Marketing Workshop: I Didn't Know It Was Going To Work

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Loren Feldman:
Welcome, Shawn and John. It’s great to have you both here. John, I still don’t completely understand how you’re doing what you’re doing. So I’d like to start: Could you just explain your basic business model to us? In other words, how are you making print work here in 2023?

John Garrett:
Yeah, thanks, Loren. Well, the basic premise is that even though we live in the Information Age, no one knows what’s really happening in their own backyard. We put together all the information that matters to you, that’s news to you, that you care about in your community, and we send it to you. And people love it. And since people love it, they read it. Then advertisers want to be a part of it. And that’s how we generate our revenue. We’re not a subscription-based product. We’re a free, high-quality, local journalism product that really connects people to their communities, and local businesses are a big part of the community.

Loren Feldman:
But what you just described could kind of describe local journalism for the last 100 or 200 years. And yet, publications have been closing all over the country. Why is yours succeeding where others are failing?

John Garrett:
Well, I mean, there are probably several ingredients to that. But let’s also not discount strategic decisions that a lot of those new organizations have made for a variety of ownership reasons, and whatever reasons, just bad strategy planning. But the critical piece, I think, for us, as the news organization that we are today, is the circulation piece. We mail 2.5 million newspapers every month to residents all over Texas. That’s by far more than any publication, actually, in the country.

And so, when a lot of the local news organizations, the legacy—I’m talking legacy right now—when they made their strategies on circulation costs, like how much it costs to subscribe to your local paper, they’ve ramped that up so much that their circulation has just plummeted. If circulation plummets, then fewer advertisers are interested in that audience. Their model is: Let’s build a reader-revenue model. So they’re just trying to drive circulation dollars, while Google and Facebook and TikTok and all those guys just say, “Thank you. We’ll take all the local ad dollars.” And their product just isn’t competitive any longer.

We are competitive, because we’re local. For most local businesses, geography is the number one filter. Do you live near my store? Do you live near my restaurant? We do geography better than, I would say, even better than Meta or better than a lot of these digital companies do.

Loren Feldman:
What do you mean by that? Because, obviously, they do it with geofencing and other digital techniques. What are you able to do that they can’t do?

John Garrett:
Yeah, so I mean, we know every address we’re going to. There’s no digital ambiguity about the cell phone and exactly where it’s at. The other thing is that, if you continue to look at Round Rock news articles, we know that you care about Round Rock. So we have good first-party data. So naturally, going to every single household in a geography is pretty impressive—as opposed to buying geo targeting, which I think is a great product.

But when you’re talking about competing, we’re not saying we’re the only ones that can do geo targeting. When you’re talking about going to a business owner and saying, “Hey, do you want to reach these people around you,” we need to be able to compete. And we compete very well. And so that’s just unique. I mean, none of the large dailies in any of the cities that we compete with here in Texas can compete from a geographic standpoint like we can. It’s not even in the same conversation.

Shawn Busse:
Yeah, I could see that. It’s like, when I go online, and I say, “What is my IP address?” You look it up, and it has me over in Hood River, which is about 45 minutes east of Portland. And if you’re advertising to me thinking I’m in Hood River, all of those ad dollars are wasted. It’s not even that close.

What people are realizing is that a lot of these digital media companies actually aren’t quite as good at ad targeting as they say they are. And that’s a whole other thing. I don’t know if you have any thoughts on that.

John Garrett:
Oh, man, I’ve got lots of thoughts on that. [Laughter]

Shawn Busse:
Throw your competition under the bus. Go!

John Garrett:
Listen, I mean, it used to be cheap, right? It used to be inexpensive on Facebook to do all these targeting tools, and they know a lot about us. Obviously, what Apple’s done to Meta is crazy. I’ve always felt like the data was wrong. But now, I mean, even if they are really good at it, they’re expensive. They’re not inexpensive any longer. And so we compete with them on dollars.

And the other thing is that we’re tangible, and I think that that’s really important. I talk about this word called “phygital.” We live in a digital world. We’re physical beings in a digital world. Retail stores are coming back. Physical stores matter to us. In Round Rock, Texas, and in Austin, Texas, and Frisco, Texas, we’re a tangible product to the business owner and the decision maker. So Facebook’s not really tangible. So I think that gives us a little bit of an edge, because we have people there in those cities, but also we show up at the business owners’ home address. They kind of know who we are. I think that helps. It gives us a little bit of an edge.

Loren Feldman:
Could you take us back? When did you and your wife start Community Impact? And what gave you the confidence back then, at a time when a lot of media companies were struggling? What convinced you that this would work?

John Garrett:
Well, I always wanted to be an entrepreneur. I had all these really stupid ideas that my wife would always turn down. But I had been in the business my whole career, at that point. I don’t know, I just kind of drew out this idea that my wife and I—we had a two-year-old kid, we didn’t care about school sports. That’s a big thing, a difference between us and other community papers: We don’t write about sports, or courts, or anything like that. We write about business development, local news, and government.

So our focus area was always, “Hey, what do people actually care about that doesn’t have Johnny kicking the winning field goal that lives in their family?” So we really focused on things that we felt like people were interested in and curious about. And so I think, like any business owner—I mean, most business owners I know—I did not know that it was gonna work. [Laughter]

Shawn Busse:
I appreciate you admitting that.

John Garrett:
I took a $39,000 credit card loan to start it, because it was hard to get loans, and you’re still personally liable for it. So I took it, and I had one of those 1.9 percent financing for the life of the loan as long as you pay the minimum. I did that. And I was young enough in my career where I felt like I could make those mistakes, and then still go get another job. So I don’t know, I just felt like it was a good idea.

And I’d been in the business. So that’s the other thing. I grew up in the business, so I knew a lot about the business. I knew not only the business side, I’d learned some of the journalism side at the Business Journal here in Austin. And so I think I was kind of ready for this move. But I didn’t know it was gonna work.

I mean, my first issue, my costs were about 30,000 a month to print, mail, and have a couple of staff members. And we were really smart. On the front end, we did $16,000 of revenue, but it was 50 percent. So we told everybody, “If you sign a 12-month contract, we’ll give you 50 percent off the first month,” which was really smart because that meant in month two, we had $30,000 booked of revenue. And so we were pretty much cash-flow positive month two.

Loren Feldman:
Wow.

John Garrett:
Which is really, really helpful when you’re spending $16,000 a month on printing and mailing. So I was kind of stupid, to be honest with you, about how fast the budget would run out. I think I was kind of blind to the reality of how cash flow works, but it worked. And I did a lot of prepaid. My customers helped finance, obviously, the business, because we took the payment upfront. The printer gave us terms, but postage doesn’t. Like, you’ve gotta prepay postage, but just being scrappy at the beginning I think helps. Like, “If you prepay, I’ll give you a little discount,” that kind of thing.

Loren Feldman:
When was it that you started, John?

John Garrett:
We started in 2005 in the Round Rock/Pflugerville area. It’s the northern suburbs of Austin, home of Dell Computer Corporation. It’s not a sleepy town. I know a lot of people around the country think we ride horses to work. It’s a high-tech town, and it’s a great place to start a newspaper.

Shawn Busse:
How did you sell those first deals? I mean, you basically have an unproven thing. You don’t have any, I don’t know… credibility in a lot of ways, right? So clearly people trusted you. How did that happen?

John Garrett:
Yeah, I mean, I had a graphic designer kind of put together some mock boards—like giant poster-board signs, but really nice—of what it would look like. Because it was just a different concept, so I needed our customers to visualize it. So I had these two giant boards, I’m walking around with one of those portfolio cases taking it to local businesses. I’m like, “Hey, don’t you think Round Rock needs this?” And I mean, listen, I got told no a lot. Some of the most successful business owners in the city, who I had looked up to, said things like, “You’re gonna mail 60,000 newspapers? You’re crazy.” And I mean, I got a lot of a lot of nos.

But how I got yesses, there’s a lot of luck involved. At one of the biggest health care companies here in Austin, this woman never answered her phone. She told me this years later, but I called, and she thought it was her family. And so she answered it, and I got a meeting with her. And she was a big supporter at the beginning.

So, I got kind of lucky, but also I had relationships. I was in the Austin market. I knew local business owners, and I had a lot of people take chances on me. Actually, my invoice number one, his name’s Ken Moncebaiz. He owns a steam cleaning place here in Austin. You know, a lot of entrepreneurs want to help other entrepreneurs. And I think just being vulnerable business owners, directly, is a really good way to build trust. And there were a lot of Austin entrepreneurs who just helped me because they wanted to help me. And that’s something special.

Shawn Busse:
Yeah, I think that’s such great advice. So often, I’ll talk to somebody who’s trying to get something off the ground. And they approach it from, “How do I sell and convince,” as opposed to just asking for help. Again, in a way, that’s what you’re doing, right? You’re going out there and saying, “Hey, can you support this thing? Here’s why it’s different.” And sometimes people will say no, but then they’ll point you to somebody else who will say yes. And that’s a whole other thing to think about: How do you turn a no into a yes?

John Garrett:
That’s exactly right. I love what you said there. Like, “Will you help me? You know, we would say that. “Will you help us bring local news to Frisco, Texas?” We had no credibility in those cities, right? “But will you help us?” That’s really good. And you’re right, yeah, we direct you to other people. That’s really good advice.

Shawn Busse:
So you were tapping in. Even from an early point, it was almost like a higher purpose. So you’re saying, “We need this. Will you help us?” As opposed to, “I’m running a business trying to make money, and I’m trying to sell you.” So it’s a very different way of approaching it.

John Garrett:
Yeah, it resonates with everybody to say what I said: “We’re living in the Information Age, but no one knows what’s happening in our backyard.” That just resonates to us all. There’s all this information, and it’s everywhere. It’s out there. Where do I go to find the city council agenda? Where do I go to find out what they’re building behind my house? Hey, are they going to build something cool nearby? When’s this road going to be done? Like, where do you go to find that information? It’s out there. We just curate it in a unique way, and we send it to everybody, and people are like, “Thank you.”

Loren Feldman:
John, you told us that, today, it’s a lot more expensive than it used to be to advertise digitally. And today, you have tremendous credibility. You’re sending your publication to every home and the advertisers that you reach out to know that and understand that and believe that. That wasn’t the case in 2005. Back then, who did you see as your competition? And back then, your digital competition was a lot less expensive. How did you win that battle?

John Garrett:
Yeah, so we did view the local dailies and the local community papers as competition. We won by circulation. Like, it wasn’t even close. The Round Rock Leader, the local paper in Round Rock, a city of 50,000, 60,000 people—they might have been going to 3,000. We were going to all of them. So for us, our selling pitch was kind of a cost per household. So even though it’s cheaper to buy in the Round Rock Leader, sure, it’s only $100 a week there. And maybe it costs us $400. But we’re going to 30 times as many households. So we sold it on a cost-per-household, cost-per-thousand basis, and that’s how we competed.

But it didn’t take long, because, listen, one thing that we are serious about is design. Our product is a 35-pound, high-bright newsprint stitched in thread. It’s a beautiful product. And so it stays on people’s coffee tables all week long. I mean, all month long. We’re a monthly. And when they see it, quality sells. So, we never wanted to be the cheapest, although on a cost-per-household, we were an incredible value. We are kind of more expensive, even today. Today, we’re really selling against digital. I mean, we still sell against billboards, and there’s some TV, but mostly we’re selling against Facebook and digital services, those kinds of things.

Shawn Busse:
The quality comment is really interesting, John. I think about when I was in a small town, I grew up in southern Oregon, and I was in a community of maybe 25,000 people. And I remember that you’d go to the restaurant, and there’d be a little wire rack, and there’d be this very poorly designed, very cheaply printed kind of local news sort of thing. So it was free, like yours. But it wasn’t coming into my home, and the quality was just terrible.

And then the other option was, like you said, the paid circulation. So the Ashland Daily Tidings, which is now out of business. So that was actually not very well done either. So it seems like you’re doing something interesting here, where you’re giving something away of high quality.

John Garrett:
We have like 38 editions. And we have something like 33 designers on staff. So most publications in our industry would have, like, four. And it shows in how we curate the news. Yeah, design is a big part of who we are.

Loren Feldman:
Can you give us a snapshot of how big your company is? Employees?

John Garrett:
Yeah, so hopefully, the budget says we’ll do 35 million in sales this year. We’ve got about 200 employees, including staff, and we have our own printing facility here in Austin. And we’re all over the state, so we’re in Austin, Houston, Dallas, and San Antonio. And we’re focused on Texas. That was a big change for us.

During the pandemic, we had a lot of difficulty. We were out in Phoenix, which was profitable, but what happened with the supply chain and what happened with the world just made us think, “What are we doing?” So we’re focused on Texas, which is a pretty good place to be—ninth largest economy in the world. So we’re gonna hang out here for a bit. We have a lot of room to grow here.

Loren Feldman:
Tell us about that. What drove the decision to expand? And if it was profitable, can you tell us more about why you decided to stick with Texas?

John Garrett:
Yeah, so our DNA is hilarious. Like, our DNA is, “Let’s fight the incumbent.” And so what happened with us is, we were growing in Houston, Austin, and in Dallas at the time. Hurricane Harvey hit Houston, and hit it hard. And we’re local businesses. So they were flooded, but we just had this mentality of: “Okay, giant, you’re gonna face us. Let’s take it on.” There’s a phrase that says, “Everything’s bigger in Texas.” We said that CI is bigger than Texas. So we felt like what we did should be bigger than just the state. And so, yeah, we went out to Phoenix and, listen, I’m not counting out that we will ever go national again. I think what I’m saying is, the world changed.

So we have this print facility here, and pre-pandemic, it made a lot of sense. We would print here, ship a day out to Phoenix, and it cost us like $2,500 a truck. We could make those economics work. What happened with the pandemic—you remember the truck shortage—it went from $2,500 to $10,000. And our paper, by the way, paper’s still like gold. Our paper costs per ton went from like $650 to $1,200. And for us, our circulation is about $100,000 a month of COGS increase.

So we just couldn’t justify the mission, because we were growing. I think we had five editions in Phoenix. And what happened was, there was another locally-owned, independent news organization that wanted to kind of go where we were. And so we ended up selling the operation to those guys and just kind of put our tail between our legs. It was sad. We put a lot into it. I lost a lot of money, to be honest. And so it’s kind of sad to suck that up.

But today, knowing all that I know, today, all that’s happening in the world, I feel really good about that decision—even though, as an owner and as just somebody who likes to win, it hurt. It hurt a little bit, obviously to close that down. So, luckily, all of our employees were offered jobs there with the new company. And you know, we did the best we could as an ownership group—ownership group meaning me and my wife—to take care of those folks.

So, yeah, we’ve won, and we’ve lost. Atlanta we launched in March of 2020. Like, really? [Laughter] That was gonna be six weeks, right? The pandemic was going to last six weeks. That’s what we thought back then. And so anyways, we ended up closing that down as well. And we had a little operation in Nashville where we had actually acquired another publication, and we ended up closing that down, too. So we just said, “Hey, let’s focus on Texas.”

Loren Feldman:
And have those supply chain issues and the heightened costs reverted to where things were before the pandemic? Or are you still fighting that?

John Garrett:
Yeah, trucking is a little easier. I don’t really know how much it would cost to send a truck out there now. I’m sure it’d be double, but probably not $10,000. But paper is still high. We just got our first reduction that we’ve seen in years. So we got a 15-percent reduction cost, but you know, we’re up 100 percent. So we’ve got a little ways to go. I’m not a math expert, but I think we need to get back to a 50-percent reduction. I think that’s right. We’ll be back to where we were before, but I don’t see that ever happening. I think there’s a lot of stickiness to these cost increases.

Shawn Busse:
Tell us, John, I’m familiar with the Business Journal here in Portland. I know they’re a national organization. Their model seems to be really built upon paid subscription and then events. They do a lot of that stuff, and then advertising sales. Tell us a little bit about how you differ from them and how you see your strategy when they’re in a market you’re in.

John Garrett:
Shawn, I love that question. Because part of the reason why I started—you know, I was at the Austin Business Journal, same company. Here was our sales pitch back in 2005: “The reason you want to advertise in the Business Journal is because you want to be around decision makers. The reason decision makers read the Business Journal is because we tell people about things that are happening first.”

And I just thought to myself, “Why is it only the insiders”—like the smart developers and bankers and all those guys—”are the ones who know first? Shouldn’t everybody?” Like, if you own the farm that the developer knows the road’s going through, shouldn’t you know that when he shows up at your door so you don’t sell the farm for an unfair price?

So that was how we flipped it. We said, “Everyone deserves to know this stuff first.” And so we flipped it on its head that way. We don’t do events. I think that’s a great business of theirs. We could get into events, I think, although I will tell you that most of our customers say, “Please don’t do events. We’re so sick of all these events.” [Laughter] They’re smart to do it. I think it’s a big revenue driver for them.

And I think most people in our industry are less concerned about ad sales than we are, print in particular. We really still believe in the power of print, and it shows in our numbers. But most news organizations are selling digital services. You know, how do I help this local business buy Facebook? And that kind of a thing, so more of an agency model. We’re really more focused still on owned and operated.

So we did create a great email newsletter during the pandemic. I think it’s the best community email newsletter in the country. It’s free, and it’s growing like crazy. We’re sending out about 180,000 a day now. So we’ve turned it from a monthly news organization to a daily news organization. And we’re doing sponsored content, Loren. So there’s a real product mix, market fit for digital, that in my opinion, hasn’t been there in a long time for news organizations. You know, pop-up banners and autoplay videos, they don’t get me too excited. But sponsored content is pretty fun. And it’s a great product for some of our customers.

Loren Feldman:
Why do you think the newsletters succeeded? What are you offering that people wanted?

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