Ad recession: We’re at the end of the beginning, not the beginning of the end

Posted by Peter Kirwan on 8 August 2008 at 10:58
Tags: Associated Newspapers, Daily Mail & General Trust, Johnston Press, Media, Newsquest, Northcliffe Media

Writing in the FT, Tim Bradshaw predicts that ITV’s forecast 20% YOY decline in September ad bookings might come to be seen as “the moment the credit crisis finally hit advertising budgets”.

This is unlikely. The credit crisis was taking a visible toll on ad expenditure as long ago as January. But in ad markets, as in property markets, the real point of impact was early May.

That’s when the decline in ad revenues moved aggressively into double-digit territory. The scale of the collapse is really visible in the numbers for Newsquest’s classified ad revenues provided in monthly bulletins issued by Gannett.

In April, Newsquest was dealing with a classified market that fell by 5.7%. During May, its classifieds were down 14.7%. (At Trinity Mirror, the Q2 decline seems to have been similarly sharp; at Northcliffe, less so.)

Since then, we’ve moved up another gear. Last week, Trinity Mirror disclosed that ad revenues at its regionals declined by 17% during June.

That’s actually worse than ITV’s prediction for September. Why? Because ITV is comparing its performance with a buoyant September 2007, which featured England reaching the Rugby World Cup final.

Strip out the effects of that, and, as ITV’s Rupert Howell notes, the channel’s underlying YOY decline in September will be something like 14%-15%.

This feels about right. When it comes to percentage declines, the big ad budgets devoted to commercial TV are always going to lag behind what’s happening in the regional press. The smaller local businesses that sit at the economy’s sharp end always feel the pinch first.

So that we can all keep a sense of proportion, here are a few data points that illustrate the speed and scale of the downturn.

The percentages refer to all ad revenues including digital (or in the case of Newsquest, to classified revenues only, where mentioned). The months mentioned are those in which the declines actually occurred (rather than when they were reported to the market by the companies in question). All % comparisons are year-on-year. . .

July:
Trinity Mirror regionals: down by “around” 17%
Trinity Mirror nationals down by “around” 13%

June:
Newsquest classifieds: down 19.3%
Northcliffe regionals: down 16%

May-June:
Trinity Mirror regionals: down 11.3%
Trinity Mirror nationals: down 13.2%

May:
Newsquest classifieds: down 14.7%
Northcliffe regionals: down 12%

April:
Newsquest classifieds: down 5.7%

March-June:
Associated Newspapers: down by 3%
Northcliffe regionals: down by 11%

March-April:

Trinity Mirror regionals: down 3.3%
Trinity Mirror nationals: down 2.4%
Northcliffe regionals: down 6.7%

January-April:

Trinity Mirror regionals: down 3.1%
Johnston Press: down 7.1%

January-February:

Johnston Press: down by 4.2%

Er, what was that about a broad-based recession?

Posted by Peter Kirwan on 29 July 2008 at 22:55
Tags: Daily Mail & General Trust, Media, Pearson PLC, United Business Media

This morning, United Business Media turned in revenues up by 10.4% YOY for the six months to the end of June. Cash conversion improved, and so did operating profit (up 11.4%).

Even CMPi managed growth of 6.2% (although margins dipped slightly below 20%).

For the journalists among you, it’s worth pointing out that all of this happened inside a company (UBM as a whole) where only 25% of revenues are now generated by print. That’s down from 56% four years ago.

It’s just as well, then, UBM’s events business is doing a fair impression of the Duracell bunny. In his presentation to analysts this morning, David Levin, UBM’s chief executive, kept the best news until his last slide, which contained these bullet points:

– Forward bookings across UBM’s major events scheduled for 2H08 are 10% ahead of the previous year.

– Bookings for 2009 major events demonstrating good growth — 10% ahead.

Pearson was also presenting half-year results this morning. There, the FT Group delivered revenues up by 11% for the half-year. Much of that was attributable to the group’s Interactive Data division. But FT Publishing itself managed a 2% increase in subscription, circulation and advertising revenues.

Not bad given what’s happening to City jobs and financial services advertising.

Dame Marjorie sounded over the moon. She told the FT: “In downturns, companies like ours, which have consistently invested and have very strong balance sheets, have huge opportunities. This [the next couple of years] is probably going to be the most fun time I have had yet in this job.”

How so? Scardino mentioned acquisitions, “bolt-ons, things which are hugely synergistic”.

Whether or not she’s thinking — in part? — about enriching the FT Group with acquisitions remains to be seen.

Three or four years ago, when the FT was languishing miserably at the bottom of its profit cycle, investors would have demanded Scardino’s head on a pikestaff at Traitor’s Gate if she’d so much as hinted at such a thing. Now, as the FT prepares to confront a rampaging Wall Street Journal, there’s just a chance that things might be different.

Stranger things have happened.

The Fallon brothers: A counter-cyclical media dynasty

Posted by Peter Kirwan on 23 July 2008 at 19:13
Tags: Daily Mail & General Trust

Those counter-cylical brothers-in-media Ivan Fallon (The Independent) and Padraic Fallon (Euromoney) will have plenty to discuss on family get-togethers this summer.

The Indy is going south with the rest of the consumer media. But as today’s trading update for Q2 proved, Padriac Fallon’s Euromoney Institutional Investor is firing on all (or most) of its cylinders.

Euromoney’s home page gives a flavour of the exotica generated by the company’s employees — everything from Petroleum Economist (which must be rocking at the moment) to a two-day summit for tax specialists in Rome in September that will cost £1,295 to attend.

Padraic Fallon started out editing Euromoney (the magazine) 34 years ago and is now the company’s £2m-a-year chairman. For years, while many in the B2B sector were content to live off dwindling recruitment revenues, Fallon perfected a business model that now defines the ideal.

That’s to say: minimal dependence on advertising, a big events business — and, if you can get it, plenty of subscription revenues generated by high-quality specialist content.

Less than one-fifth of Euromoney’s revenues come from advertising. Subscriptions account for nearly 40%, and the balance is generated by a mix of databases, conferences and training.

In March, the company reported revenues up by 7%. Today, the company unveiled even faster growth. During Q3, revenues rose by 13%.

How has a company that made its name in the financial sector managed this feat? The answer partly lies with Euromoney’s focus on emerging markets, where revenues are roaring upwards at 25%+ per annum.

The company’s interest in booming commodity markets must also have something to do with it — although Euromoney does seem noticeably coy about the performance of Metal Bulletin, which it acquired for £220m in 2006.

Neither do today’s interims specifically mention what’s happening inside the company’s core financial publishing division. But during the six months to March, revenues in this division fell by just 1%.

This feels like a creditable performance, one that reinforces the currently bullish logic of both the FT and The Economist: in a slowdown, the demand for high-quality information about what’s happening in financial markets is relatively robust.

Looking ahead, Euromoney isn’t expecting any problems. Today’s trading statement suggests that the revenue pipeline for Q4 “looks similar to this time last year and [is] in line with the board’s expectations”.

Nice work if you can get it.

The Standard says that Brenda feels your pain. No, really. . .

Posted by Peter Kirwan on 27 June 2008 at 15:39
Tags: Associated Newspapers, Media

Journalists and recessions don’t get on well together.

Sooner or later, a downturn becomes an exercise in standing around, waiting for things to get better. The constant drip-drip-drip of negative news is problematic. And the ebbing away of economic activity means less novelty, fewer stories, a national life lived more slowly.

For most people, the downturn is only about two months old. But already, you can see that attitudes are getting a bit brittle in newsrooms. The search for a new angle is becoming neuralgic.

Editors get led down blind alleys under such circumstances. Take, for example, this afternoon’s front page splash on the Evening Standard: “Queen hit by credit crunch“.

Brenda, it seems, has been hit by the spiraling cost of maintaining her many royal residences. Oh, and there’s the doubling of Prince Andrew’s travel bill to £800,000 to take into account, too.

Under such circumstances, should we think of the Queen as a cost on the national P&L? Or as a consumer pressurized by rising costs like the rest of us?

Naturally, the Standard knows where it’s going with this one. The destination is visible in the simpering headline: “Rising costs and not enough cash. . . just like us, your Majesty.”

Almost certainly, a mountain goat with Alzheimer’s would cringe at the parallel. So far as I know, Brenda doesn’t have a mortgage to repay. Or a job to lose. Nor will she ever need to sit nervously in a plastic chair at the local Citizens Advice Bureau and discuss her credit card habit with a debt counsellor.

You could probably add a few differences to the list yourself. Lord knows, there were enough of them the last time I looked.

Trying on the old line that we’re in this together with Brenda and her brood is simply cack-handed. It won’t butter any turnips for Viscount Rothermere on the 5.15 from Charing Cross.

Welcome to The Great Unbundling, Mr Rusbridger

Posted by Peter Kirwan on 25 June 2008 at 17:11
Tags: Associated Newspapers, Guardian Media Group, Independent News & Media, Telegraph Media Group, Times Media

Scientists say that falling in love alters our brain chemistry, and therefore the way in which we perceive the world.

Presumably, it’s the same with losing.

Last week, the Mail Online overtook the Guardian and the Telegraph to become the UK’s most-trafficked national newspaper site.

Now, suddenly, the Guardian is suggesting that it’s becoming increasingly “anachronistic” to compare ABCe data for newspaper websites.

Yes indeed. That’s because the Mail’s great surge in online visitors hasn’t been generated by what Mike Butcher, the author of the piece, would call “news”.

No — it’s all down to Keira Knightley’s “razor sharp” collarbone and pictures of an emaciated and distressed Amy Winehouse wandering around the streets of London in the small hours dressed only in her underwear.

Butcher argues for a purist view. He accuses the Mail Online of playing fast and loose with link bait (which is patently true).

Sites like the Mail Online and The Sun — with its three lane pile-up of tits, bingo and fantasy football — aren’t really news sites at all, he argues. They have more in common with the US celebrity site TMZ.com.

As for The Guardian, well, it seems tempted to pick up its toys and walk away. Now that the Mail Online has bested it, Butcher tells us that:

guardian.co.uk. . . will be more interested in how it is faring against the Huffington Post, a liberal US blog network, than comparing itself to other domestic newspapers.

Of course, tinkering with competitive sets in the wake of commercial defeat has a long and venerable history within sales organizations. It goes on everywhere, and it’s symptomatic of denial.

Commercially, no-one will be fooled. That’s because the web’s animating force is all centripetal, not centrifugal. Competitive sets are getting bigger, not smaller.

In terms of advertising revenues, the Guardian must compete directly with the Mail Online as well as Google, MSN and Yahoo — and a host of others.

In the absence of pornography, violence and racism, the quality of news coverage that brings in the punters simply doesn’t matter to advertisers.

That said, Butcher’s piece does point to something important.

The Mail Online’s successful experiments with link bait are a prime example of what the author Nick Carr calls the “unbundling” of news content.

No longer do we have to pay a set fee to buy a newspaper that contains a mix of highbrow and lowbrow content.

Zooming in from Google in 0.25 seconds, we can get our fix of “+keira +knightly +baftas” and exit just as rapidly as we arrived, leaving any “serious” content undisturbed.

The real question for editors at the Guardian and the Telegraph is how to preserve resources for the news content that Rupert Murdoch calls “boring”. They need to do this in a digital world where 20%-30% annualized growth is a minimum requirement.

The pressure to unbundle, to encourage links with bait, is enormous. It can only grow. For better or worse, it will influence news agendas.

If mentally cordoning off a bit of cyberspace and labeling it “serious news sites only” helps editors to manage the pressures, fair enough.

But let’s not pretend that this will influence the ad market.

Because it won’t.

Morgan Stanley hails Roger Parry as King of the Bears: Prepare your handbasket for hellish ordeal, say bankers

Posted by Peter Kirwan on 18 June 2008 at 12:47
Tags: Daily Mail & General Trust, Future, ITV, Johnston Press, Trinity Mirror, United Business Media

Nasty. Morgan Stanley has slashed its profits forecasts for the media sector in 2009 and 2010.

In an aggressively-worded note, the bank’s media analysts foresee distress spreading from consumer-facing media companies to their B2B counterparts. Like this:

Away from the consumer-related areas we see pressures mounting in the corporate environment.

Finance directors looking into the second half of 2008 and into 2009 are likely to seek to reduce controllable costs whether in advertising, marketing, information costs, travel and other expenses.

This means that, while the thrust of this note is to reduce expectations for consumer-related companies, we also take down numbers for those exposed to B2b markets and professional publishing.

Morgan Stanley has cut its profit forecasts for what it calls “advertising inventory companies” (I guess this means anyone who sells advertising) by a whopping 17%.

Advertising and marketing agencies have been cut by 12%. BSkyB is down by 10%. And “professional publishers” are down by 6%.

Morgan Stanley is very bearish on what it calls the “cyclicals” (ITV, Trinity Mirror), which remain dogged by “a combination of structural deterioration, heavy downgrades and, in some cases, leverage fears”.

One possible exception is Johnston Press. Having endured the pain of an early rights issue, the company “could produce very attractive returns on a 2 year view”.

(Note that reference to “heavy downgrades”: The point here is that share price collapses haven’t yet been “heavy” enough to generate buying signals. The implications of this are fairly scary.)

Among the few positives, Morgan Stanley regards United Business Media and DMG&T as “safe” and “interesting”.

A big shake-out is predicted for adland, as revenue growth moves from 3.75% in 2008 to -1% in 2009. As Morgan Stanley puts it:

In 2008, boosted by a strong start to the year and by the ‘super quadrennial’ factors (Beijing Olympics, US Presidential elections, Euro 2008) most forecasters have assumed organic revenue growth of around 5%.

In 2009 estimates for organic revenue growth tend to range in the vicinity of 3-4%. Our starting point is now to ask why there should be any global advertising growth in 2009.

Losing 1% of growth (in revenues) might not sound like much. But when that 1% falls down to the profit line, it becomes a very big number. In organisations with large fixed costs (including employees), it’s also a very threatening number. . .

Scrabbling around for corroboration on this, Morgan Stanley alight upon Sir Martin Sorrell of WPP, who has been warning of a 2009 slowdown for as long as anyone can remember.

But who is the uber-bear identified by Morgan Stanley as supporting their arguments? Step forward Roger Parry, chairman of Johnston Press, Future Publishing and Media Square, the troubled marketing services company.

No doubt Parry’s unvarnished honesty horrifies the financial PRs who have to work with him. Last week, he explained Media Square’s disappointing results by commenting upon “the amazing speed with which the advertising economy has tanked out in the last six months”.

For good measure, Parry added that “the level to which confidence has fallen is really scary.”

At the time, I was rather hoping that no-one would notice his comments.

Too bad: Morgan Stanley did.

The Independent: Leader of the reactionary party, and loved by the City

Posted by Peter Kirwan on 5 June 2008 at 14:17
Tags: Daily Mail & General Trust, Independent News & Media, Johnston Press, News Corp, Telegraph Media Group, Trinity Mirror

At the World Association of Newspapers congress in Gothenberg, Independent News & Media reconfirms its web-wary credentials.

Here’s Simon Kelner, editor of the Independent, deploying a line that’s at least a decade old:

“I have the impression that the internet is like going into a bar where everybody is shouting, whereas when I read a newspaper it is much easier.”

Not to be outdone, Gavin O’Reilly also reached into the store cupboard of web scepticism to describe printed newspapers as the “ultimate browser” (oh dear). O’Reilly went on to add:

I find it rather remarkable how unsophisticated the commentary is on our industry today. They [media commentators] seem to support the conventional wisdom that newspapers are soon to become a relic of the past and that opportunities only exist in a digital sense.

For good measure, he compared bloggers who criticize ACAP to the perpetrators of drive-by shootings.

If you work at either of the Independents, frustration would be a legitimate response. And no matter where they work, Digital Bolsheviks who work tirelessly to bring about the dictatorship of the digerati will shake their heads sadly.

But hold on a second. Take a look at activist investor Denis O’Brien’s criticisms of IN&M. Is he worried about a lack of investment in digital publishing? Apparently not. Instead, O’Brien complains that the IN&M board isn’t sufficiently independent.

Is the City concerned about IN&M’s lack of enthusiasm for digital?

Nope. Nine analysts follow IN&M. Seven of them are currently advising investors to hold or buy, or expect the stock to “outperform” the market.

Only half of the 16 analysts that follow Trinity Mirror analysts think similarly. Fourteen follow Johnston Press, but only nine attach a hold, buy or outperform rating to the stock.

Although some of IN&M’s popularity is attributable to the presence of Denis O’Brien on the shareholder register, it’s also true that the City likes IN&M.

It likes the fact that IN&M isn’t very interested in the future of news organizations.

And it likes the company’s exposure to the developing world. Overseas adventures are a tried-and-tested method of generating new revenues. You can’t say that about digital investment.

In a recession, the public markets are no place for revolutionaries. Trinity Mirror has been hamstrung by its quoted status for years. Johnston Press is no longer using its quoted status to consolidate the industry. And IN&M has emerged as the leader of the reactionary party.

Among UK-based quoted news organisations, only DM&GT seems to enjoy some freedom to manoeuvre. News Corp enjoys something similar — largely because, like DM&GT, it has diversified intelligently and is still run by a shareholding figurehead who is more than a creature of the markets.

But for the next couple of years, and possibly beyond that, the best way of fomenting a digital revolution will be to do it privately.

In this respect, the Telegraph and the Guardian are both object lessons. Both are shielded in their own ways from short-term investor demands. Not surprisingly, both sit the top of the online traffic rankings for national newspaper sites.

Conicidence? I don’t think so.

Let’s have a fight about web metrics — Part 2

Posted by Peter Kirwan on 23 May 2008 at 19:06
Tags: Associated Newspapers, Guardian Media Group, News International

I was only joking this afternoon when I said it would be fun to have a fight over the nationals’ traffic figures.

But it seems they’re serious about it.

It turns out that the Guardian, News International and Associated Press are all suspicious about the rapid increase in traffic at Telegraph.co.uk, which this week culminated in the site becoming the UK’s most popular national newspaper site.

ABCe measured 18.6m uniques at Telegraph.co.uk during April.

But the site’s rivals had already raised concerns about ABCe’s March data with the Joint Industry Committee For Web Standards (Jicweb), the industry body that advises ABCe.

Brand Republic carries (reg. reqd.) a bland statement from Jicwebs that we can’t trace to the organization’s site — and which tells us very little about what’s at stake.

But there certainly seems to be a review of ABCe’s methodology in the works. Jicwebs is saying that this has been partly prompted by the rival publishers’ complaints.

Sheesh. We can file this one under: Life, art and imitation of the latter.

Forget about ABCe; let’s have an old-fashioned fight about traffic numbers

Posted by Peter Kirwan on 23 May 2008 at 11:38
Tags: Associated Newspapers, Daily Mail & General Trust, Guardian Media Group, News International, Telegraph Media Group

The Telegraph.co.uk has ended the Guardian’s long reign as the most widely-read national newspaper website. So writes my colleague Martin Stabe on the basis of ABCe data for April that run like this:

• Telegraph.co.uk: 18.6m unique users
• The Guardian: 18.54m unique users
• Mail Online: 18m unique users
• Times Online: 15.4 unique users
• Sun Online: 14m unique users
• Mirror.co.uk: 4.28m unique users

Now ABCe hasn’t been established as the gold standard of traffic measurement for very long. But already, the new regime has become boring.

Am I the only one who feels nostalgic for the days of near-impenetrable arguments about rival sets of traffic figures propounded by executives who themselves don’t fully understand the data? Surely someone could be persuaded to start an argument?

Admirably, ComScore seems interested in fomenting a barney. Just as ABCe’s hegemony seems to be solidifying, the panel-based traffic counting firm has decided to start publishing monthly figures for newspaper sites for the first time.

ComScore’s traffic analysis of the UK’s nationals for March looks promisingly discordant with ABCe — and (coincidentally) rather positive for News International:

• The Sun: 4.3m visitors
• The Guardian: 3.6m visitors
• Telegraph Group: 2.8m
• Times Online: 2.6m
• Daily Mail.co.uk: 2.4m
• Independent.co.uk: 1m
• Mirror.co.uk: 990,000

OK — more seriously now. . . ComScore’s numbers are scaled up from a “panel” of UK consumers.

The UK bit is important. The Mail Online, for example, ranks high in ABCe, but boasts a large overseas readership. Cut that out influence — as ComScore claims to have done — and the site’s aggregate traffic looks much less impressive.

ABCe’s data is pulled directly from publishers’ server logs. Quite apart from its UK focus, ComScore suggests that its figures are lower than others because:

1) Its panel-based (research) methodology is not skewed by cookie deletion.

2) It counts as one individual the same person hitting a site from different locations (eg: home and the office).

These may well be persuasive arguments. But it’s hard to tell.

As the spat over ComScore’s data for Google’s Q1 clickthroughs proved, ComScore’s problem is a lack of transparency about how its research methodology works in practice.

Coincidentally, the same argument applied to Nielsen NetRatings. The last time I looked at its site, it contained the vaguest of descriptions of its methodology, lost beneath layers of corporate verbiage.

And Hitwise? I like the idea of pulling traffic numbers from ISPs’ servers (which is what the company does). In my humble opinion, Hitwise also does a slightly better job of explaining its methods to the outside world. . .

Of course, all of this is irrelevant if all you need are figures to bamboozle gullible clients during the first 20 seconds of a sales presentation. . .

DMGT’s investment in Spot Runner could bring cheap local video ads to regional newspapers

Posted by Peter Kirwan on 20 May 2008 at 10:55
Tags: Daily Mail & General Trust, Northcliffe Media

Just caught up with this: Daily Mail & General Trust has invested in a US company called Spot Runner, which specializes in helping small companies to create and place cheap TV ads.

As part of the deal, DMG&T will take a lead role in deploying the start-up’s technology in Europe — something we look forward to watching with interest.

I’ve been following coverage of Spot Runner casually in the US media and marketing press for a year or so. Founded in 2006, the company allows thousands of mom and pop businesses to run highly localized TV ads across the US.

It’s a classic Long Tail effort –albeit one that seems highly geared toward North America’s highly fragmented local TV market (at least at first glance).

Recently, for example, Spot Runner struck a deal with Stuller, a US company that makes money by distributing cheap jewellery to 40,000 independent retailers across America.

For a minimum spend of $1,500, any one of these stores can plaster their own details across a templated ad featuring Stuller goods created by Spot Runner. Spot Runner also does the leg work of finding remnant air time for the resulting ad in local markets.

So what? Well, here’s what. Forget about America’s highly localized TV markets. Instead, focus on the fact that Spot Runner’s technology is ideally suited to small companies anywhere in the world who want to make and run video ads on the web.

Naturally, if Spot Runner can combine video advertising with the power of local search and content, the results could be very powerful indeed.

Online video has become an extremely lucrative niche for national sites. The potential for local advertisers doing their stuff — at low cost — on thousands of local news sites is obvious.

Spot Runner’s ambitions don’t stop with video. Nick Grouf, the company’s chief executive, is making it abundantly clear that Big Media should regard Spot Runner as a multi-platform rival to Google:

“Businesses don’t think, I want to be in print, or be online, or on TV. They think I want to [grow my revenue]. What we’re doing right now is trying to learn more about how to make our advertisers successful. To the extent that print is part of that [purpose] we will help them with that focus.

This kind of talk has got a large number of Google’s fre-enemies excited about Spot Runner. Aside from DM>, the company’s investors include global ad networks WPP and Interpublic, broadcaster CBS and Spanish-language media giant Grupo Televisa.

Paid Content suggests that it knows “on good authority” that Google tried to buy Spot Runner soon after its launch. The start-up allegedly turned down the offer — and Google has subsequently ventured into TV advertising on its tod. (NB: Other accounts suggest that Google walked away from Spot Runner — see here.)

The potential isn’t lost on the highly-rated former Microsoft executive Joanne Bradford, who recently left her job running Microsoft’s global ad sales organization to take up a senior role at Spot Runner.

It’s going to be interesting to see how DMG&T delivers on its commitment (as Paid Content puts it) to “help take the service to UK and other parts of Europe”. . .