Centro Acquires Real Cities from McClatchy

Real Cities is about to change hands again. The McClatchy-owned newspaper ad network has been acquired by Centro, a firm that manages local online media buys for national advertisers and agencies. The deal was set to be announced publicly today.

The firms hold a unique place in the local media landscape, each aiding the struggling newspaper industry in recent years to secure its digital sea legs in a stormy economy amidst sinking print revenues.

While Centro is often lumped in with local media networks like Real Cities, it isn’t. The firm doesn’t sell media per se. It uses its platform to simplify buying and selling of local online media, including radio and TV sites. That nuance may be lost on some industry observers, especially now that the company has purchased Real Cities, which is an ad network.

According to Centro Chairman and CEO Shawn Riegsecker, however, Centro isn’t buying the media properties available through the RealCities network. Instead, the firm is buying business relationships with agencies and advertisers currently working with RealCities. “We are not picking up the publisher contracts,” said Riegsecker. “We firmly believe that the network model is not the right model agencies are looking for.”

The acquisition essentially ends the existence of Real Cities as an entity, although Centro will own the brand, and may or may not choose to actually use it in the future. Real Cities was a division of Knight Ridder until McClatchy acquired KR in 2006.

Riegsecker contends his firm provides more value to agencies than a standard network because Centro can buy anything available direct from a publisher, including premium placements. Ad networks typically offer less valuable inventory publishers can’t sell through their own sales teams. Many local networks offer only newspaper sites or only sites owned by particular media firms.

The acquisition, suggested Peter Krasilovsky, program director of the Marketplaces program for local media research firm The Kelsey Group, “may signify to advertisers that Centro is a place to aggregate more of their budgets.”

National online advertising for local media sites is poised to grow 15 percent this year to $420 million, according to Borrell Associates.

Although Riegsecker stressed Centro is no network, the fact is the firm is after the same national ad dollars and clients local ad networks are. Companies like Yahoo and quadrantOne are seen by some as Centro competitors. Yahoo has established relationships with several newspaper publishers that both sell Yahoo display ad inventory to their local advertisers, and provide their local inventory for Yahoo to sell to national advertisers. QuadrantOne, co-owned by Gannett, Hearst Corp., Tribune Co., and The New York Times Co., is a newspaper network aligned with several of the same publishers in Yahoo’s paper publisher group.

While ad dollars flowing through Centro can eventually make their way to quadrantOne — or in the past, RealCities — the power grab lies in part in the platforms, where the data resides. According to Riegsecker, the acquisition gives Centro “access to McClatchy’s inventory data.”

Centro hopes the advertiser and agency relationships it will get out of the Real Cities purchase not only open doors to ad dollars from new brand clients, but assist in distributing its ad management platform. “We pick up new advertisers in the transition, although there is a significant overlap of industries between the two,” said Riegsecker, adding, “We have the ability to take those clients and overlay them across our ad management platform.”

Yahoo’s long-term goal is for its newspaper and other publisher partners to use its ad platform for all their campaigns. It appears Centro is also pushing to establish agencies on its platform, at least for their local media buys. The platform is being tested by “multiple agencies,” according to the company.

“In any business, defensibility comes through scale,” said Riegsecker.

Call it competition or co-opetition, but whatever it is, it gets a bit more confusing when considering former Real Cities owner, McClatchy, became a member of Yahoo’s consortium after essentially defecting from a newspaper trio involving Gannett and Tribune Co. That collective, in its efforts to establish what was once to be known as the GMT network, eventually became what is now quadrantOne.

Based in Chicago and established in 2005, Centro has additional offices in Atlanta, Boston, Cleveland, Dallas, Denver, Detroit, Los Angeles, New York, Raleigh-Durham, and San Francisco.

It’s unclear what will become of Real Cities offices or staff. When asked about staffing changes as a result of the acquisition, Riegsecker told ClickZ News, “I’m not discussing anything related to employees at this point.” Terms of the deal were not disclosed.

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