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OwnLocal: a startup trying to shake up traditional media ad revenue

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OwnLocal: a startup trying to shake up traditional media ad revenue

OwnLocal was founded in 2010 by Jason Novek and Lloyd Armbrust, who have years of technology know-how and experience working in the newspaper and publishing industry, respectively. Shortly after its conception, the two co-founders were joined by Jeremy Mims who also brought publishing experience to the table.

“The reason we started OwnLocal was based on need,” said Armbrust. “I had been working for several newspapers, and some of them came to me and said, ‘Hey, we want you to implement some digital solutions at our newspaper, but we want them to be scalable.’  So we started asking ourselves questions, such as, ‘What can we do to make a newspaper money tomorrow? What’s the magic ‘switch’ that we can turn on for a newspaper so they can start making money right away, without a ton of extra work or expertise?”

The solution: taking existing print campaigns and automatically turn those into digital marketing campaigns. At the beginning, this meant creating SEO (search engine optimization) campaigns but over time with improved technology, that expanded to SEM (search engine marketing), Facebook ads, and a lot of other forms of digital advertising – primarily created to help small businesses. 

We talked to Armbrust about the life of working as a startup in such a traditional media market, the challenges and opportunites for local media today, and the future of OwnLocal. The company will be at Stand 1.560 - Counter No. 9 during World Publishing Expo.

 

WAN-IFRA: Your core business proposition is taking news media's traditional ads and automatically optimizing them for standard display, to offer SEO/SEM campaigns, responsive distribution, and, ultimately, up-to-date measurement metrics for results. Or more to the point, those businesses want you go offer them quick scale and revenue?

Armbrust: Yeah, that's correct. Basically what OwnLocal does is we take print advertisements, or radio advertisements, or TV advertisements, and we automatically convert them into digital marketing campaigns.

That's really not limited to one thing or another. We can do SEO campaigns that are very easy and very profitable, but we can also do websites, we can do SEM, we can do Google ads, we can do display ads. We can do a myriad of things once we pull all of the data from the traditional print advertisement.

One of the advantages of using technology instead of people is that we can instantly scale. Once the product is set up, it's literally ‘turn the key’, and the system works and starts producing a lot of revenue for our partners.

 

What is the core technology or concept that drives that automation?

We have a lot of different technologies that we use. We use, of course, machine learning and computer vision techniques that are very advanced. We have some very basic PDF scraping, and some very basic technologies that we have adapted on. We have one of the more advanced OCR (optical character recognition) libraries, and one of the more specific OCR libraries to print than anyone in the world. We've been able to develop this by processing millions and millions of ads. We've processed hundreds of thousands of ads a month, and this gives us a lot of information to improve the technology.

On the other side, since we work with about 47,000 small businesses at 2,000 publishing partners, we have a lot of view into what small businesses are doing: how much they're spending, what their competitors are doing. One core piece of tech that we actually acquired a company to get was something that we call “whoosh traffic.” What that is, is it takes a screenshot of Google, Bing, and other search engines every day, so that we can compare how well a small business does in search, and compare how well their competitors are doing in search. We know really accurately how well our software is working, in terms of SEO.

We have similar techniques for optimizing SEM, and for doing display ad campaigns, and for developing websites that really improve the overall picture for a small business online. Since it's automated, it's very, very cost effective.

 

 

OwnLocal is essentially a startup working in a traditional media space. How does that work to your advantage – and your disadvantage?

OwnLocal is one of the few companies that is a true intersection of what I would call a Silicon Valley-backed technology company and a company that works with media, more specifically, that works with newspapers. That's been really helpful and at the same time really damaging.

Most technology companies are used to working with entities that move, adapt, change, and build quickly. That’s typically not the case with the newspaper industry.

You've probably heard the phrase, "Fail fast." It's very hard to fail fast in an organization that's 200 years old. While we have the ability to iterate outside of the newspaper organizations, we are pretty much bound by their needs and desires, which is both good and bad. It’s made us move a lot slower than we would have liked, but we have also been very successful.

We work with over 2,000 publications today, but it's taken us over five years to get here. We've been consistently growing at 100 percent a year, but man, that 100 percent started out really small. Over time, it had to grow, and grow, and grow.

Most successful startups that work with small businesses, or work with any users, are used to growing at a much higher rate. We've had to be more pragmatic in the way that we built our company because of the industry that we're in.

At the same time, working with the respectable local media companies that we work with also has really helped our credibility, because while their business and their trust was difficult to earn, now that we've earned it, it's also going to be very hard to lose, and that puts us in a very strong position in the market.

Now, especially as we're expanding internationally, we can say, "Hey, we work with all of these big companies, like News Corp, Tribune, Digital First Media, etc., and you can go and talk to any of them for a recommendation because we have relationships with all of those companies.”

People in the US and even internationally know that we can be trusted. There's a huge advantage to that. We're at a very interesting intersection of technology and traditional media that most people don't get a chance to be at. I feel really fortunate to be there.

 

Here in Europe local media companies are often criticized, fairly or unfairly, for not being innovative enough. What are your thoughts on agility of local media in North America and generally abroad? 

Generally, I think that local media is doing an okay job of transitioning into digital ad sales and digital media.

Overall we're talking about billion dollar companies that have very intelligent people who are very good at keeping their money. They're going to do okay. They're going to figure out some sort of transition. I think that's the same for anyone in North America or abroad.

That said, I think the cliché, "It's hard to turn the Titanic" is true here, when you have an entire organization that was built very efficiently to do one thing. It's very difficult to get them to do another thing. Plus you're talking about lots of different platforms: digital display, Facebook, Google, website building, etc.

The real problem is two-fold.

Number one, it’s asking local media companies to take on a responsibility that they haven't had in the past, including learning technology, quickly adapting to new technology, and building and managing technology.

I firmly believe that media companies should not be experts in every different type of software available, and that’s hard for media companies to grasp. In the past, they were used to creating end-to-end solutions. They printed the product, wrote the product, sold the product, built the advertisements, and delivered the product, taking ownership of the entire process.

Media companies need to get used to the modern world, which means utilizing eternal services that are really good so they can focus on their core competencies. For example, media companies shouldn’t host their own websites when they can work with Amazon Web Services, because Amazon does a really great job at hosting. That's one mistake I see media companies making. 

The second problem is that media companies are used to selling products with a much higher margin. Print, TV, and radio products all generate very high margins. They sell for a lot of money, so companies can afford to have an ad rep that makes a lot of money, an account manager that makes a lot of money, and a fulfillment manager that makes a lot of money. The newspaper's still very profitable at the end of the day.

Digital products, on the other hand, have a much smaller margin. If you're going to sell a Google SEM campaign, you will not make that much in profit because most of the money is going to Google, so you have to sell a very large campaign for it to be worth it.

In our experiences, media companies need to sell digital campaigns that are more than US$ 1,500 a month to make a real profit. The problem with that price point, of course, is that most SMBs newspapers work with want to see a campaign that they can afford, maybe between US$ 500-600 a month. There is this disconnect between what a media company can afford to build and fulfill and sell, which is above US$ 1,500 a month, and what small business can actually afford to buy.

I think those are the two big problems that media companies are facing today, both in Europe and in North America.

 

Who are your competitors?

There are several companies out there who seem like our competitors, but in reality just do tiny pieces of what we do. There are companies that do website creation, or reputation management, or directory listing syndication, or things like SEO and SEM campaigns. They're all really great companies that we can plug into and tie together with our reporting. We're actually not competitive to these companies.

One example is Weebly. Weebly creates great websites. If you want to have a fully functioning website platform that can do absolutely everything, you could set up a Weebly account, and sell that to your small business customers, but the downside is it's very time consuming for you and your staff, and, depending on the competency level of your small business, can be difficult to train on how to use.

We have a website platform that's very simple to use, but doesn't give that many options. For that customer that wants an entry-level easy-to-use product, that's what we offer

There are a lot of companies, (for example AdTaxi which Digital First Media and News Corp use) that handle digital marketing campaigns that cost between $1,000-$3,000 per month. If there's a large campaign that should be managed by a human, then they're very complementary to us.

We work best as the “starter package” for newspapers’ small business clients, the ones who know they need digital advertising, but don’t know exactly what they need or where to start. These other companies who offer similar services seem like competitors, but after diving deeper, really offer complementing services. There is nobody else in the market today that offers our same services.

In fact, what we have found is we worked as a stepping-stone for some of these other platforms. People can come in and start spending $50 a month, $100 a month, $1,000 a month, with us on our automated platform, and then graduate into these larger more sophisticated platforms that will produce more and more revenue for newspaper companies.

 

I understand you want to expand more into Europe. Are there specific plans for that?

Yes. We have already begun discussions (I can't name any specific names for confidentiality purposes) with pretty much every local media company in London. We just returned from a whirlwind trip there and met with the decision makers at those organizations in person. We are moving forward with three of them right now.

This is easy revenue for all of these guys to turn on automatically so it's kind of a no-brainer for them. In fact, that's the phrase we consistently hear over and over again when we present our platform. We say, "You roll this out to all your customers, we integrate the technology, you start making money." It's a math equation.

Count the number of ads you have, multiply that by $20 or $30 per client per month then multiply that by 12 months and that’s how much you will make the first year working with OwnLocal.

We can go to somebody like Gannett, who has 20,000 adds a month. We can say to them, "You charge $30 (or £30) a month per ad. Do the math. We're talking about a $5-6 million a year opportunity for these companies, which really makes it a no brainer.

And remember, this is the first piece of revenue these people are going to be getting. There are many other products we can offer after our initial package.

 

How do you see OwnLocal's offer and business model evolving if print advertising for local publishers continue to decline like it has in recent years?

That's a great question that we get all the time. Obviously print advertising is in a decline, less internationally than in the U.S., and while print may go away at some point in time, we don't have any data to suggest that it's going to go away in the near term.
 
Actually, in smaller markets we see the decline in print slowing down, and the reason is pretty simple. As long as direct mail continues to be an important way for people to advertise, print advertising in newspapers will continue to be a cheaper option by comparison.
 
It's less expensive to send your message packaged with something else, rather than send it separately in a piece of direct mail, so when you compare the two, print comes out on top. I really believe that's why print has continued to be successful.
 
That said, we're a transitional technology, and at the end of the day our goal is to create a business model for our publishing partners around digital advertising. We're taking print advertisers (approximately 20 percent of small businesses we serve are not online in any way before using our platform) and transitioning them to online advertising.
 
So we hope to keep growing that section of the business and improving it so we become the online platform for these small business under the banner of the media companies.
 
We never want to replace the media companies or go directly to the small business, but we are looking to increase the small business's digital spend so that one day when there is no print advertising at these publications we can power the online revenue.

Author

Dean Roper's picture

Dean Roper

Date

2015-09-04 21:21

Author information

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