Today's announcement that Centro is taking over the Real Cities Network isn't really an exclamation point. It's more like a period, marking movement between eras. Centro has brought local news websites significantly more revenue over the past several years. Real Cities, on the other hand, was a vestige of Knight Ridder (KR Digital, specifically, in this case) and one of spare parts that McClatchy acquired when it bought the KR papers.
In essence, Centro -- which has become an even more important revenue source as it brings online-only national advertising to local sites -- eliminates some of the noise of the local marketplace in taking over Real Cities. Real Cities repped about 1800 websites in its network. Most of them are also working with Centro, which targets local sites of all kinds -- daily newspaper, broadcast, alt weeklies + -- in delivering local and regional audiences to advertisers. Centro does gain relationships with advertisers, maybe more than 100 new ones, considering that many of them were duplicated.
"It's a scale play," says Centro CEO Shawn Riegsecker.
There is still noise to be sure -- lots of networks and exchanges out there, and the Tribune-Gannett-Hearst-led QuadrantOne still trying to find its footing. But today's announcement sets up 2009 as an intriguing year, focusing acutely on online-only advertising. On the one hand, we've got the newspaper consortium focusing on the adoption of the Yahoo ad platform (starting in September and rolling into at least 1Q next year). On another, we have a new combined Centro/Real Cities. Shawn Riegsecker says his company is growing at a 45% YOY level, even with major declines in General Motors and ATT spending, caused by economic and structural shifts.
Online-only growth is what newspaper companies need.
Tribune reported quarterly earnings yesterday, and said digital revenues had dropped 4% YOY. That's because of classified upsells of course. They produced now-seen-to-be-illusory 25-35% annual growth rates in good times, and now they are dragging online revenue -- the old bright spot in newspaper revenue reports -- down into negative territory. Tribune was the fourth company, after Lee, Belo and Scripps to go negative in the second quarter in digital revenue, with those above the line gasping for positive air.
McClatchy proudly announced in its earning call that it was approaching 50% in the level of online revenue that was online-only -- not upsells. Gary Pruitt's gang isn't alone. 2008 has seen a profound mindshift, accompanied by much hiring and staff re-training, all aimed at making this transition. Unfortunately, it's another case in which the newspaper industry is reacting late, after things have turned, well, officially negative. But it's the right move.
We can all see that McClatchy's move is another in a series of the Pruitt Strategy, enunciated clearly as emerging (!) out of the current mess as a "smaller, more efficient company". He pulled off the sale of the Star Tribune at what turned out to be a good time, got out of Shop Local (long a non-performer), is busy having other companies print his papers (Boise, Bellingham) and now is getting out of the Real Cities Network game.
Here, we can see a survival strategy getting into place. Focus on what you are good at: local content production and local sales. And....importantly use other people's technology. That's the other clear message from the Centro takeover of Real Cities: ad technology is key.