local media insider

Times Digital Group's in-house agency bills $500,000 its first year

A small, separate team with more chemistry than hierarchy creates a success in Kingsport, Tennessee

Alisa Cromer
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Initiative: Times Digital Group, separate ad agency

Media company: Kingsport Times News
Market: Kingsport, Tennessee

Key executives: Patrick Savage, Business Development, David Cate, president

Summary: One version of the "agency model" is to replicate a full service ad agency owned by - but separate from - the original media company. The Kingsport Times, now bills about $500,000 in annual revenues from its agency, right down the street. Here are steps they took and lessons learned.

1. Forming the company

The  Kingsport Times News always had a separate digital division that handled the newspaper website and digital sales. In 2010, in order to form the ad agency, the company reintegrated half of the digital division back inot the newspaper company to facilitate the digital first strategy, train ad reps, create banners, and manage the site. The other half of the staff - about five people - was spun off into a digital advertising agency with a new business model, Times Digital Group.

2. Location

The group was originally run out of a “hole-in-the-wall” separate from the newspaper site. While some media companies split out digital into separate facilities to avoid absorbing - or being absorbed by - the older newspaper model and culture, in the case of Kingsport, it was a branding issue. In February, 2011 the agency moved to a a trendy downtown storefront, with high ceilings and an entire wall is painted with IdeaPaint, creating a giant white board. The new digs are intended to generate a new identity; and also to circumvent the bias some large accounts have formed against newspaper companies.

"I know this sounds harsh, but we've done everything we possibly could to separate ourselves from the newspaper; to provide fresh, progressive ideas," Savage said.

3. Agency structure

Ad agencies have a different organizational structure that fits their business model, a small horizontal team that uses contractors until full positions can be established. For most local agencies, the majority of revenue comes from services, not placement fees.

“Very little has to do with buying audiences,” Cate says. Key staff were hired from ad agencies – only the team leader has a background with media. The key sina qua non (without which that, it will not happen) positions for the agency include:

*General manager (who also helps with business development)

*Art Director

*Trafficer who coordinates the buys, production and street teams

*Business Development

Additional staffing provides services in high demand as the group developed; ie  programming, videography and copywriting (the last two were eventually hired). The team also uses e-lance for back-up work. In total there are eight people on the new team. There is no programer as yet, although they are considering hiring one based on the volume of revenues (40% of total). They picked PHP and WordPress to be the core platforms supported, but are now working on three projects with three different disciplines. Part of the need for programming comes from building sites or landing pages that tie in to promotions.

 Cate notes that creating the team took more chemistry than formula.

An example of a key hire is Patrick Savage, business development; at age 32 he already has ten years of agency experience. He and Cate originally met via their membership in the Ad Federation, where they often talked about changes in media strategies. Patrick was laid off around the time that Cate was developing the agency. (Tip for local media companies thinking through this model: Join the local Ad Federation or other social media executive groups and get to know people who may be potential recruits.)

The agency background prevented the kinds of bias that often blind-sides sales reps to what their clients are really thinking and wanting to buy.

From Savage: "I never worked in newspapers...Newspaper reps have a bad reputation. They (clients) find them pushy. They see them as sales people more than marketing."

“This is the same opinion I had coming into this; I'm not a sales person, I'm a media specialist. To me it doesn't matter if they buy print. I coordinate everything based on the return they want to get, and the money they are willing to spend. We've found that with the higher level client they really appreciate that. They really felt like they were being pitched and forced into something that didn't really work."

Each person on the team has multiple skills. Both Cate and Savage, who share biz dev responsibilities, can operate a video camera and produce a shoot, or sit down at a computer and create graphics. Savage pointed out that all team members have a Bachelors degrees in a related field.

“If you are going to go small you have to wear a lot of different hats. The title moniker doesn't really work. Even the idea of a manager as a guy who tells people to do stuff - and has nothing to do but that - is not really applicable. We all do video work; we are dabbling in different aspects of the business. Agencies themselves are dealing with the same climate of change,” Cate says.

4. Targeting larger advertisers

The agency targets higher-end advertisers; a typical client will have a $20,000 plus capacity.

“I don’t want to be a cable TV person,” says Cate says, referring to the small digital services contracts. “I don’t want to sell contracts as small as $79 a month. “

Proposals are based in part on hourly time to produce campaign components. Patrick says he doesn’t really look for a monetary amount, but rather a qualitative criteria: “Anyone who has an actual marketing plan.”

Cates sees the agency as going after larger accounts, with the smaller accounts are still handled by the newspaper. The sales strategy also requires thinking “big,”

“Our strategy is to have a great idea for a client before we even go out on a call,” Cate says. Currently about half of the new business has come from referrals, they include a project for a university, another local newspaper, and an employment agency, and the city of Kingsport.

"I love not selling, if that makes any sense," Cate says.

These accounts are part of very close relationships the Times developed over the years. Cate registered Kingsport.com for Times for the newspaper in 1998, and then negotiated its sale to a group of partners. Today, the site build out by the agency will be a joint venture between these two and the city. The original contract is $30,000 with potential $100,000 next year. The new city web site will have sign up for text for a variety of partners, including the power company, school system, Chamber, and City to post things like road closures. The newspaper company will also be a partner in return for promotions, and sell to local businesses.

Other clients include Food City, Bristol Motor Speedway, Pal’s Business Excellence Institute, Bristol Rhythm & Roots, Johnson City’s Blue Plum Festival, the Kingsport Chamber of Commerce 


5. Products and services built around campaigns

The largest shift in thinking is from selling audiences to selling services that produce agreed-upon results. Even the programming often supports new sites for individual promotions.

“At one time we were selling audiences; we’re selling services now and services have a different value. When you are selling services, the value is in the quality of the overall campaign, branding and conversions.”

Services provided include:

*Producing blogs (nine of ten advertisers can not sustain them)

*Microsites for events and promotions

*Custom mobile apps

*Media buying on behalf of clients

More of the business requires billing hourly. Unlike newspaper, the design is not free. Hours are tracked on freshbooks.com (timefox.com is another recommended program). The focus is on the quality of the new campaign and the objective results from the overall campaign, rather than on the price of media. The separation of the brand and location helps to sustain the hourly pricing (imagine giving creative away for free in one part of the building, but charging for it in the next room).

6. Clarity about the newspaper relationship

Newspaper sales representatives are commissioned on accounts sold by the agency – just like any other agency sale. However Cate and his crew have access to the newspaper account base and can cherry-pick accounts they want to call on.

"We can say we think the account has more potential,” Patrick says.

“This answers the problem of individual accounts shifting from print (and therefore, being lost). We've worked this out pretty well. Our job is to do what is best for the client; to reallocate dollars most effectively to retain the account,” Savage says. Occasionally the print rep goes with the agency rep, but “most of the time we are by ourselves.”

The only account that actually gave up its print buy was Crystal Motor Speedway, who was only a trade account. The new plan utilizes QR codes, a personalized URL for contests that include a 50th anniversayr contest, creation of a contest web site and social media videos. Each initiative has generated from $11,000 to $20,000, and will “more than likely reach $100,000 by the end of one year.”

Results

1. Revenues are around $400,000 for 2011. In comparison, banner ad sales on the newspaper site are around $500,000.

2. Largest category is web development, which accounts for 40% of revenues, followed by video at 30%, and mobile at 10%. The rest is composed of various services and consulting. “The web is changing, people come in through the back door, no the front door, through social media channels.”

3. Video is especially lucrative and in demand, up by 300%. Clients include a cooking school, grocery store, local realtors, and business conferences including the Chamber’s award banquet.

4. In 2012 the agency was asked to budget for 20% growth.

Lessons learned

1. Separating from the print model can increase print buys.

“We don't necessarily see ourselves as not being print-friendly. I started as a print buyer – of preprinted inserts over eight states,” Savage said. “But every year we saw that the print slice is getting smaller and smaller. We need to convince accounts that we can handle social media, viral video and interactive marketing. We can be a full service interactive company.”

2.  A small agency requires an entrepreneurial leader
Cate says he “takes things “personally” and operates in an start-up environment. This is a key factor we see in successful agencies is the dynamism of the leader. We've seen this with other inhouse agency teams as well.

3. A small, driven horizontal team
Cate proposes that forming an agency is not a formula. “You can’t just have an ad rep and start… it’s all about talent. You have to have the right talent in place before you consider doing something like this… at least a few people who have a joint vision, because it won’t work otherwise.”

Regarding hierarchical roles: “I had this discussion with my publisher; they (on the newspaper side) are all used to having a manager. This day and age it’s not a healthy thing … to have to have people in place to tell people what to do, especially when it is as small as this.”

Resources:
Hours are tracked on freshbooks.com (timefox.com is another recommended program). Please see How to Start an Ad Agency for a full list of resources recommended by members. 

Many thanks to David Cate, president and Patrick Savage, business development for sharing their expertise with us and to the Local Media Association (formerly Suburban Newspaper Association) for inviting them to speak at various conferences.  

Alisa Cromer

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.

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