What numbers are the most successful local media companies tracking - and achieving? This report gives you a start by showing a few that should be on the new dashboard.
Top performing Morris Publishing Group has created a snapshort report (see image to the right) that tracks its major digital revenue stream via three essential criteria - the Sell-through-rate (STR), CPM and ad count, tracked this month over last month, to focus the company on monthly incremental growth.
Borrell & Associates also identified a total of nine metrics that top peformers (by market share of advertising in the DMA) pay attention to. Below is a run down of these numbers. A sample dashboard for these numbers, and replication of the Morris mini-dash is included as an attachment
1. Operating profit margins
Borrell suggests that "reorganized or re-energized companies" work from margins around 5% to 10%, and that these margins will edge up to 30 to 35 per cent in later years.
"If you really think that you can knock the ball out of the park with your revenues, I'd scale that expectation back a little bit," Borrell said in his presentation.
"The profit margin in digital media is destined to be similar to radio, where there’s very little cost in product and delivery. Radio’s EBITDA is typically 30% or more, and we fully expect many digital operations to get there as well. "
Top companies focus on marketshare to expand profits, rather than increasing margins. We think 30 to 35% margins are very realistic for digital revenue streams, many of which are self-serve, but not for the overall media company, as local media will remain high touch and very competitive.
2. Share of local online ad spending - 15%
Borrell has two reports; the digital advertising for your market is free here; the overall advertising per market is a paid report provided here. Borrell says top performing companies achieve 15% market share. He noted that this goal may take three to five years to achieve and that 30% is the maximum in any DMA.
Tracking marketshare encourages companies to break out of incremental thinking and focus on the larger potential.
3. Online revenue from legacy advertisers - 45%
Expect 45% of digital revenues to come from legacy advertisers.
This statistic demonstrates the need to track not only upsells of digital to current advertisers - but also penetration into new markets.
The "butterfly" arising from the "mediamorphosis" is more like a thousand unrelated insects. There is just not enough revenues in the existing models to sustain the existing models for news. Developing an overall strategy means new high end and low end products and services that appeal to new groups of advertisers.
4. Inventory sell-through rate — 100%.
This benchmark has a sister: Dollars lost to unsold inventory, in a perfect world, is zero. Borrell recommends reporting the value of unsold inventory in dollars to management as a way to light a fire under sales of digital sales. Managers don't like looking at unsold dollars.
As Borrell notes, "several of the dashboard metrics are politically motivated. That is, companies are using them to motivate their executives. If you aim for 100% sell-through and contain a dashboard item that says the value of last month’s unsold inventory was $50,000, don’t you think a publisher or GM is going to notice that figure and want to do something about it? Yes, of course. And what they’ll do is get the legacy reps mobilized to sell – or better, hire more digital-only sales people."
A correlary here is to monetize all remnant ads via ad networks. 40% of remnant ad space is not monetized in any way, according to a recent study of 30 markets by Mather Economics.
6. Percentage of local businesses that advertise with a dominant local media company— 40%.
Print and online businesses should be able to create relationships with 40%-50% of the businesses in their markets, Borrell said.
We advise members to track advertiser count; this is a key indicator of market share in a universe in which businesses have, literally dozens of needs and preferences. Note that Morris's report tracks total advertisers running at any moment as a key indicator.
7. Email address of adults in the market — 80%.
With each email address worth $10 to $15 in annual revenue, building email lists are a fast way to power up other programs. Borrell contends that 87% of people more than age 12 have an email address, and to aim for a large overall chunk of these names.
Borrell notes, "We included the email goal because most online ventures have completely forgotten that email is a more powerful marketing opportunity than the web, yet they all focus on the web."
80% is a noble target, though we think 50% emails/population is a good objecitve. Keep in mind that unlike monthly traffic, which changes continually, email is accumulative - that is, once an email has been captured it stays on the list.
8. Average online revenue per digital-only rep - 2x salary
Borrell advises that digital reps should bring in revenues equal to two times their total compensation, depending on market size. So a compensation package that runs $35,000 to $40,000 in a small markets should produce $70,000 to $80,000, while larger markets with reps earning $90,000 should bring in $180,000.
9. Average online dollars per legacy rep — 10%. Borrell said that 5%-10% of legacy reps' sales budgets typically come from digital sales. Knowing this figure again underscores the need for digital only reps to make larger goals.
10. What about digital revenues as a % of total revenues?
We are seeing 25% digital to total revenues for for top companies with 50% as the 2016 target at high performing companies. However, this is not a statistic Borrell recommends tracking.
"It isn’t a metric that best-practice ventures track at all, actually. One could easily ramp this metric way up by allowing the core product to deteriorate."
See our worksheet on tracking these metric in your own company, attached, below.
Many thanks to Gordon Borrell and Colby Atwood of Borrell and Associates for providing this data to members and attendees of the 2012 LocalOnlineAdvertisingConference.
The author, Alisa Cromer is publisher of a variety of online media, including LocalMediaInsider and MediaExecsTech, developed while on a fellowship with the Reynolds Journalism Institute and which has evolved into a leading marketing company for media technology start-ups. In 2017 she founded Worldstir.com, an online magazine, to showcases perspectives from around the world on new topic each month, translated from and to the top five languages in the world.