Recently, my family and I found ourselves running ahead of schedule for our end-of-vacation flight back to Raleigh out of Bangor, Maine. To kill some time, we stopped by Stephen King’s house.
Maybe at night it has more of a spooky feel, but by day, not so much. “Nice landscaping!” said my wife.
I had to remind myself that not all of King’s stories are scary. Remember “Stand By Me”? There’s a scene in the movie that’s actually hilarious, when one of the teenage boy characters is talking about a legendary blueberry pie-eating contest. In his telling, one of the competitors gets revenge on his town (they had bullied him with the nickname “Lard Ass”) by instigating a chain-reaction vomit fest of everyone in attendance.
Maine is known for its blueberries, and we ate a lot of blueberry pie on this trip.
This is all to say that newspapers should be eating a lot more blueberries, too. I’ll explain.
As it stands now, newspapers work to help solve one main problem for businesses: Bringing more customers to their client companies through advertising.
To provide a sense of scale, I asked Claude to do a back-of-napkin analysis of services that businesses buy from the marketplace. I suggested Claude divide those services into four “pies” and estimate annual national spend as well as average percentage of operating budget for businesses that are smaller than $10M:
Here’s the thing though. Advertising spend represents just a sixth of the marketing pie. The largest slice consists of sales rep salaries and commissions, with agency services and software comprising most of the remainder.
Now, that advertising slice was more meaningful when newspapers successfully competed for so much more of it. In 1975, for example, newspapers captured about 30 cents of every ad dollar spent (about a third of that pie piece). Today, however, newspapers only grab about 2 cents of every ad dollar, a 15-fold decrease in market share (with significant losses to cable, streaming and Google/Facebook).
Newspapers are competitive for just one fiftieth of the advertising pie slice. All that trouble — for the equivalent of one stinking blueberry!
Consider again those sales rep salaries and commissions, which represent half of the marketing pie. What businesses wouldn’t give to outsource a chunk of their sales! Hiring and training a sales rep — who might not work out at all, or who might jump to another company — is a huge risk.
If newspapers already have a sales department, why not have them selling more stuff? I know this is controversial, because every time someone brings up expanding the marketing mix to a legacy newspaper, the sales department pushes back. The word “cannibalization” comes up, as in, “If you have us sell X, that’s going to cut into our ad sales!”
In 2010, I sold a video production company I’d founded to a newspaper whose publisher wanted to use that business to create video ads for his advertising clients. It didn’t go so well for him, he said, because his ad sales reps didn’t want to cannibalize their print ad revenue.
Steve Jobs famously cannibalized his iPod product by building the iPhone, explaining, “If you don’t cannibalize yourself, someone else will.” So intent was Jobs at wanting to stay at the front of a sales trend that he had Apple abandon the iPod even before it had hit its peak sales. He knew that the prospect of an iPhone represented a much, much bigger pie.
You know who should have listened to Apple? Blackberry.
Newspapers should take a lesson from it, too. I’m afraid my buyer’s story is more the rule than the exception. When I talk to publishers, they discuss waiting for ad sales directors and reps to retire to clear the way for new initiatives. The notion that a department or even one individual within one’s company can quell innovation until they are good and ready to retire is perverse. What is this, the Ad Sales Mafia?
I often hear the word “loyalty” mentioned in the context of staff resisting change. Innovators look for an island when you’re lost at sea; loyal “Maintainers” give you a big bear hug — and threaten to drag you to the bottom of the ocean.
Ad sales might feel like a bird in the hand worth preserving, but this is a hummingbird compared to the ostrich it used to be. There’s got to be a willingness to go big or go home.
My late uncle was a career chemist for 3M. He holds the patent for the electrodes you’ve certainly worn on your chest if you’ve ever had an EKG. Before that 1983 invention, getting electrodes to stick to the skin and be effective was a messy and painful endeavor.
Investment in innovation often produces results. The classic example is IBM, which went from being a hardware company to a services company. American Express, Western Union, Fujifilm and Corning are some other examples of companies that diversified their offerings in the face of tremendous shifts in their markets.
Unlike these business examples, publishers never really had to invent their business model. Subscriptions and ads were legacy products handed down by previous generations.
Sans innovation, we cut costs, find efficiencies. We add a few marginal gains in event management and charitable dollars. But for most newspaper companies, such optimization won’t be enough to turn a profit. Without profit, one does not have a business today; given the inevitable rise in production costs, without year-over-year increases in revenue, one does not have a business tomorrow.
Something else: Steve Jobs liked to preach that it’s a mistake to begin one’s sales journey with a product and then try to figure out how to sell it to the market. Instead, the first step should be to get to know your user (in this case, the business customer), understand what they need, and only then design a solution. As someone else put it, “Why are we always presenting last year’s play in front of this year’s set?”
Lois (not her real name) had been in business eight years. Her home healthcare business in Raleigh was struggling to pay her a living wage. She’d survived one disastrous business partnership and was trying to rebuild. When we met, she was finding it difficult to gain attention in the market and bring in new customers. Her expertise was therapeutic, not on the business side.
My firm redid her logo and branding. We did it quickly — and we did it at no cost to her. Lois was suitably impressed and signed up for a 12-month subscription to Clockwork for BusinessTM, my firm’s experimental approach to helping small businesses in the AI age.
In the first month my team helped her choose a domain and build out a Squarespace website to go with a new business card, flyers and employee recruitment collateral.
In Month Two, I met with her to talk about her financials. Collaborating with Claude in Excel, then checking the work with a fractional CFO, we created for her the relevant financial reports and cash-flow forecasting with two years of transactions from her business checking account.
That led to some hard questions, such as: How did she arrive at her pricing? What was a new customer literally worth to her in terms of margin? This is difficult work, as Lois isn’t a math person and doesn’t like the idea of raising prices. She wants to help people, and she naturally thinks this feel-good impulse will bring good outcomes for her business. But the numbers showed that her business was on a treadmill.
Over 99 percent of businesses are small businesses, and most of those fail within the first five years. Lois has some adjustments to make, and it’s up to my firm to help her succeed faster.
If I’m being honest, I don’t know yet if I can develop the systems and knowledge base to scale to hundreds of businesses in a given market. But I think someone has to try. It’s clear that business owners want advisement as well as help executing plans.
I think newspapers are well-positioned to rescue local business. Papers have the in-person proximity to businesses, a muscle-memory of trust and a rolodex of current and past business customers.
But it’s going to take a strong, public-facing commitment — and a sizable investment. The AI tools are powerful, but only if someone learns how to use them. Business, while by no means rocket science, can present its share of rabbit holes and tar pits.
I would strongly urge individual publishers and trade groups such as America’s Newspapers to start their own B2B skunkworks. Pool dollars and establish a laboratory that prototypes and tests new products and services from ALL the business service pies.
Newspapers have to abandon their current rendition of supply-side economics and venture beyond their comfort zone. They need to explore B2B services other than advertising and even marketing, as businesses are struggling with a myriad of issues from sales to HR to finance to IT. No one (yet) is stepping up to the plate to solve them in a comprehensive way.
We talk about reporters following the money to locate scandal; newspapers should follow the pain of businesses in their locales to discover the opportunity.
Newspapers offer a service that is taken for granted until an emergency (if you’ve ever been a parent, you can relate). Informing our citizenry of fact and truth is vital to our democracy, but the news is no longer a viable product and is unlikely to be so again except for a few winner-take-all outliers.
Of course, newspapers should continue to perfect the gathering and packaging of news to find new and larger audiences. But they must look elsewhere for the big bucks. To do that, they should lean into the other side of their institution, the business side, that all along purported to help local businesses succeed.
By the way: Having a healthy mix of businesses supporting a news operation helps to prevent ideological bias and, just as important, the appearance of bias.
So, publishers, don’t be scared: Go after bigger pieces of the business services pies.
Your newsrooms depend on it.
A former award-winning reporter, Eric Larson, MBA, led a successful newspaper turnaround and now focuses on the revenue side of newspapers. Reach him through his website: www.theorgdetectives.com.
