The consecutive decreases began in the third quarter of 2006, when combined print and online ad dollars fell 1.5 percent to $11.7 billion. Since that point, newspaper ad dollars have fallen more than 50 percent, and there is no sign of a comeback. And yet, there are some bright spots: circulation losses are slowing and digital ad sales are continuing to rise. Nevertheless, digital ad sales are not rising fast enough to make up for print losses.
To help boost digital revenues, more publishers are looking closely at exchange-based buying. Minneapolis’ Star Tribune has been gradually putting more inventory into programmatic sales. We spoke with Ray Faust, VP of digital ad sales at the Midwest paper, about how the Star Trib’s use of real-time bidding and private exchanges has evolved.
AdExchanger: There’s a lot of uncertainty among publishers about how to approach programmatic buying – is it something to embrace? Is it a threat? The New York Times Co. executives, in discussing the decline in digital revenues last week, attributed part of the decrease to the shift in ad spending to real-time bidding and away from direct sales. Where does the Star-Tribune stand?
RAY FAUST: We provide a fairly valuable asset to our local market advertisers, and obviously a lot of pageviews with corresponding ad impressions that we hope to monetize through direct sales. We're generally able to fill a decent amount of inventory, but there are impressions that aren't sold directly and we want to monetize those pageviews as well.
It's no secret that we're in the business of making as much revenue per pageview as we possibly can. It's definitely something that's a function of being a local market publisher, too. Of the billions of impressions that are bought off of the exchanges, a vast majority of them are coming from national brands, national advertisers and the like. They're looking for an automated, easy way of getting the right type of audience, and if that exchange-based, data driven buy ends up having them get our inventory, then that’s a win for them. And if we're able to do it in a way where we have some price control and feel like we're getting fair value for that impression, then we're okay with it as well.
How long has The Star Trib been accepting programmatic buys? Was it a gradual process of testing a sliver of inventory and then a slow immersion? Or did you just turn on the spigot one day and let the inventory flow?
We’ve made our inventory available to the networks, and that model worked for years. It wasn’t until the rise of RTB and data driven decisioning that it became clear that whatever relationships we had with networks, they were in effect putting that inventory on the exchange and making money off of it as well.
When the role of working with networks directly ran its course, it was clear to us that we needed to find a way to do better on the digital side. We had been working with Rubicon on yield management for a long time and we decided to take the next step and have them host a private exchange for us.
As we've evolved, we've been fortunate to find a way to leverage our relationship with them, but at the same time, make sure we’re not entirely reliant on them either. There once was a time when you'd do your contracted deals with networks and set up a relationship with a supply side platform – set it and forget it, so to speak. With the private exchange, we take a more active role.
Does the Star Trib’s more active role in managing the private exchange involve balancing out the direct sales part with that programmatic part?
Certainly, you can just sign a contract and let her rip and the ads will be placed without thinking about it. What you have to think about, now, in terms of the use of programmatic buying that you didn't before, is what the goals of a given advertiser’s campaign are. Some campaigns are better for direct sales and others are better placed through programmatic. And a lot of it depends on timing and what sort of inventory we have available. We evaluate it on an individual basis, there’s no set formula for figuring it out.
The driving force behind our use of programmatic tools comes down to making sure we're getting fair market value for the audience that buyers want. To go a bit further, we want to set ourselves up to get maximum value for our inventory versus setting preset deals and letting that run its course over the period of the year and not really thinking much about it. If you're taking an active role, then you're more likely to be getting the maximum value of what the market will bear.
How big a revenue driver is programmatic for the Star Trib right now?
As a percent of the total, programmatically driven revenue is less than a third of our overall revenue. But I have no doubt that at some point within the next year or two, it's going to grow significantly. The idea of automation isn't going away. It's only going to become more pervasive. If you think about it, the way those third party newspaper ad services, like the ones provided by vendors like Centro or quadrantOne, go about it, it’s not being done programmatically, but it could be done that way pretty quickly. If that comes to bear, the percent of programmatic inventory fills will be a lot higher, quicker.
Overall, the amount of programmatic inventory for us is pretty fluid right now. Programmatic is the only indirect ad fill coming through the exchanges via demand side platforms. The reality is, “programmatic direct” is actually here now. We have had some campaigns filled that way. We’re plugged in with iSocket and Adslot, and we can process any demand that comes through those channels.
The Star Trib set up a paywall meter on its online articles last November. There was some speculation last week that the NYTCo’s digital ad declines were in part driven by lower traffic possibly caused by users hitting the paywall and being blocked. Have you experienced any ad sales declines related to your paywall? How do you guard against it?
Anyone who has ever modeled paywalls, and attempted to project what the impact on pageviews is, will notice that there's an inevitable decline. Our modeling has shown that it's a manageable change, so when it comes to revenue, we're confident that when we do make changes to our meter, which allows non-subscribers up to 20 articles in a given month, we'll be able to cover that loss. The area that effectively does get hit is our non-directly sold inventory.
We typically have enough impressions to fill all of our directly sold, guaranteed inventory. I’m not saying that that's not an issue for us either. Whatever adjustments we'll meet, we make sure they aren't so profound that it has a bigger impact than what we're modeling right now. But I can tell you that our revenues are up and the paywall has played a role in helping our digital revenues rise. Overall, its impact on advertising has not been a big factor yet.
Does the paywall help drive up CPMs for direct sales, since the idea is that if the audience is paying for content, they’re probably more engaged? Conversely, if people are being restricted at a certain point, does that put downward pressure on non-guaranteed inventory?
In any direct sales conversation, the paywall is definitely a positive factor. I go and call on any client directly, or their agency who values my local market, values my content, and that idea of a more engaged, paying user totally plays to them. On the programmatic side, that has no bearing.
In terms of making the non-subscriber audience more scalable, do you try to position any of your content in more of a national way, so you can benefit from more general audience buys?
In the grand scheme, we emphasize that we have a strong in-market audience. We also have a decent out-of-market audience. But we’re not trying to be a national news service. But that's not discounting us. For people in our region, we are their main stop for news. Are we going to be the one stop for somebody in New York? We may be if they have a strong affinity for Minnesota. But that’s not really representative of any meaningful activity on our site.
How do you see the wider newspaper industry trends impacting the Star Trib? Considering that on one hand, digital is where the growth is, but in terms of actual revenues, it’s still a fraction of total dollars newspaper operations generate. Where is your paper positioned with regard to those trends?
I think we're one of the only major market newspapers that have had four periods of Audit Bureau of Circulations’ growth. We may be setting a trend for how growth and newspaper vitality can actually be. That's not to say that's the case in every market or with all of our peers, but it's something that we’re doing very well. It is certainly helping us in adverting, and advertiser needs, and how that is evolving.
Of course, we're facing the same challenges that everyone in traditional off-line media is, but I think what we have going for us is that The Star Tribune is a strong, if not dominant, brand in this market. If that remains the case, we're going to be in a good place whether it's print or digital. It's not a layup by any stretch, but I think we positioned ourselves very well to ride the tide and the current as well, so to speak.
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