their newspaper Web sites, according to people close to the discussions. In addition, Yahoo and the newspapers could sell ads on each others’ sites, with revenue being shared among the partners. The deal is being finalized, these people say.

Lincoln Millstein, senior vice president at Hearst Newspapers, said he hopes Gannett, McClatchy and Tribune will join the Yahoo consortium instead of striking out on their own. “We’re all struggling to get our fair share of national advertising revenues, and this partnership with Yahoo would go a long way toward achieving that goal,” he said.

So far, Gannett has signaled its intent to go a separate route. In a December presentation to investors, Mr. Dubow, the Gannett CEO, first mentioned the troika’s efforts to build “the largest network of newspaper-developed local sites for any advertiser to reach local consumers.” He said that “unlike past efforts in the industry,” the group will “focus on customer needs.”

In an interview, Gannett’s Mr. Williams confirmed the project is in the works. He said the group would welcome other members so long as they agree to conditions about ad pricing and placement. “If other people are interested in participating, they can join, but only if they are willing to live with the rules,” he said. The project would rely in part on McClatchy’s existing national online sales network, called Real Cities.

GMT is leery of the Seven Amigos’ agreement to use Yahoo’s technology to deliver advertising on the newspapers’ Web sites, according to a person close to the situation. Yahoo will then gain sensitive information such as which newspaper sites are doing well and which pages are most popular.

By contrast, the GMT group is considering other technology options that wouldn’t involve handing control to a potential competitor. It has held discussions with Centro LLC, a Chicago-based company that places ads on newspaper sites across the country, according to a person close to the situation.

Shawn Riegsecker, the president of Centro, says the two camps need to get together to compete with big portals. “If you break this industry apart, you completely devalue the value proposition to the spot advertiser in the national market,” Mr. Riegsecker says.

—Sarah Ellison contributed to this article

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