I will be a panelist at the Investigative Reporters and Editors conference in Orlando Friday, June 15, 2018 for the LION Publishers mini-conference there. One topic of discussion is how to raise enough revenue with digital advertising to finance investigative journalism, or any local journalism at all.

This is a long essay of my thoughts on what to say. The problem we are addressing is how do we sustain democracy with local news reporting when the revenue models cannot sustain the expense of covering the school board, commissioners’ court, and city hall?

The money isn’t there yet. But we are close. The big guys are following Dallas Morning News’ former publisher Jim Moroney’s model he describes as a three-legged stool of revenue.

One leg is to sell digital programmatic advertising everywhere. The sales ops I was a part of there 10 years ago has transitioned into a digital ad agency. That sales team doesn’t care if a client is in Dallas or Cleveland, Ohio. They sell programmatic digital banner ad campaigns to anyone, placing the ads anywhere on the Internet. Their websites, like DallasNews.com, are relegated to mere honey buckets meant to attract as much programmatic ad placements that are sold elsewhere, not by their sales team. This is the same model Gannett is pursuing. Their sales folks are reselling ReachLocal, which is an opaque waterfall of middlemen who drive up the final cost of advertising to the client but it’s wrapped into a fancy reporting interface to make clients feel good about spending 10x the cost of the ads placed. What's left of the Gannett paper's website, GoSanAngelo.com, is a honeypot for collecting programmatic digital ad revenue sold elsewhere.

Moroney’s second stool leg is to sell digital subscriptions to local content on DallasNews.com. Once the paywall is in place, Moroney likens digital subscriptions to making money out of thin air. It has no added cost, so sell extended access to your content at whatever price you can get, he says.

The third leg of Moroney’s model is to provide professional services, like Facebook campaign management. The challenge there is that anyone can become a “Facebook guru” and compete with you at a lower price point and probably offer a better solution. A couple of years ago, Dallas Morning News purchased a social media-marketing firm and folded into a company called “SpeakEasy.” Their concept was to leverage the Dallas Morning News social media presence to increase value for its clients. SpeakEasy is now a part of the paper’s digital agency.

Let’s look at the first leg of the stool, digital ad revenue.

I am skeptical of decoupling ad revenue at publications from their content, especially in the hyperlocal space. Decoupling forces publishers to serve two masters who don’t intertwine. I believe the solution is to maintain the bond between advertiser placements and content. It is what holds a local business community together with their market.

We have had great success with direct digital ad selling on our own website and right now, direct ad sales are the only way to sustain local journalism, because it maintains the bond of content, commerce, and community.  

Businesses, whether it was Walmart, Best Buy, H-E-B, or a local car dealership benefitted from our reporting on the Republic Services trash contract. But, the burden of cost of reporting and investigating Republic was carried primarily by the car dealerships. They purchased ads direct, eliminating the overhead of value-less middlemen established in the programmatic ad buying chain, or network.

That means that Best Buy, et. al. purchased ads that were paid to the content producer (us) at a steep discount, denying the content producer needed revenue to produce investigative journalism.

The UK Guardian did an investigation into the Ad Tech industry. They purchased digital ads on their own website through a DSP, or Demand-Side Platform. They discovered that for every $1 they spent, the UK Guardian realized less than $0.30 in revenue. A waterfall of middlemen who provided very little value within the chain siphoned off revenue the Guardian deserved to collect.

If you add up all of the millions of banner ad impressions we deliver on our wildly successful San Angelo LIVE! website, we have a price per 1000 impressions we have to reach that is 3 to 5 times what national ad buyers are currently spending with us. It’s not that Walmart, Best Buy, and H-E-B are ripping us off. Rather, the entire Ad Tech industry is ripping off content producers, especially local content producers, with hidden fees and commissions at multiple levels of middlemen. H-E-B and Best Buy are still paying a premium, but that premium is not being delivered to the most important end of the value chain, the content creators.

Part of the answer is a mechanism local publishers can use to drive up the auction price at the SSP, or Supply-Side Platform, side of its ad inventory and force middlemen to decrease their commissions and fees to the actual levels of the value they provide, if any at all.

This is accomplished with header bidding, meaning every page load becomes a real time auction of the ad units that will be displayed. Our local clients should benefit from those auctions as well, by pre-empting national buys based upon their price per impression bid.

We are currently using header bidding between three SSPs and have seen a significant increase in revenue per 1000 impressions because we are starting for force national advertisers to compete with our local clients, although we still have not reached the levels we need to be. But no one else has either.

Another way to look at this is that national advertisers own property in Tom Green County and their bottom lines are subject to the whims of local government and how much their locations here will pay for water, trash collection, and taxes. Yet, their current ad buying methods do very little to finance the local journalism needed to keep a watchful eye on civic issues in their markets.

Forcing national advertisers to compete with local ad clients on a level playing field is the only way to force the C-suite of Walmart to finance investigative journalism, or any journalism at all, at the local level.