Economy, Competition Challenge Stations

The volatile stock market could make advertisers reluctant to plunk money down early on spot advertising and avoid the 2012 political logjam up ahead.

So says Kevin Gallagher, EVP and local activation director at Starcom USA, which places nearly $2 billion worth of local media advertising on behalf of about 40 clients. Among them: General Motors, U.S. Cellular, Samsung, Bank of America and Walgreen’s.

Working alongside his fellow members of the 4As and broadcast executives through TVB, Gallagher is also actively engaged in Project Reinvention, the effort to take some of the labor and cost out of making spot TV buys.

In this interview with TVNewsCheck Contributing Editor Janet Stilson, Gallagher also says TV stations face some big challenges, namely competition from cable systems that can meet advertisers' desire to target parts of TV markets and from national companies like Google and ESPN that have an eye on local digital dollars.

And there are “pain points” between the buyers and sellers during spot transactions that need to be eased, Gallagher says, not the least of which is the tendency of stations to bump one advertiser for another, particularly during election season.

An edited transcript:

Please give some me insights into how Starcom’s media mix has changed in recent years and how you think it’s going to change moving forward.

The larger framework is that, in the overall media mix, client ad dollars continue to shift to digital media. The degree to which that’s happening is a little bit hard for me to speak to since I specialize in local broadcast.

Can you be more specific in terms of what percentage of the local media mix is online and mobile, how much is broadcast TV, etc.?

I don’t know if I can be specific. I think within local, what clients are looking for is greater target-ability. So we’re starting to look at how can we spend dollars more efficiently; how can we do things like [set top box] geo-targeting to maybe only buy a certain segment of a Nielsen DMA rather than buying the entire DMA?

So that only involves buys on cable systems as opposed to stations, right?

Right, because with the station you get the entire market whereas in local cable you can segment some geographies within a DMA.

There are station groups, like Fisher Broadcasting, that have created lots and lots of hyperlocal websites in certain markets. Would you consider geo-targeting in the online space as well?

I think as long as they can aggregate the audience and sell us the audience on some type of efficient transactional basis it can help us. If they can aggregate that audience up to us as Seattle and we can buy Seattlesites.com from Fisher Broadcasting, and it’s an audience level that’s on par with some of the bigger portals, that’s fine.

So what you’re doing with television, going after certain pockets of major markets, is not what you’re doing in the online space? You’re only looking for entire markets online, right?

Usually, yes.

How do you think that TV stations can work more effectively to serve your needs or your clients’? Are there certain areas of local and national spot that can stand some improvement?

I think the challenge for local broadcast stations as we think about the digital screen and online video is that they’re not only competing with other local online sites; they’re also competing with the national sites, even sites like Hulu, which can geo-target to a specific DMA.

So the stations are not just selling against their competition down the street. They’re competing against Hulu and Google and all the big portals. The online audience for that national portal, broken down to an individual market, can be bigger than the local station site’s audience.

Do you see something that the stations can do to better compete in that digital environment?

I think they’re doing a good job competing.  It’s all about content, really. There’s something to be said for localization of content — local news, local weather, local sports — similar to what they do on the broadcast side.

It’s just like a numbers game. When there are brand icons like ESPN, which has an ESPN Chicago, it becomes really hard for a WLS in Chicago to become the destination for sports. I think that a viewer or online user in Chicago is naturally going to gravitate to ESPN and then ESPN Chicago, as opposed to saying “I will get all my sports information from WLS.com.” And that’s the challenge.

Again, I don’t want to say that the stations are doing a bad job. It’s just it’s a different marketplace, and they’re competing against big national iconic market brands

What’s your long-term outlook for national spot and local spot? Have the stock-market gyrations affected your view of spot?