Resources: FCC Report Recommendations

Advertising Policy

Those concerned about the state of news, information, and journalism, especially accountability reporting on the local level, need to face the fact that it has been advertising that has made possible much of the nation’s accountability journalism. And the drop in ad rates, especially online, has undermined traditional media models and thwarted online ones. Consider a local news website that generates 1 million page views per month. With average online ad rates of $2.52 CPM (cost per 1,000 impressions), it earns $3,000 monthly, not enough to pay a full-time journalist. If that rate were a few dollars higher, the website would earn $6,000 monthly, turning its operation from a hobby into a job. The current low rates for online ads make it less likely that local news start-ups will be able to survive. The health of news media, in other words, is susceptible to fluctuations in advertising rates and spending.

So it is worth thinking of advertising spending through the lens of public policy. Are there public policies that will cause harm by further reducing ad dollars that go to local news efforts? Conversely, are there ways that we could encourage an increase in ad dollars to help support local news efforts? 

Government as Advertiser 

The U.S. government spends a substantial amount of money on advertising. Looking at spending in 2003, the Government Accountability Office found 137 contracts with advertising agencies, totaling $1.6 billion over three years, spent mainly by seven government departments: Commerce, Defense, Health and Human Services, Homeland Security, Interior, Treasury, and Veterans Affairs.1 In 2005 alone, the federal government spent $1 billion, the GAO reported. 

The Commerce Department promoted the census and boating safety; Health and Human Services and the Centers for Disease Control promoted a variety of public health programs; Homeland Security launched campaigns to help people prepare for terrorist attacks and other emergencies; the Pentagon spent millions on recruitment; the Department of Interior did ad campaigns related to national park services, Indian affairs, and fish and wildlife; and the Treasury Department communicated information about taxes and marketed its coins. 

Where is this money spent? Generally, it is up to the government departments to contract with an advertising agency to design an ad campaign and decide where to run it. In many cases, they spend it on national media platforms. For instance, in March 2010, the Census Bureau ran ads during some of the following shows: The Amazing Race, E! News, Friends with Money (starring Jennifer Aniston), Food Network’s Semi-Homemade Cooking With Sandra Lee, and The Da Vinci Code on TNT. They also ran a Super Bowl ad in 2010. 

In the past, government marketing managers may have erred on the side of national advertising purchases because that seemed to be a less expensive way to reach large numbers of people. But some have suggested that technological changes could enable the federal government to target their spending to local media more efficiently while maintaining or improving cost effectiveness. TVB, a company providing local TV stations ad support, has suggested that organizations like theirs could enable the government to reach national audiences through local media outlets. TVB proposed that the federal government shift some of their spending to local entities. TVB president Steven Lanzano emphasized:

“. . .the significant benefits that the United States government could realize by focusing on local media, rather than exclusively on national media, in its advertising spending. In addition to conserving increasing scarce federal funds, U.S. government spending on local media could provide an important element of support for local journalism and the information needs of local communities.” 

The group argued that structural changes in the industry have made national buys through local stations easy—and that “local television can save advertisers, including the federal government, significant revenues for comparable advertising purchases because local television is more efficient than network television.”

Online ad networks make local targeting even easier on the Internet. The government could request placements on news websites in communities throughout the country, or targeted to specific demographics. And the Newspaper National Network allows advertisers to do national ad buys using local newspapers. 

If a decision were made to direct federal ad dollars to local-oriented media, it would be imperative that policymakers develop a system that would guarantee as much political neutrality as currently appears to exist — unlike in the 19th century, when politicians would favor supportive newspapers with ad contracts. This seems doable. Ad networks would likely enable government managers to lay out the parameters and then turn over the specific ad buys to brokers. Federal officials need never make decisions about actual specific media placements. 

Recommendation: Consider Targeting Current Government Advertising More Toward Local Media

The government spends money on advertising to advance various public goals—such as military recruitment, census compliance, or park safety. In 2005, the amount spent was $1 billion, according to the General Accountability Office. Currently much of this spending goes to national entertainment media. Some local broadcasters have argued that this could be targeted to local news enterprises without undermining the cost effectiveness of the campaigns, and perhaps even saving taxpayers money. We agree. Targeting existing federal advertising spending to local news media could help local news media models—both commercial and nonprofit, online and off-line—gain traction and help create local jobs, while potentially making taxpayer spending more cost-effective. In the past, it may have been more cost effective to buy national rather than local but technological improvements have made it possible to easily purchase local media placements on TV, in print and online—so that shifting ads to local news media could prove more cost-effective for taxpayers. To be clear, we have no opinion on how much the federal government should spend on advertising; but if it does spend money on marketing, it makes public policy sense to target it to various local news media. 

One critical point: with such an effort, this strategy must be implemented in a way that is strictly non-political and not subject to political manipulation. This appears to be an achievable goal, as ad spending currently seems to be apolitical and new technology allows for the buying of ads so that government entities need not be involved in the micro-decisions about which specific media entities get money. Targeting would need to be focused on broad industry-standard categories and quantitative measures. 

Another important advertising-related policy issue is privacy. Regulators and consumers have an extremely legitimate concern that targeted advertising might invade the privacy of Internet users. However, since it commands higher prices, ad targeting offers one possible way for local content creators to build sustainable business models that can help finance local journalism. When considering privacy rules, the policymakers should also consider the positive benefits of ad targeting for local news and journalism operations. In recognition that advertising is, and will always be, a crucial part of media business models, we also recommend against proposals to raise money for public media by taxing advertising. This would make it harder, not easier, for both commercial and nonprofit media entities to create sustainable business models. As scholar Adam Thierer has written, “Advertising benefits society by subsidizing the creation of news, information, and entertainment.”