Is the Web the Only Place to Place Newspaper Ads?

A startup is betting its future that it is. The odds -- and the competition -- are stacked against this strategy

M. Blake Barker wants to take a bite out of the business of buying ad space in newspapers. In January, he launched the Newspaper Industry Communications Center (NICC) in Vienna, Va. That mouthful of a name has a simple goal: Move newspaper advertising to the Internet -- and pronto. Funded as a for-profit subsidiary by the Newspaper Association of America trade and research group, NICC aims to create a one-stop shop where media buyers can pay for and place ads anywhere in the nation. In turn, newspapers can receive payments and the necessary artwork from one source.

NICC claims to be the first outfit to do all that totally over the Web. "This will change the way businesses work in this industry," predicts Barker, who is NICC president. The company's ambitious goal is to grab a dominant share of an industry that places $6 billion worth of newspaper ads annually. Based on the usual 1% commission, it's a $600 million market that has always been splintered into many small players.


  NICC, however, is far from a sure winner. Media buyers question the need to modernize services that they have spent decades developing. Newspapers may be hesitant to give up control of their local markets to a national media provider. Furthermore, skeptics doubt that NICC can offer more than a small incremental improvement over similar, non-Internet services. "Companies have been providing similar services for over 30 years, and they think they can just switch everybody over to Internet all at once. It's unrealistic," says Carl Bryant, executive vice-president of NICC competitor Media Passage.

NICC is the latest evolution of a service known as "one order, one bill." This comes in various forms, provided by a number of companies around the country. Some accept ad orders only by fax or postal delivery, others allow electronic submission over proprietary systems, and still others provide for Internet-based orders. They all offer media buyers the convenience of placing a single order for an ad that will run in hundreds of different newspapers. That way, the advertiser can cut costs and save time by avoiding the confusion of dealing with multiple newspapers.

NICC's main innovation is doing everything via the Internet. Media buyers place orders with NICC by logging on to the company's Web site, submitting a graphic file of the ad, and checking off a list of newspapers where it should be placed. The system then automatically distributes the order and graphic file to the selected newspapers. Simultaneously, NICC prepares a single bill for the buyer that covers all ads made on a single order. NICC also e-mails the newspapers to notify them that they have new orders to pick up on the NICC site.

Once the ads have run, NICC collects the printed hard copies to show that the promotion was published and sends them in a single package to the buyers. All payments go through NICC, which bills the newspapers 1% of the sale's value or $75, whichever is less. Advertisers use the service free of charge.


  NICC already is facing a fair amount of resistance from the newspapers, which are unsure of the value of a purely Web-based system. The Los Angeles Times, The New York Times, and the Chicago Tribune are all still considering whether to sign up.

If they don't, that could be a crippling blow to the venture. Says Dennis Grant, the Chicago Tribune's vice-president for advertising: "If J.C. Penney wants to advertise nationally...we're Chicago. You can't advertise nationally without Chicago."

Newspapers have good reason for concern. NICC is designed primarily to help advertisers running national campaigns. But these account for only 15% of an average newspaper's revenue. Grant's concern is that the service could become attractive to local retailers, which provide 45% of an average newspaper's revenue with no middleman to take a commission. "My salesmen could have to compete with NICC," worries Grant. "Then we'd end up having to pay a commission on all that revenue."


  Regional press associations, which have long dominated the one order, one bill market, have helped make it fiercely competitive. And several national rivals could give NICC a run for its money. Seattle-based Media Passage, for example, placed around $400 million dollars worth of newspaper ads in 2000 for clients such as Verizon Communications. The company already gives buyers access to a number of Web-based planning packages but receives orders by e-mail, fax, or post. Plus, Media Passage can bill directly into the media buyers' accounting software, a service NICC does not provide. Media Passage, which merged on Jan. 16 with competitor OneMediaPlace, can also place ads in over 7,000 newspapers nationwide as opposed to NICC's 1,350.

Barker will also have to contend with the largest one order, one bill processor in the country -- Newspaper Services of America. The Downers Grove (Ill.) company, which placed around $1.5 billion in ads last year, is currently developing its own Web-based processing system. "This is the beginning of Internet experience not only for us but the whole industry," says NSA Chairman and CEO Scott Harding.

NICC is already girding for a fight. It gained some critical mass with its October, 1999, acquisition of one order, one bill shop the California Press Assn. The CPA places $300 million in national advertisements a year, including all of Penney's ads. NICC hopes the combined business will place $600 million in ads by the end of 2001. Meanwhile, Barker has staffed up with former newspaper hands, including senior advertising and info-tech execs from newspaper giant Gannet Corp. and Washington Post Co. to capitalize on their contacts and industry expertise. He also has an advisory boarded stocked with notables ranging from a senior vice-president at newspaper chain E.W. Scripps to a media buyer from Bloomingdales.

NICC will eventually win customers over through its comparatively low prices and superior convenience and security, Barker contends. "Faxes get lost or misdirected," he says. "But once an order is placed on our site, anyone from the paper who's got the access code can log on and retrieve it."


  These arguments have yet to sway advertisers, however. "We already place advertisements electronically," says Verizon Communications' Bill McCarron. "NICC has to bring something more to the table." Terry Prill, a Target Corp. newspaper strategist, is taking a cautious approach: "We have to see what kind of value they can add to our current operations. We want to examine their service before we make any decision on whether we want to use it." Winning over customers like Target, which places 70 million newspaper inserts every Sunday and arranges all its own media purchases, is crucial because they stand to gain the most from NICC's free processing of ads and billing.

The advertisers' wait-and-see attitude could put NICC in a nasty catch-22. Barker is hoping that as larger advertisers start to use the system, more newspapers will have to sign on to have access to those clients. But placing millions of inserts for mega campaigns requires access to the top newspapers in every regional market. So if NICC can't offer exposure in as many newspapers as its competitors, it's value to national advertisers will be limited.

So, Barker must sign some 5,000 newspapers to his service. He admits his company "has a lot of work ahead of it." No kidding. It'll be a heck of a job convincing newspapers to cannibalize their own ad sales in the name of elusive Web efficiencies.

By Edward Popper in New York

Edited by Alex Salkever

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