The Danger of the Upsell

One of the hidden tactics of the newspaper industry is the upsell. The notion used to be that you could attract an advertiser with a basic package and then talk them into upgrades which didn't cost much more but delivered additional attention for the advertisers. It used to be little symbols and bold type in the classified section.

In recent years, this notion has translated to upselling advertisers to the online version. As tactics go, it was pretty easy money. Furthermore, by getting these advertisers to try online, they could be transitioned over time to the emerging model. It also made the sale easier, since online volume was much lower as a price point. It was more or less like buying a tie after getting an expensive suit, a fairly trivial addition that could make the first purchase better.

The danger, I believe, is being exposed in this model. Growth rates of newspaper internet properties are lagging far behind the growth rate of the internet as a whole. Media General reported a 3% decline in internet revenue (likely the worst of the bunch), and Lee reported a gain of 7.5%. eMarketer estimated that advertising on the internet as a whole would grow at greater than 20%.

In many ways this growth slowdown is related to an unhealthy reliance on this upsell. If the only people that purchase your product are going away, your potential market is getting ever smaller. Upselling requires adoption of print, which is clearly fading.

Online first advertisers are very different than print first advertisers. Online advertisers expect capabilities like behavioral targeting, profiling, re-marketing and click and action based models. Print advertisers buy reach. Upselling also taught the sales teams how to sell online reach as the primary metric, rather than efficacy or targeting. This will make the inevitable transition to online first sales even more traumatic. The sales team will be selling the wrong metric, to advertisers that are generally sophisticated about metrics.

The answer here is both simple and complicated. Training the sales force is one part of this, but the technology to sell advanced targeting is not always present. It is my guess that this is one of the main reasons behind Cox's announced purchase of Adify today. It's not only a play for the revenue, but can ad needed technology to the core product as well. Yahoo likely will be doing the same when it rolls out its platform to consortium members. Perhaps in the not too distant future, the web sales will be able to move beyond the upsell. Who knows, maybe print will be the upsell for web teams.