The Breakdown

Explaining Southern California's economy

Is sponsored content the secret to making money for the news business?

“For me to march into a newspaper and say, ‘You should do a section on our university?’ In my past experience that wouldn’t be an appropriate ask,” said Cal State Fullerton Chief Communications Officer Jeffrey Cook.
“For me to march into a newspaper and say, ‘You should do a section on our university?’ In my past experience that wouldn’t be an appropriate ask,” said Cal State Fullerton Chief Communications Officer Jeffrey Cook. Courtesy CSUF

Aaron Kushner will soon launch a new daily Los Angeles newspaper whose success depends not just on readership but also on capturing advertising dollars in a fiercely competitive marketplace.

Kushner is the CEO of Freedom Communications, the parent company of the Orange County Register. He said his new paper, the Los Angeles Register, will have six to 10 sections and take on a similar business model as the O.C. Register.

One of the ways the O.C. Register gets ad revenue is through its sponsored university section. Three times a week, the paper has a special university section that is filled with stories on its primary advertising sponsors, which rotates between Cal State Fullerton, Chapman University and UC Irvine.

RELATEDOC Register says more than 30 employees and its editor are leaving the paper

Disclosure of university sponsorship is on page three in small print. The paper maintains it gets final say on the stories. Kushner said the paper is still considering whether to launch a similar section in L.A.

The section illustrates one approach advertisers are taking as they look for new ways to get people to notice their message: sponsored content. It can take various forms, from sponsoring sections to advertisers writing articles about trends in their industry. Often, these stories are posted right alongside stories written by newspaper reporters, but are labeled “sponsored.”

Growing market for sponsored content

There was $1.9 billion spent on U.S. digital sponsorship ads last year, an increase of 24 percent from 2012, according to New York-based research firm eMarketer. 

Companies are trying to figure out the best way to leverage their brands online. Part of the challenge is overcoming “banner blindness,” said Steve Rubel, chief content strategist at Edelman, the world’s largest public relations firm. That’s when consumers have trained their eyes to look away from banner ads at the top or bottom of a page and focus on what they are really on the website for: the editorial content.

“This can make it challenging for companies that want to get their message heard,” Rubel said. “Sponsored content, in a way, complements that, because it allows you to put your content in a more centralized place.”

Rubel said he’s seen the cost of a sponsored article range from as low as $5,000 up to hundreds of thousands of dollars, if not more.

He said sponsored content could work for brands that want to showcase what they know, and not necessarily what they sell. This could be business-to-business products or professional services, he said.

At Business Insider, sponsored content might appear on the business news website as a video or article, and it’s labeled “sponsored content." Julie Hansen, Business Insider's president and chief operating officer, said she believes it's the future of marketing.

"Sponsored content can be a better way for advertisers to get their message across and for our readers to consume their message," Hansen said. "In other words, it’s not interruptive form of advertising. It’s all part of the site, all clearly labeled.”

But Richard Tofel, president of nonprofit investigative journalism website ProPublica, said sponsored content can be misleading. His organization does not have any plans to put sponsored articles on its site.

He said sponsored articles tend to sell at a higher price than other kinds of online advertising. 

“We think the reason it sells for higher prices is that there is a certain degree of confusion among readers about whether it is really about editorial or advertising,” Tofel said.             

Print ad revenues continue to shrink

The interest in sponsored content comes as newspapers and other publications are dealing with shrinking print ad revenues. Digital ads are increasing, but not enough to fill the gap, said Rick Edmonds, media business analyst at Poynter.

Sponsored content “is a potential source of new income,” Edmonds said.

Several media organizations from Forbes, The Atlantic and even the New York Times have used or experimented with sponsored content. But there have been some stumbles. The Atlantic once  ran an online article from the Church of Scientology and labeled as "sponsor content" on its website. When people posted negative comments on the article, some of them didn't appear on the website, prompting readers to get upset. The Atlantic later took down the post.     

At the Orange County Register, Cal State Fullerton told KPCC last year that it spent about $275,000 to sponsor the university section, nearly all of the communications department's advertising budget.

Kushner said the college advertising sponsors are similar to Macy's placing an ad in the paper. He maintained his paper has the final say on the articles. In an ad contract obtained by KPCC it says the universities are encouraged to “actively collaborate” with the paper on story ideas.

“I think we have done a pretty good job ourselves of maintaining an editorial wall between our newsroom and our advertisers," Kushner told KPCC. "I haven’t seen or heard of any particular instances where that’s been an issue for us.”

Edmonds from Poynter said the ad arrangement invites questions about whether the paper’s coverage of other topics may have been impacted because of the need to fill the university section.

“There’s some blurring of the lines there,” Edmonds said.

The Federal Trade Commission, which regulates unfair business practices toward consumers, held a workshop on sponsored content last year. The commission said in a statement that the workshop “raised more questions than it answered.”

“While it is too soon to identify next steps, the FTC staff will certainly consider whether issuing a report or otherwise providing additional guidance would be helpful to the advertising community and consumers,” the commission said in a statement.

Rubel from Edelman said marketers want transparency. He said Edelman counsels clients that sponsored content helps increase visibility, but it is no replacement for having a staff writer at a publication write a story that mentions a company.

“That kind of output is always going to be the most trusted, (with) the most value and consumers are very smart,” Rubel said.

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