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Those Sleeping Giants -- Local Television Web Sites -- Are Waking Up To Do Battle With Newspaper Web Sites – Witness The New Expanded TV Co-Branding Deal With Monster.Com For Classified Job Ads

Philip M. Stone - April 13, 2007

More than one-third of US web users visit a newspaper Internet site, which is great for newspapers as they try to persuade advertisers to look not just at print circulation but to combine that with its web site readership numbers, but local TV is now waking up, adding loads of local video and programming to their sites, and this week’s expanded deal with Monster.com shows they are getting into the classifieds big time, too.

It has always been a strange phenomenon that newspaper web sites have done so much better than local TV web sites. Borrell Associates pretty much shocked broadcasters and newspapers alike earlier this year when it announced that last year local newspaper web sites were pulling in around 50% (some $80 million) of total video ad revenue whereas local TV stations had a paltry 20% (some $32 million).

The obvious question then was how come the newspaper sites were doing so well, or conversely, how come local TV was doing so badly?

The answer probably is that TV had taken its eye off the ball, plus it was still mired in discussion of whether local news video should be held for the scheduled over-the-air broadcasts, or be sent directly to the Internet. While most daily newspapers don’t have local print competition, local TV stations do, and in their battle to capture every tenth of a rating point possible they basically decided to hold their prime local news video for the over-the-air broadcast rather than release it earlier on the Internet. And there just weren’t that many journalists assigned to update text on their sites.

Local TV could afford to take that view when it earned margins around 40% (around double that of newspapers) so there wasn’t so much of a “need” to look for revenues elsewhere. When newspapers found their profit margins dropping to around 17% they started investing big-time in their web sites, including shooting their own news video, and now that local TV margins have dropped to around 25 – 30% that didn’t really ring as many alarm bells as dropping newspaper margin did. There are few newspaper newsrooms these days where at least some journalists have not been taught how to shoot video (Borrell says that some 1,450 US daily newspapers web sites make use of video players).

Local TV this year is increasing its share of the video advertising pie to 24%, according to Borrell, and if the TV stations got their digital sales act together they would do a whole lot better.

Online video is currently only about 5% of the total local ad spend at around $161 million last year, but Borrell projects in another five years it will equal 35% of the local online ad dollars, and that puts it value at more than $5 billion.

Whereas on average a newspaper’s web site is currently contributing around 5% of overall revenue, in local TV it's only 2%, although it does fluctuate widely depending on market size. “Newspaper sites are attracting video to online directories and they’re selling ads like hotcakes,” according to Gordon Borrell, CEO of Borrell Associates.

But Borrell projects that local TV stations are expected to grow their online revenue by 55% this year, but even that only comes to around $618 million.

So with that background the announcement this week that Monster, a leading global online career and recruitment company, has signed a deal with Internet Broadcasting to double their current relationship and now represent 120 local TV web sites in 108 markets, including the top 20, is one that newspapers will find chilling. If newspapers thought they would have media online classifieds to themselves via deals with CareerBuilder and the like, then this is their wake-up call.

The new co-branded Monster local TV sites, expected to launch in the next few weeks, will feature Monster’s search capabilities, career advice and various tools, for instance, to look up salaries and write resumes. Employers can post jobs and search Monster’s database to find candidates. Internet Broadcasting will do its bit via co-branded TV spots, online ads and integrated content placement.

Internet Broadcasting publishes web sites for many large corporations that own local TV stations and says that currently around 8% of Americans surfing the web visit one of their sites. The deal with Monster could really bite newspapers.

But wait a minute, hasn’t Monster been signing deals with newspapers, too? Absolutely! Last summer it signed deals with about 60 newspapers and in February signed a major deal with the New York Times for 19 properties. And just last month it signed an alliance with Adicio, a provider of online classified advertising software used by more than 200 newspapers. The Adicio deal allows its clients to use Monster tools and resources to post employment ads, and by using Monster’s “click-to-print” option, online ads can be transformed automatically for print.

There’s no mention from Monster’s news release how it will handle overlaps of its co-branded sites in various cities (in New York, for instance, the New York Times and WNBC.com). ftm tried to contact Monster’s PR chief Steve Sylvan but he had a taped message saying “if you are a reporter on a deadline then please call Daniel Perry” so we called Daniel only to get a recording saying “if you are a reporter on deadline then please call Steve Sylvan”. After some 90 minutes of that we gave up -- don’t you just love PR departments that put you on that merry go-round?

Monster, incidentally, needs all the business it can sign. It told Wall Street earlier this month that it was going to miss its quarterly revenue projection by less than 1% -- it would be around $328 – 329 million instead of the expected $330 - $338 million and Wall Street greeted that with its feet, by the time the day was done the shares were down all of 13%.

Be that as it may, TV, the sleeping giant, has awakened to its web revenue possibilities, and there are plenty of people out there, including the classified companies, willing to help them along. And the corporations behind local TV such as Hearst-Argyle, McGraw-Hill, Post-Newsweek etc., have the financing to ensure the job gets done.

Newspapers can no longer count on having a clear field when it comes to attracting Internet viewers to local news, as if newspapers didn’t already have enough problems. With the competition heating up for that online local readership, it’s going to take even more effort to retain that online readership, and they have to do that to succeed in their current strategy – for they have no other – of convincing advertisers to judge their reach not just on print circulation numbers (that have been going down) but combine that with their Internet readership numbers (that have been going up).

If TV breaks that strategy by stealing away too many newspaper web readers, then newspapers will be going back to the drawing boards once again trying to figure out their new message to advertisers.

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