Is Small Business Big Enough For TV?

Chew on this figure for a moment: $390 billion. That’s more than the GDP of some 200 nations worldwide, including Israel, Ireland and oil-rich Venezuela. It’s also the size of the prize at stake, by one media industry estimate, in the digital marketing services (DMS) bonanza.

Take a look at who’s going after that pot of cash and you could well ask, “Who isn’t?” Google’s in the hunt, as are Yellow Pages companies and major newspaper chains  such as Hearst and Gannett. Of course, newspapers and the print Yellow Pages took huge advertising hits in the last decade as the Internet exploded, while TV stations suffered less.

But now, key questions arise as to where TV stations stand in the DMS rally. First: Are TV broadcasters being left in the dust by competitors who have already staked out the beachfront property in this relatively new revenue sector?

“Everybody’s getting into it, the Yellow Pages companies, the radio companies; they’re all putting a foot in the water,” says David Lewis, vice president of marketing for LocalEdge.com, a digital marketing services agency that Hearst Newspapers syndicates to other newspapers. LocalEdge dates to 1968, and started as a Yellow Pages company; it entered digital seven years ago.

EVERYBODY IN THE POOL

“Three to four years ago, only a couple of big players were doing this,” Lewis says. “Now you see companies that specialize in SEO, or social media, and three or four big players at one end of the top 20 metros. There are also a lot of boutiques entering the space; here in Buffalo there are probably 40 digital companies, whereas a few years ago there were only three.”

But is Hearst using LocalEdge with its own TV stations? “They just started offering a search product of ours in the past few weeks, and we only see that growing,” Lewis says. That product is customized search engine marketing (SEM), where companies can buy clicks on major search engines.

“With the TV side, this is so brand new that I just [entered it] into our system,” Lewis adds. “We haven’t even sold anything yet, and we haven’t even rolled it out to our sales force. They’ll be reselling our products, and we’ll do the back-end fulfillment and customer service.”

As for why TV stations, even at his own company, are just starting to explore DMS, “I’m not sure why TV was a little slow in jumping on board,” Lewis says. “They’re probably not as impacted as newspapers and the Yellow Pages side.”

And that leads to a second question TV stations must ask themselves about digital marketing: Does it really matter? For depending on your point of view, digital marketing services represent either the next unconquered frontier of local advertising, or a sector that requires a whole lot of work for not all that much revenue.

Sure, a $390 billion revenue pot is big: Just ask Gordon Borrell, the CEO of Borrell Associates, a company that gauges media ad spending in local markets. His firm came up with that estimate in a report on digital marketing services published last October.

But half of that amount is generated from just two sources: website design and development. “Time and again in all the surveys we’ve done, advertisers view their own website as advertising, like the sign outside their store on the street,” Borrell says.

Borrell’s research also shows why some TV stations shy away from committing to DMS. Compared to a spot for, say, a TV ad at the height of the political campaign season, the returns on many digital services are miniscule. Website hosting might cost $10 a month, reputation management $15 a month or search engine optimization $400 a month — though those services and more add up to an average annual expenditure of $17,000 per business.

As Borrell puts it, the DMS play cuts two ways for TV stations. For them, it’s a phenomenon that’s both largely unexplored and incredibly diverse — even complicated. Year to year, the channels for digital exposure expand faster than you can say “cyberspace.”

“That’s the damndest thing: There’s no one outlet you can point to like search advertising, or an ad on Facebook or LinkedIn, that’s the answer,” Borrell says. “It’s not one thing, but a myriad of things, and that’s why it’s so difficult. Everyone wants the world to be simple and to have the silver bullet. Unfortunately, what works is doing just about everything and doing it on a very consistent basis.”

So TV stations going after local advertising via digital marketing have to think not just in one direction, but at least six. Or 12. Or more. It wasn’t all that long ago when local media consisted of whatever you could print, hear on radio or see on TV. But in the last 25 years alone, media choices have roughly doubled. “That means more billboards, several hundred cable channels, email, mobile devices, smartphones, iPads,” Borrell says.

On top of that, you have to think like the local plumber or pizzeria owner who’s approaching digital exposure more as a hassle than an opportunity. Assuming they know anything about digital to begin with, they worry about their websites and Facebook pages; their email lists and newsletters; their search rankings on Google; their daily Twitter feed. And if they don’t know the Web from a cobweb, they want someone to take the digital marketing off their hands so they can concentrate on plumbing or pepperoni pies.

And then there’s mobile, which despite its rocket-fueled growth among consumers has even less certain revenue prospects. “It all weaves together in a very complicated way, and the digital marketing services have become popular because it’s a way to weave through the complicated jungle and get the message across,” Borrell says.

So should TV stations join what Borrell has called the industry-wide “lemming dive” into DMS? “It’s optional, not mandatory,” he says. “They’re not going to die if they don’t do it, but right now they’re failing to leverage themselves into a new business, and that’s a shame. It’s just a more interactive version of their TV station.”

GANNETT’S ON BOARD

One company moving into digital in a big way is the media giant Gannett, which owns 23 TV stations and 82 U.S. daily newspapers. “It’s just a logical progression in the history of the company,” says Vikram Sharma, CEO of Gannett’s digital marketing services in print and broadcast. “We have investments in cars.com and careerbuilder.com. We’re active in the digital space and have been for some time.”

In terms of building up the local advertiser base, Gannett has shopLocal.com, a shopping service that allows consumers to explore local business (and the national chains with local branches) in a format reminiscent of the newspaper Sunday circular. But it also has the power to propel its advertisers into social and mobile with a deep local reach, a combination that Sharma refers to as “SoLoMo.”

Sharma says that Gannett’s TV station reps are starting to get an idea of how much digital marketing firepower the company has at its disposal. “A car dealer in Cleveland, someone we worked with in broadcast, came up to our TV rep and said, ‘We’ve been working with you on TV for the longest time, but my kids are on Facebook, and we know we need to to do something with that, and we don’t know what it means.’ Our TV rep replied, ‘I know what you’re saying, I don’t know what it means, but I know someone who does.’ “

And insofar as outlets for digital marketing, Gannett has also been aggressive about building them. It got into the daily deals space in 2011 with dealchicken.com, which can work the local business turf for revenue in much the same way Groupon does.

“They work in concert,” Sharma says. “We’re doing the same thing in our TV markets that we do in print. There are lots of people who advertise with us on TV who also advertise in search engine marketing, and are looking at social media.”

Still, “it’s not an exact science,” he acknowledges. “It depends on the market and the competition. Consumer behavior has changed, and we need to bring a comprehensive set of services to the table that responds to that.”

For those TV stations wondering where to go next, one answer in the short term might involve TV stations working with the search engine giant Google, says Jim Doyle, who runs a national sales training and marketing consulting firm that partners with broadcast and cable television companies.

“Google’s going to become an increasingly bigger competitor and some TV companies are doing alliances to sell keywords,” Doyle says. “But the greatest combination is to have a high Google presence, and a high awareness before customers go to Google, in what’s called an organic search.”

THE OTA-DIGITAL COMBO

And that’s where TV stations can win the day in local markets, using a mix of station ads and digital marketing to help tip the scales in online searching. “Seventy percent of people typing in a search into Google aren’t looking up just any old merchant, they’re looking for a specific guy,” Doyle says. “I can use my core TV [campaign] to have that awareness high and win the organic search, while a Google alliance can help me win the non-organic search.”

And certainly, marrying digital business to a broadcast platform has become the way forward at one publicly-traded company bouncing back from near bankruptcy.

“We’ve recognized that local is our franchise,” says George Mahoney, CEO of Media General, now a pure-play TV broadcasting company after selling off its newspapers, while making increasing forays into digital. “We’ve recognized the importance of local content. And so in 2012, we added 13 new newscasts across Media General…. We’re doing the same kinds of things on the digital side. We have a different set of initiatives there, but we also are growing our digital business very nicely, and focusing now on audience extension products and audience development. We can marry those initiatives to the broadcast side so that both sides of the house are pulling together.”

This story originally appeared in TVNewsCheck’s Executive Outlook, a quarterly print publication devoted to the future of broadcasting. Subscribe here.