WSJ: Newspaper ‘Open Network’ Coming

In a long piece this morning, the WSJ (subscription req’d) is reporting that Gannett, McClatchy and Tribune are preparing to launch an ad network called the “Open Network”:

The joint effort, code-named “Open Network,” marks a big new bid to win back advertisers that are defecting in droves to the Web. Currently, national advertisers buy the bulk of their online display ads — banners and boxes — from big portals such as Yahoo Inc., Time Warner Inc.’s AOL or Microsoft Corp.’s MSN. Yahoo has announced plans to work with seven other newspaper publishers to build a similar one-stop-shopping spot for advertisers. Google Inc. has also reaped a bonanza with advertising links that appear next to search results.

The three newspaper companies, known in the industry as GMT, are likely to each contribute 10% of their online-advertising space to the network, according to people familiar with the situation. They hope to announce something early this year, although the deal isn’t finalized and could still fall apart.

The venture is designed to help the chains tackle a vexing problem: They have long had trouble attracting national advertisers. In their print editions, this is largely because of price. Newspapers can jack up ad prices for local retailers that have few other ways to reach a hometown audience. But national advertisers often find it cheaper to buy a TV spot or magazine ad than to buy space in dozens of newspapers. National advertisers also account for about 75% of advertising on the Internet, according to PricewaterhouseCoopers.

Here’s the Hearst-led (Yahoo!) consortium’s response:

Lincoln Millstein, senior vice president at Hearst Newspapers, said he hopes Gannett, McClatchy and Tribune will join the Yahoo consortium instead of striking out on their own. “We’re all struggling to get our fair share of national advertising revenues, and this partnership with Yahoo would go a long way toward achieving that goal,” he said.

So far, Gannett has signaled its intent to go a separate route. In a December presentation to investors, Mr. Dubow, the Gannett CEO, first mentioned the troika’s efforts to build “the largest network of newspaper-developed local sites for any advertiser to reach local consumers.” He said that “unlike past efforts in the industry,” the group will “focus on customer needs.”

While the new network would be a step forward in some respects, as Millstein suggests, multiple newspaper networks would in a way be self-defeating for advertisers and the newspapers. But we’ll have to wait and see what happens.

I have more to say, but I have to get on a plane soon.

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Update: The network is coming.

Peter Krasilovsky writes in detail about the challenges of such a network and argues it might be better to just buy Centro. I might agree with that suggestion.

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