Local radio and television stations are in various stages of extending the broadcasting business model from traditional over-the-air to an array of digital platforms. This allows both new inventory with different attributes to be sold and a critical revenue growth path. How these digital incentives by broadcasting firms get resourced, managed, executed and evaluated is going to become an increasingly important part of the economic profile of the industry. Broadcasters need to know what’s working or not and why. They need to understand the opportunities and the threats in the digital media ecosystem. And broadcasters need to make commitments to the digital space in a meaningful but responsible way that ties back to corporate missions and the need to generate revenue growth.

These are the ingredients behind our new advisory service, “Digital Strategies for Broadcasting.” Technology can drive new workflows, partnerships and revenue streams, and in doing so challenge existing management and operational structures and processes. Running a broadcast company with digital media assets is quite different from running a traditional broadcast property.

BIA itself has taken the “digital plunge” with its acquisition of The Kelsey Group, which extended our expertise, knowledge and relationship base into digital media. With the launch of DSB we are leveraging those resources along with the expertise, data and services BIA has provided the broadcast industry with since 1983.

The explicit goal of DSB is to help our advisory clients develop and execute their digital strategies as successfully as possible. This may mean broadcasters but it can also mean assisting those firms elsewhere in the local media ecosystem looking to understand and work more productively with broadcasters as partners, service providers or vendors.

For more information about Digital Strategies for Broadcasting, click here.

Click to register for our free webinar on Tuesday, March 16, Digital Strategies for Broadcasting: Capitalizing on the Shift to Local and Digital Media.

Earlier this week I went to hear an economist offer his take on the current economy and how soon it would recover. Long story short, I believe the speaker, who had outstanding credentials, was overly optimistic. (I really believe he may have been on vacation on some secluded island for the past year.) In fact, his views were the most positive I have heard or read in the past six months or so. However, he did say a couple of things that I agreed with. One was that television and radio have combined their news and entertainment divisions so that a prime objective of news is now to be entertaining … that is to attract viewers and listeners. Therefore, he said, the media has good reason to say the sky is falling: It brings people in.

Recently, Sharon Begley wrote a column in Newsweek titled “Why Pundits Get Things Wrong.” She quoted a study by a research psychologist at Stanford University who concluded that there was no way to predict the accuracy of anyone’s forecasts. There was no relation to whether the forecaster was a Ph.D., an economist, a political scientist or a journalist or had any other credentials, affiliations or fame. What works for the media, she wrote, are “bold, decisive assertions that make better sound bites; bombast, swagger and certainty make for better TV.”

For more than a dozen years, The Kelsey Group has been predicting the future of the industries we cover. We take the best information we have at the time, talk to industry participants, weigh their views with our own perspectives and make forecasts of the future. We do the best we can to help our clients and the businesses we serve.

The acquisition of The Kelsey Group by BIA resulted in the combination of TKG’s strength in directional media, including all things interactive, with BIA’s strong position in television, radio and newspapers. The benefit of the merger became clear yesterday when the newly formed BIA Advisory Services released a forecast that my colleague Neal Polachek described as “an expanded and more comprehensive view of the U.S. local media sector (by widening our unique understanding) of local media by adding six categories to our forecast.”

It is a little bit unnerving to be offering a new forecast in this difficult economy. Some of the headlines about our forecast said “local ad markets shrinking,” or used terms like “declining” or “downward spiral.” Unfortunately, BIA and TKG analysts do envision local advertising revenues declining from $155.3 billion in 2008 to $144.4 billion in 2013, a negative 1.4 percent CAGR. What is notable, at least to me, is that most of that decline comes from the primarily directional media of newspaper classified advertising and print Yellow Pages. The growth is all in the equally directional Internet Yellow Pages, local search and other interactive digital advertising. There’s just not much share change in traditional direct mail, television, radio, out of home, cable or magazine advertising.

As Harry A. Jessell put it so well in today’s TVNewsday, “the newfangled competition will come, but nobody is in a better position to rule the local online world than TV stations. They have the content, the business contacts and an unmatched ability to promote.” Broadcasters should know that that was the mantra of newspapers 15 years ago. Recognition is the easy part; the hard part is following through and actually making the changes that will help you to compete.

ESPN, which is 80 percent owned by Disney and 20 percent owned by Hearst, has been a leader in verticalizing its brand and content, with dozens of properties covering everything from the core network to ESPN Desportes to the retail stores. Web sites and online radio have played prominently in the vertical mix.

Now The Wall Street Journal reports that ESPN will leverage some of its properties — especially ESPN Radio – to launch its first ESPN local-oriented Web site in Chicago, the location of several other “local” launches (HuffingtonPost, RHD’s ChicagoB2B.com, others). The site, slated to launch in April with MillerCoors as a charter sponsor, will feature a daily Chicago version of “Sportscenter,” ESPN columnists and local radio personalities.

It is likely that the site will grab some of the audience from the Chicago Tribune and Chicago Sun-Times. Currently, type-in traffic for ESPNChicago.com goes to ESPN Radio 1000, “Chicagoland’s Leader in Sports.”

BIA, which is Kelsey’s parent company, works closely with radio station groups and other traditional media players in finance, operations and strategy. Mark Fratrik has been watching Google’s efforts in radio sales (“Google Audio Ads”) from the inside. In the aftermath of the Big G’s decision to get out of the business, we talked to Fratrik to get his take.

“Google is facing the same downturn in the economy as the rest of us. It has exited the newspaper advertising sales market, and actually laid off computer programmers,” noted Fratrik. “After three years, Google hasn’t attracted a serious number of radio stations as clients. And the ones that have signed up only want to provide remnant inventory, in less attractive time slots.” Fratrik noted there were big cultural problems to overcome.

“Radio operators were never comfortable getting in bed with Google,” he said. “Among other things, the Google model asked for information that broadcasters thought was confidential. It also required the purchase of equipment. I heard the pitch when it was first launched, and I couldn’t see how this would be successful.”

Why didn’t Google’s entry into the radio advertising market work out? “The initial read three years ago was somewhat positive — they were going to use their core strengths in Internet scalability and transactional efficiencies to attract buyers and sell inventory that local stations were unable to sell. But even with their model and their reach to many more potential advertisers, they could not sell enough to make it a profitable business line.”

Some radio sales professionals have argued that radio ad time cannot be commoditized successfully by a Google-like approach. Local radio stations are also always finding it difficult to sell advertising (BIA estimates a 10 percent revenue decrease forthcoming in 2009). Is there still value in radio sales, generally?

“It is that vital personal connection to the local ad community that may well be broadcasters’ ‘secret sauce’ in ad sales and something that Google’s mighty server farms and sophisticated algorithms haven’t been able to crack,” argued Fratrik. While Google is exiting the selling of advertising time for over-the-air radio broadcasting, it is remaining in the online streaming advertising marketplace.

What does this suggest? “Clearly, online streaming has shown remarkable growth in recent years attracting demographic groups that advertisers want,” said Fratrik. “And not restricting the advertising inventory that Google can sell during those online broadcasts also makes it viable for Google to remain.

“Remaining in online radio advertising sales while exiting over-the-air radio sales is a tremendous market indicator of where radio broadcasting is moving,” added Fratrik.  “Several over-the-air broadcasters are already improving their online presence, and this action by Google should only prompt more radio broadcasters to follow suit.”

Weeks after its decision to abandon its Print Ads program, Google has done the same with its sister program for radio ads. Both programs offered ad buying capability in their respective media, through Google’s AdWords online ad platform.

The company essentially cited the same reason that it did for newspapers: “It didn’t have the impact we hoped for.” The remaining piece of this once three-headed traditional media division is its TV Ads program, which is reportedly doing well.

In April, we saw that the “audio ads” program was hitting a bump. While Google claimed affiliations with 1,600 FM and AM radio stations, it alienated some radio station owners by trying to force them to commit a percentage of a wide swath of inventory. 

Specifically, there were complaints that Google cut revenues after it made a deal with Clear Channel for 5 percent of the radio station giant’s inventor. This included both premium inventory, such as drive time, and remnant inventory at off hours.  The Clear Channel deal made sense for Google at the time, since it provided enough desirable inventory to be taken seriously by quality advertisers. But it placed competing stations at a disadvantage. 

Additional Reporting by Peter Krasilovsky

Pegasus News, the Dallas hyperlocal site, was seen as a great model for other markets when Fisher Communications, a leading broadcaster in Seattle and the Northwest, bought the site in July 2007.

But the roiled market in broadcasting apparently stifled Fisher’s ambitions. Ultimately, there were never serious efforts made to install a Pegasus platform on any Fisher property. On Dec. 31, Fisher sold Pegasus for $1.5 million to an unnamed company that is only being described as a “broadly held private media company.”

Before the sale, longtime Seattle Times interactive executive Nancy Bruner, who had been recruited to run Fisher’s interactive efforts, also left the broadcaster (although the two incidents are not necessarily related).

Pegasus founder Mike Orren says his 18-person team sees the sale as a good thing. Initial signs for adding the Pegasus platform to various Fisher markets had been positive, he says, but “the whole world for broadcast media changed a lot” since the company’s acquisition.

Ultimately, Pegasus never provided much more than some tech support and a few ideas, he says. Lost Remote broke the story and has some more details and interesting comments.

National Public Radio is going to try anew to rev up hyperlocal on the Web sites of its affiliates, according to a paidContent.org interview with incoming CEO Vivian Schiller, who was recruited from a leadership position at NYTimes.com. Schiller is a resident of Washington, D.C., where NPR is located.

The  proposed hyperlocal effort harkens back to the mid-1990s when there was a widespread (and short-lived) land grab to be the anchor for communities between newspapers, Yellow Pages, portals, city guides, TV networks, TV stations, local governments, cable access channels, cable MSOs, PBS and radio stations. Those efforts generally fell by the wayside, and hyperlocal has mostly been the province of local bloggers, blogger networks and directory-like start-ups.

“So many companies have started and folded trying to win in local hubs,” noted Schiller in the paidContent interview. “Big news organizations spend hours wondering how do I create the hyperlocal presence, you don’t have the infrastructure. NPR can do it. It already has the trust and the infrastructure in every town and campus in America. I want to find a way to create indispensable local media hubs.”

We’ve long known Google to be on a path toward facilitating media buys across a cluster of offline traditional media. A clearer glimpse into this vision was given yesterday by Meredith Papp, product marketing manager at Google, during TKG’s session at SES.

Papp, who works for the division that handles traditional media advertising strategies, presented a few of the ways the company will be a one-stop shop for online and offline media buys. This ongoing strategy will essentially tie together moves made by the company in radio (AudioAds), television (Google TV), newspapers (newspaper pilot program) and magazines (remnant ad placements).

Using AdWords as a central hub, users will be able to manage all these campaigns together (along with paid search), and see how they affect each other, as well as online traffic and click performance. With some of the aforementioned media efforts, the company has also gained the capability to produce spots for television and radio.

Google TV could be huge for all the reasons we’ve examined around the growth and lowered barriers for SMB video, combined with Google’s reach and brand strength. And radio has lots of promise for Google, initiated through its acquisition of dMarc and enhanced by its agreement to resell Clear Channel radio inventory. Looking forward, radio ads could also have lots of synergies with any future Goog-411 monetization efforts, which will similarly use audio ads.

One example given by Papp involved the ability for an advertiser to produce a radio ad and target various geographies, demographics, etc., using the AdWords dashboard. But the neat part was this particular advertiser’s (outdoor clothing company) ability to determine that its ad automatically run when the temperature reaches below a predefined level.

There will be lots of examples like this for dynamic ad placement. This could be a powerful proposition for many local and national advertisers that want not only to diversify their ad campaign across different online and offline media, but also to have a much greater ability than ever before to manage and track campaigns all in one place.
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Side note: It’s looking more and more like Spot Runner should be an acquisition target for Google in its growing agency-like role with video production and distribution across many media and its direct sales efforts. The price tag is getting higher though — especially after the company’s recent $51 million funding round.

These are tough, fast-changing times for newspapers, and many of them are taking severe measures to get back on track. Sometimes, it means putting the innovative online guy in charge of print too, as Bay Area News Group has done with online advertising head David Prizer. But sometimes, it means consolidating power under the old print hands that believe they need to “own” the online efforts because that is where the action is.

Last week, The San Diego Union-Tribune, for instance, laid off its online leadership: GM Chris Jennewein, content head Ron James and business development head Jim Drummond. Mark Davis, the paper’s current head of strategy, will take over the Internet operations.

Some anonymous spin in The San Diego Weekly Reader, an alternative paper, suggested that Jennewein and his team probably had to go because of a “disastrous” experiment in the creation of an online radio station, and its decision to provide a bigger news footprint during the San Diego fires last year, removing advertising from the home pages. The implication, I guess, is that the paper should stay on the straight and narrow and maximize all revenue opportunities (or whatever the cliché.)

But will the print people clearly see the opportunities inherent in the online world of marketplaces and community? Can they leverage what they have into new businesses? It is a fair question.

I have consulted for SignOn on and off for eight years. From my limited interactions with the company, I could see that there had been tensions among the print and online staffs. But I don’t know the real reason for the online team’s removal.

From my observation of SignOn, I can tell you that the site has been a pioneer among newspapers in the creation of e-mail targeting for local businesses and sponsored verticals, especially for tourism, such as a Super Bowl guide when the Super Bowl came to town. SignOn also created a business directory that specifically focused on tourism. And it has extended the franchise to vertical directories in print, creating widely distributed elder-care and legal directories.

It also has been a pioneer in the use of multimedia, including photo libraries, podcasts and video. All this especially came to fruition during its exceptional coverage of the devastating San Diego fires, where the site was a community lifeline for hundreds of thousands of people who had been evacuated. I don’t remember any criticism about its decision not to run advertising on the home pages at that time.

What it was doing was building the loyalty of the local audience. Shouldn’t that be priceless in a town where the print circulation is in the low 20s?

The site has also conducted a number of inexpensive experiments, including the Wikis for local community and music scene information and mobile news headlines, which might be seen as a necessity in QualComm’s hometown. More recently, it created the AmplifySD Radio local music station and the SignOn Radio station, which expanded the paper’s footprint to the work day with weekly shows on such topics as local gardening, dining and online politics.

I will need to talk to someone who can tell me why it was such as bad idea. While there had been some equipment to purchase, the day-to-day operating costs certainly weren’t very much.

What Jennewein and company didn’t do was jump after every opportunity and reinvent the wheel with every new thing that came along. They prioritized and worked within a budget.

The print people will now apparently take over the reins of the operation, determined to focus on both print and online. Maybe they will do better. But obviously, this will only happen if they understand what Jennewein and company have long understood: that their job in not only to sustain existing revenues, but also to create new revenues that comes from the opportunities that are inherent in interactive media and by reaching a broader swath of the dynamic San Diego community.

Google’s ambitious effort to take its bidding system across media might be hitting a bump in radio. The company’s program started out fairly well when it bought dMarc (since renamed Google Audio Ads) for $102 million plus incentives in 2006. Since then, it must have been doing something right. It now claims affiliations with 1,600 FM and AM radio stations. DMarc only had 700 affiliates.

But Google Audio Ads has alienated some radio station owners by trying to force them to commit a percentage of a wide swath of inventory, said various station executives.

One owner complained that Google significantly cut his share of revenues “on the day that it made a deal with Clear Channel” for 5 percent of the radio station giant’s inventor. This included both premium inventory, such as drive time, and remnant inventory at off hours.

The Clear Channel deal made sense for Google at the time, since it provided enough desirable inventory to be taken seriously by quality advertisers. But it placed competing stations at a disadvantage.

By contrast, Bid4Spots has curried favor with its reverse auctions for unsold inventory held every Thursday, according to CEO Dave Newmark. The system is mostly utilized by national advertisers, which gain a broad reach at the local level.

To be sure, Bid4Spots doesn’t have the clout of a Google, and is less likely to be as persuasive in bringing as many new advertisers to radio, which isn’t an easy sell right now. Perhaps the stations need to be forced to give up some of their prime inventory. But results have been good, and the stations like it.

At this point, the auctions are grossing $100,000 to $200,000 every week. They have grossed an aggregated total of $8.5 million of auctions since the company’s founding in 2005.

Bid4Spots’ Newmark touts his reverse auction model as a win-win for radio stations. It is totally voluntary, there is no revenue share beyond normal agency commissions (15 percent), the spots generally come pre-produced, and the funds are pre-cleared.

Most importantly, the rates are sealed so that the stations are not competing against their own rate cards or revealing competitive information to other radio stations. If the stations can sell the spot at a higher rate, they can simply withdraw the auction. “This motivates them to drop their rates,” says Newmark. “When prices are this low, they must be sealed.”

The Bid4Spots system is especially appealing when compared with Google’s requirements for desirable inventory that could otherwise be sold at higher prices. If stations wanted to go that way, they wouldn’t go to the trouble of an unorthodox marketplace, says Newmark. That’s why previous “forward auction” models such as AdAuction.com failed (back in 2004).