Newspapers Compete Harder For Online Ads

Local advertising is the lifeblood of daily print newspapers, but in the online world they haven't been able to compete successfully with Google Inc. and Yahoo Inc. for pay-per-click local ads. That may change as Quigo Technologies Inc., which last fall began offering a private-label version of its pay-per-click AdSonar Exchange marketplace, adds to its customer list. The vendor last week said it has signed more than 130 customers to use its technology, which lets newspapers provide a local advertising tool on their Web sites so sellers can manage their ads and bid on local news content that would trigger their pitches to appear.

Like Google and Yahoo, Quigo employs a revenue-sharing model in which it receives a portion of the ad revenue it brings to its newspaper customers. The difference is that newspapers that contract with Google or Yahoo to have ads driven their way give up ownership of the relationship with the advertiser, while Quigo stores order details on its servers but lets advertisers interact directly with the newspaper site.

"Quigo enables us to take advantage of contextual advertising opportunities in our own markets, and we can drive the sales rather than having the sales and advertising driven to us," says David Prizer, VP of interactive and classifieds for ANG Newspapers, which counts the Oakland Tribune among its numerous Northern California papers. Before Quigo, newspapers weren't equipped to offer the pay-for-performance model to compete with Google and Yahoo. "We have to be in that business," Prizer says. Quigo has been responsible for incremental increases in new local ad revenue, Prizer says, but he adds the long-term payoff could be significant both from local advertisers and nonlocal companies whose Web crawlers will increasingly turn up Quigo-enabled sites as they troll for ad opportunities.

But Martin Nisenholtz, senior VP of digital operations for the New York Times Co., says pay-per-performance advertising models shift the risk from the advertiser to the publisher. "If anyone sees it as a panacea to support large-scale newspaper operations, they're out to lunch," says Nisenholtz, who points out that The Times has a partnership with Google. The bigger challenge in attracting local ad dollars, he says, is that newspaper sites haven't matched application functionality such as mapping and search tools that accompany local content on sites such as Google and Yahoo.

Yahoo has led Google in the local-ads market, attracting more than four times the traffic to its Yahoo Local site than visited Google Local in July, according to online measurement firm Hitwise. But Google has grown its share of local search by 61% since February, compared with 14% growth for Yahoo Local, Hitwise reports.

Still, they haven't succeeded at meeting every advertiser's needs. The Houston Chronicle's Chron .com says it has been able to attract local advertisers because Quigo enables it to guarantee an ad will run with a certain type of story, a capability Google added to its local news site only last month via a tool that lets advertisers specify ad placement on sites that have opted to be included in the service. Quigo "allows a local advertiser to come and bid on our site only," says Stephen Weis, Chron's VP and general manager.

Quigo also lets advertisers establish a daily budget to control ad spending, an area that has proven difficult for Google, which last week was hit with a lawsuit for allegedly overcharging advertisers on their daily budgets. Google isn't commenting on the suit. But the company does say that it doesn't see itself as a competitor to newspapers. It's in Google's best interest to help newspaper Web sites remain financially healthy since it relies on them for content, says Marc Leibowitz, Google's director of strategic partnerships.