Tiered Sales Model Works

Jul 31, 2006  •  Post A Comment

By Debra Kaufman

Special to TelevisionWeek

Internet Broadcasting’s advertising model features three tiers: partnerships with third party dot-coms such as Monster and TripAdvisor, the bread and butter of local advertising and – of increasing significance – national advertising.

The local advertising component is a natural, given that the Web sites are tied in to local TV stations, with their emphasis on local news and weather. According to VP of Local Sales Dave Buonfiglio, advertising is currently 60 percent local and 40 percent national.

In Internet Broadcasting’s business model, the TV stations reap 100 percent of local advertising on the Web site, and Mr. Buonfiglio’s team is responsible for helping them to create this new revenue

“Our concern first and foremost is that local stations are confident to create local revenue and are maximizing that possibility,” he said.

Selling online ads has been an uphill battle for TV stations, but that is changing, Mr. Buonfiglio said. “It’s interesting on the local level, and it’s getting more interesting every month,” he said. “There is an increasing level of acceptance in local markets to do this kind of advertising. We see a great deal of improvement in the acceptance of this as a viable medium, which has been very, very gratifying to see.”

Convincing existing advertisers to add an online component has been a major strategy for stations to up their online advertising revenues.

“They will approach their current TV advertisers and suggest a convergence campaign for the TV and the Internet, some kind of orchestrated, organized, integrated campaign,” he said. “It gets really creative. We’ll talk to the advertiser about what they’re trying to accomplish and then create a TV/Web campaign to solve that. TV obviously has enormous strength and the Internet has complementary strengths, so we try to create something that works on both media.”

As an example, Mr. Buonfiglio points to a recent advertising campaign for Scion dealers at Hearst-Argyle station WCVB-TV in Boston. The on-air/online campaign “What’s your Scion?” featured on-air ads touting the features of the Scion and encouraging viewers to go online at TheBostonChannel.com to build their own car and submit it for entry to a contest, with the prize of winning the car they had designed.

“What they got back was thousands of people who had signed up for the contest,” Mr. Buonfiglio said. “They had lots of interesting information related to the demographics of what people were interested in.”

Mr. Buonfiglio noted that the complementary nature of TV and the Internet is more than just the lean-back/lean-forward paradigm

“We’re talking about an at-work audience for the Internet,” he said. “For the Internet, prime time is daytime. We’re able to reach people where and when TV hasn’t historically been able to reach them. What’s nice about that media consumption cycle is that we’re not cannibalizing each other’s audiences.”

Early on, the stations created their own Web spots, but Internet Broadcasting quickly learned that most stations didn’t have the capacity to build a new set of ads internally.

“We realized we had all this on-air promotion the stations were committed to, so we got into the business of creating TV commercials so we knew we were maximizing our exposure,” he said.

Internet Broadcasting’s in-house production team also adds features such as surveying, e-mail, contests and even video (contributed by the local station). Some stations pay Internet Broadcasting for the production of the spots; for other stations, ad production is part of the deal they’ve cut. “It’s a very high-value opportunity that we offer,” Mr. Buonfiglio said. For stations that have promotion production facilities to create local ads, the producer sometimes shoots a quick 15-second Web ad before wrapping up the commercial shoot.

Advertisers have to leave their preconceived notions about media at the door when it comes to online advertising. “It’s less about demographic and more about lifestyle,” Mr. Buonfiglio said. “It’s more about being able to communicate to an at-work audience than to worry if the user is 25 to 54. The audience does skew a little younger, a little higher-income, a little more managerial by the nature of who has computers at work. That’s how we position.”

Aiming online advertising at the “busy-at-work” requires thinking out of the box. “From my standpoint, I’m more interested in making sure I communicate to the network audience in the way that relates to the lifestyle communication,” he said. “The Internet is a convenience medium, and you can deliver messages of convenience-like a $5 off coupon for Applebee’s-that appeal to a busy lifestyle.”

Better solutions for traditional classified areas, such as real estate, are on the drawing board. “It hasn’t been one of TV stations’ strongest categories,” he said. “That’s been the newspaper’s strength, but we’re figuring out ways to go after that. There is also a lot of buzz about classified and local search. I think, as an industry, we have a ways to go with coming up with the right products, but this is the right time for TV stations to be involved with experimentation in the classified world, to see if they can’t create a sort of Craigslist approach to classified advertising. Craigslist is hard to compete against, but I think we’re figuring out good revenue models.”

Growing Acceptance

Before he worked in the Internet world, Mr. Buonfiglio was in cable, where he saw that medium go from “untested, unused” to accepted. “I think we’re very much on our way with the Internet,” he said. “It’s happening faster than it did with cable.”

The speed of acceptance for Internet advertising underlies Internet Broadcasting’s experience with national advertising.

“In the early days we didn’t foresee national ad distribution being as vital a component as it is today,” said Internet Broadcasting founder, CEO and President Reid Johnson. “It’s absolutely on fire. Advertisers have enjoyed a decades-long relationship with TV, and they want to leverage that into new media.”

Paul Bremer, executive VP of ad sales, agreed, adding that Internet Broadcasting’s national network sales initiative “grows in the high double digits every year.” “We’re seeing traditional advertisers adapt to the Web in general,” he said. “National advertisers understand local news.”

National brands that are advertising on the Internet Broadcasting network include Disney, MasterCard, AT&T, Allstate Insurance and Ford. “I would estimate that every national brand is in a different state of adaptation to the Web,” Mr. Bremer said. “Some are using it for branding efforts, and some are using it for direct response. Our job is to create the right environment for the brands to showcase themselves.”

Internet Broadcasting defines itself as the largest broadcaster of local news online, and distinct from competition such as CNN.com and MSNBC.com, which are broad news outlets associated with cable news networks

“I think there is enough [advertising] to go around,” Mr. Bremer said. “Advertisers are looking for ways to expand their reach. We look at ourselves as a national network made up of local affiliates. National advertisers can see this as a national buy or a regional buy, and our footprint is big enough to make the case.”

National advertising is where Mr. Johnson and Mr. Bremer both see future growth for Internet Broadcasting. “As more traditional advertisers come to the Web and see how it positively affects their business, more dollars will be out there,” said Mr. Bremer. “We’re well positioned to talk to their target audiences in a relevant way.”

Video is an increasingly talked-about advertising medium for the Internet, and Internet Broadcasting can aggregate video from its network of local TV news sites to build broadband programming, Mr. Bremer said. “We’re constantly creating content,” he said.

As a network of local affiliates, International Broadcasting is also
capable of working with national advertisers on specific markets and lifestyle-oriented channels within that market. “It’s one-stop shopping for geo-targeted buys,” he said. “And we know from our research that our viewers are in-market, whereas a lot of local newspaper sites have a lot of out-of-market usage.”

Sponsorship opportunities are another potential outlet for national advertisers. Mr. Bremer pointed to just such a partnership with Sara Lee, another national advertiser.

“We have a food channel and a family channel, with all the content related to that,” he said. “Sara Lee can put their advertising in a contextually relevant place. We integrate Sara Lee’s content … with our own content.”

A custom content page can take the user to video vignettes, produced in-house, of a master chef preparing these recipes with ancillary content such as recipe ideas, contests, and-the advertiser’s ideal end game-a one-click move to the Sara Lee Web site.

Internet Broadcasting’s marketing and research department, headed by Julie Burrows, executive VP of marketing, research and product development, uses WebTrends’ Web analytics for the facts and figures of consumer behavior, as well as qualitative research on consumers’ attitudes and usage on news Web sites. Her research, including a recent study performed by Heinrich Marketing Research focused on “advertising relevancy,” bears out the power of local TV sites for national brands.

“The study was to try to understand how consumers view ads on local TV sites, and how much a station’s credibility lends credibility to the advertisers on that site,” Ms. Burrows said. “It showed that the advertisers get a halo effect from the strong credibility that stations have.”

For Internet Broadcasting’s sales team, the Holy Grail is that online advertising becomes another line item on a media plan. There’s every indication that their goal is rapidly being attained.