TV Stations' Future Digital Goals: Not Living By Algorithms Alone

• by Wayne Friedman , Staff Writer, May 24, 2013

Some TV station executives may not like the ROI specifics around the digital business model that have taken some advertising food (revenue) out of their mouths. But for many, there is no going back.

Taking a swing at new digital players who have siphoned away some advertising, Perry Sook, chairman/CEO of Nexstar Broadcasting, said at a recent conference that "local markets cannot be effectively served by an algorithm."

Sook appeared to suggest that local media may offer a more personalized approach to local brand lift and business. Alternatively, some would say all this can lead to more media waste -- that a more scientific, easy-to-digest approach (especially for those local advertisers/marketers without significant resources) is what has always been needed.

No matter. TV stations need to develop new revenue streams -- including new digital businesses such as Web sites, mobile, and e-commerce -- as well as seeking higher retransmission and management service fees.

Sook knows the battle for local advertising dollars for the future will be a tough one -- especially when the likes of his own Nexstar will only see 2% to 3% growth in traditional broadcast advertising revenues over the next five years. Other station groups will get to similar weak to modest levels during that time as well.

Sook did say that TV stations have dropped the ball regarding some present-day new digital businesses: “As an industry we have squandered some opportunities.” What exactly? Sook didn't say. Perhaps TV stations should have thought about inventing a company like localized versions of Google, Facebook, and Yahoo, which pull in a couple of billion dollars in yearly digital advertising sales.

He implored TV station executives to find other niche areas.

Good news for TV stations: So far, local digital media -- from the likes of the bigger national players, especially Google -- hasn't fully tapped into the areas that TV stations still have big brand awareness with. Local search? Probably not a business that TV station groups will excel at. That's a play where algorithms work for local marketers.

So what's left? TV stations have been attempting to get into mobile in a big way -- devices that are everywhere. That is the kind of scale that local TV stations are use to working with. But at the moment technology start-ups have not been smooth -- and more importantly, are lacking good comparative research/standards that TV stations have relied on from the likes of Nielsen for their traditional TV efforts.

All of this means -- for the moment -- that TV stations would be in the same boat as those big national digital platforms when it comes to their new digital businesses. And maybe they even need some help from an algorithm or two.