For small publishers, scaling down daily deals ad service is good business

Ben Ilfeld, COO of online community news site, last year implemented Deal Ticket, a “daily deals” feature to sell advertising on his site. In the months since he started the program in August 2010, he has learned some lessons on how to best manage this emerging revenue concept.

Ilfeld discovered that less is more when it comes to deal frequency — considering the large effort and little return his sales staff saw meeting daily requirements — and offers weekly deals now. He also learned that rather than make the deals the news site’s advertising centerpiece, it’s better as an add-on product in the advertising portfolio.  The key is knowing what merchants want to help them make the best advertising decisions, he said.

According to Ilfeld’s Google Analytics measurement, Sacramento Press saw more than 76,800 unique visitors in the past 30 days. The site has a staff of 11, four of whom are in sales. Also see Ilfeld’s recent piece for J-Lab on how he is examining granular site metrics for efficiency.

Below, Ilfeld shares his deals advertising numbers and how it is a work in progress.

  • 11 deal clients have turned into regular advertisers since we started promoting that option 3 months ago.
  • 11 advertising partners have subsequently run deals (not the same ones as above).
  • As a daily deal platform, saw gross revenue as high as $18k and a low around $5k per month.
  • As a weekly deal platform, have seen revenue as high as $5k and as low as $1k per month.
  • We do not sell that many deals. We feel we found a sweet spot that does not injure our fellow local small businesses. Most months we average fewer than 100 deals sold per offer. Some months are as low as 20. We only had one month where the average number of deals per offer hit 200

Jessica: What do these numbers mean in the context of the size of your online news business? How do they correlate to your visitor traffic?

Ben: Those are gross revenues, so you have to split it with the merchant and overhead. When you get done with that, it’s not a big hit; it would represent under 10 percent of our overall net revenue. So it’s not a huge percentage for us, but there are 11 new clients and that is kind of a big deal. We probably have between 30-40 clients right now advertising. So that’s probably more than a ¼ of doing a deal that became regular advertisers.

You don’t want to sell thousands of deals which can sometimes hurt your reputation in the community. If you sell 3,000 deals and it breaks the back of your merchant, that’s bad. It’s better to do it lower scale.

What is the daily deal competition in your market?

Primarily Living Social and Groupon. We may have started before those two, however the [regional daily newspaper] Sacramento Bee started a daily deal yesterday. McClatchy has deal with Groupon. One thing we have always done is keep tabs on everybody else, how many deals get sold, what the pricepoints are. Many of these merchants will do deals with several sites.

You have to know how successful they were with Groupon in order to sell them on your site.

Is managing the daily deals feature worth small publisher’s time? At what point is it worth it?

I don’t know. After several months, we pulled back. We gave it a while to ramp up. We made it a weekly deal rather than daily and that was all about time. Weekly, it’s not much extra time. As a daily though, it’s really a grind. I think journalists will understand that, like when they have to come up with a story every day, sales people have to have a deal every day. It was such a crushing thing for a sales person.

We dramatically reduced our costs in terms of sales and customer service. This allowed us to sell much more advertising which ended up being the higher profit margin. At this lower level we have sold more advertising, and the service is now scarce. We are sold out through September.
We may move back to more deals a week or even a daily deal, but before we do that we are likely to switch deal platform providers and activate a major asset we purchased specifically for this program.

What overall message would you like to send to community news publishers and advertisers about the online deals concept?

I think everyone should consider dipping a toe in, but it’s not going to be for everybody. Some people are going to love it, and some are going to end it in a month. I think for a lot of small publishers, I can’t see doing it at the daily level, it’s such a grind.

It depends on how you handle it, but our customers really want it. That’s the bottom line. Some advertisers don’t like it, but others do.

It’s completely individual to the business. Some businesses like it and handle it well and get good results and others don’t. You have to guide the right people to it. As an additional feature, it’s fantastic and I think we do a way better job on that level than our national competitors.

We try to do whatever we think is right for a business. We think of all our businesses as partners, not clients. We sell them products, not marketing services. It’s not their job to use Twitter appropriately or how to use Facebook. Those types of things are our job. We’re the tech people. We do what we can with the best of our partners. If they made less working with you than they made working with you in the past, they will stop working with you.

To me, it’s a very strong focus on the partnership level. We are working with them to make them money. It’s very focused. All of our sales representatives totally understand that. Tailor it to what works best for you.

If you can have even one advertising sales person with local business experience, that’s a huge difference..

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