Associated Newspapers

DMGT 2010: A weak and narrow recovery takes shape

Posted by Peter Kirwan on 25 November 2010 at 13:31
Tags: Associated Newspapers, Daily Mail & General Trust, Northcliffe Media

What’s not to like about DMGT’s final results for the year to October? A few things. Although the overall numbers suggest a welcome improvement, classified ad markets remain broken, online and in print. After the steep declines of 2008-2009, this recovery still feels very weak.

In addition, digital strategy isn’t delivering much joy. Revenues at Mail Online are growing fast, but remain vanishingly small. Meanwhile, the standalone classified sites into which DMGT has poured so much effort remain becalmed.

Associated Newspapers

Like-for-like revenues for the year to October 2010 look relatively strong, increasing by 5%, with ad revenues rising by 6% YOY. DMGT is suggesting that the combination of buoyant print display and free-to-air site growth shouldn’t be underestimated:

Underlying revenues were up 5% or £39 million with improved revenues in display advertising, digital and developing revenue streams offsetting decreases in circulation and classified advertising.

Once again, retailers were in the engine room, increasing spend by 14% YOY. Online advertising sold through the newspaper titles’ companion sites increased by 54% to £12m. (Credit for this performance is attributed squarely to Mail Online, which grew its traffic by around 70% YOY).

All well and good. But Associated is still living with the legacy of being slow to build up sales efforts at its newspaper sites. There’s no harm in ambitious talk from Martin Clarke. Yet £12m in digital revenues remains peanuts compared with the cost of underwriting Paul Dacre’s editorial vision. Much more work and investment is required.

Neither has this rising digital tide lifted all of DMGT’s digital boats. The digital classified operations formerly known as Associated Northcliffe Digital — which focus on Jobs, Property, Motors and Travel — could only manage a 1% rise in revenues, to £95m.

Northcliffe Media

Here the picture is uglier. Like-for-like revenues declined by 6%, with ad revenues down by 7%.

There are some interesting contrasts here. As we’ve seen, retail advertising grew by 14% at Associated. But at Northcliffe’s local newspapers, where retail is now the largest single ad category, it fell by 4%. The two-speed retail advertising economy persists. But for how long will retailers continue to prop up the nationals’ print editions?

It’s desperately difficult to be optimistic about classified. Last year, property ads grew by 5% at Northcliffe. With house prices teetering on the edge of a precipice, this feat may not be repeatable. Vast debts, mortgage rationing and unemployment worries will persist for much of the population.

And who among you would place bets on recruitment markets reviving? This will happen if the private sector compensates for public sector job losses between now and 2015. George Osbourne suspects that this will happen. DMGT (and the consultancy firm PwC) seems less convinced.

The City should be heartened by what’s happening to operating profits at Associated (up from 7% last year to 11% this year) and Northcliffe (up from 7% to 10%). But the mood is grimmer than you might expect: this morning, DMGT’s shares lost 4% of their value.

That’s because much of this improvement has been driven by cost-cutting (a few hundred more Northcliffe staff lost their jobs last year). This recovery itself feels anaemic, and may be more reliant upon a narrow base of advertisers than DMGT admits.

The central questions remain: What will happen to print display and online display during a second recession? And: will those classified revenues ever come back?

Like everyone else, Northcliffe is trying to reposition itself to capture what remains of the latter. This means permanently driving down the cost of advertising — and the cost of editorial (or getting rid of editorial altogether). Talking to analysts this morning, Martin Morgan, chief executive of DMGT, suggested that Northcliffe is doing all of these things, via its hyperlocal network Local People:

“We’re going to be taking the technology platform we’ve built (for LocalPeople) and merging it with the ThisIs sites

“So local people can concentrate on finding a garage, finding a plumber in such a way that provides a long tail of local advertisers - people who aren’t advertising in the local press, we think we can get them in.

“News has its place but news alone is not going to produce that flow through to looking at ads. Investment is going to go heavily in to local information content.”

Local information content? It’s an awkward term for an awkward thing: the absence of journalism.

What would Paul Dacre say if The Guardian became a fully-fledged charity?

Posted by Peter Kirwan on 9 November 2010 at 14:27
Tags: Associated Newspapers, Guardian Media Group

In the middle distance, a different kind of Guardian Media Group appears to be taking shape.

The Sunday Times reports that GMG investments like EMAP and Trader Media Group, as well as wholly-owned subsidiaries that operate radio stations and classified websites, will be hived off into “an investment portfolio from where they could be sold over time”.

So what? Well, it’s what insiders call the “direction of travel” that’s important here. At some point in the future, we may wake up to find that The Guardian is being run by a charitable foundation that looks rather like The Wellcome Trust.

This weekend’s apparently innocuous restructuring news feels like part of this process. In this respect, it resembles the 2008 decision to re-cast The Scott Trust as a limited company (which left the way open to selling EMAP and Trader, and banking the cash, without incurring a huge tax bill).

From one perspective, charitable status looks like a sensible way to run a news organisation, especially one that remains committed to a future that’s web-based and ad-funded. GMG’s current range of investments is illiquid. An all-digital existence, mostly financed by ad revenues, will be highly cyclical. Setting up a cash-rich foundation seems like a logical response.

Yet there are potential problems. Among them is the likelihood that free market-loving rivals, like Paul Dacre, would view this transformation as an unacceptable triumph for the subsidariat.

At the moment, Guardian Media Group’s corporate structure is tricky to interpret, and therefore to criticise. It’s neither wholly a charity, nor a business; neither fish nor fowl. The notion that The Guardian should be “profit-seeking” rather than merely profitable captures this ambivalence. Setting up a charitable foundation to stand behind The Guardian would give free-marketeers a much bigger barn door at which to take aim.

As a result, charitable status could become a hyper-political issue (rather like the BBC’s tax-funded existence). If The Scott Foundation (as it might be called) exists solely to prop up a commercial enterprise that competes aggressively with its rivals, it would be reasonable to expect criticism. Some might regard the result as a sham charity, rather like the ones that run private schools in this country.

The parallel isn’t entirely pointless. During the Blair-Brown years, political pressure was applied to these sham charities. In return for a soft-touch regime, they were encouraged to open up their facilities for the benefit of surrounding communities.

If similar pressure was applied to The Scott Foundation, or if it decided to fund external causes as a matter of course, what else might take the trustees’ fancy?

After lobbying from a culture secretary, it might make sense to donate £25m to local TV start-ups. Or invest in cross-industry technology platforms. Alternatively, it might be a good thing to subsidise hyperlocal bloggers, or organisations that protect free speech and press freedom.

Almost without exception, you can see where this is heading. Plenty of possibilities exist, but many of them will be accompanied by political pressure, and the inevitable allegations of economic favouritism, political bias and social engineering.

Converting a national newspaper into a charity might sound like a good idea. In reality, it’s unlikely to be an easy road.

Ad revenue recovery: Different strokes for different folks

Posted by Peter Kirwan on 13 August 2010 at 14:25
Tags: Associated Newspapers, Daily Mail & General Trust, ITV, Johnston Press, Northcliffe Media, Reed Elsevier, Trinity Mirror

The recovery is starting to remind me of the Tour De France. High on a mountain ridge, the peloton is stretched out along a vast stretch of road. But two groups are visible. The leaders represent consumer-facing mass media — the broadcasters and national press. The laggards come from B2B publishing and local newspapers. Worryingly, at this stage during a recovery, the latter should be doing far better than they are now. At local newspapers, advertising revenues are still declining.

And the mountain ridge? This represents the risk of a double-dip recession, which now seems to concern many analysts, despite contrary indications.

Consumer media: Q2 advertising revenues

Consumer confidence reached a nadir in early 2009, began to climb and reached a peak in April of this year. Since the election, it’s been falling. Few analysts now expect interest rates to increase soon. The notion of a double dip is no longer a dark, if marginal, fantasy. It’s closer to the mainstream of economic forecasting than at any time during the past two years.

As yet, ad revenues at major media organizations aren’t showing any side effects. Q2 wasn’t wobbly: it was strong. Marketers haven’t yet drawn in their horns, although that could change very rapidly.

Recent weeks have seen a flurry of half-year results and trading updates. DMGT released a trading statement in late July. Here, the trick was to look for the underlying numbers, which strip out the effect of disposals (like the Evening Standard).

At Associated, these advertising numbers confirmed the general pattern we’ve come to expect. The Mail had turned in 15% ad revenue increases during January and March — but less for February. The 15% rise in Q2 looked like continuing solid progress.

Digital revenues were up by 46% at Associated. This isn’t quite the 100% YOY increase that Alan Rusbridger of The Guardian claims to have seen during April. Yet fairly clearly, it’s getting to the point where last year’s online revenue declines are starting to look like a distant memory.

ITV’s half-yearly report suggested ad revenues had risen by 18% during 1H, compared with 15% for the broadcast market generally. These numbers closely resemble those from Associated Newspapers. Although ITV was early to recover and is still growing faster than the market, agencies move in lockstep.

Robust growth like this isn’t universal. At Trinity Mirror, ad revenues in the tabloids increased by a mere 2.2% during 1H. The company predicted flat ad revenues for July. At Trinity’s nationals, digital advertising was similarly subdued, rising by just 4% YOY. You’d have to suspect that chief executive Sly Bailey is examining both the reasons for these oddly muted numbers as well as ways to spur more growth.

Local & business media: advertising revenues

This bit of the peloton contains all sorts. Toward the head of the group are B2B publishers like Centaur Media. It’ll be September before we get Centaur’s full-year results (to 30 June). But the company recently suggested that ad revenues rose by 10% during 1H. For the record, that’s better than Trinity Mirror’s tabloids, where ad revenues only rose by 2%. On this basis, Centaur is up there with the leaders.

Yet a big distance separates Centaur Media from the likes of Reed Business Information. Stripping out the effect of closures and disposals, RBI’s like-for-like ad revenues during 1H declined by 4%. Here, management was content to suggest that the rate of decline in ad revenues has “moderated”.

This puts RBI on a par with what’s happening in local newspapers. Here, too, revenues are still declining, not quite bumping along the bottom. At Northcliffe, for example, underlying revenues were down by 4% during Q2 — the same as Q1’s decline.

If retail has powered ad recovery at the nationals, its relative weakness in local newspapers is worrying. Retail advertising declined by 6% at Northcliffe during 1H. Digital only rose by 10%. The fact that property ads — up by 9% — were one of the few bright spots isn’t exactly comforting.

Trinity Mirror’s local newspapers mirrored Northcliffe’s. During 1H, after stripping out revenue from titles recently acquired from Guardian Media Group, they saw revenues fall by 5%.

The bullish case runs like this: local newspapers are taking longer than expected to recover, but improvement is visible. Last year, after all, Trinity’s local newspapers saw revenues decline by 12.4%. The bearish case is pretty obvious. If a double-dip recession is coming, it seems likely that local newspapers won’t return to YOY growth before it arrives.

Ad revenues, for most media owners, wax and wane far more dramatically than circulation revenues. As a result, it’s ad revenues that tend to define the industry’s mood — as well as the ease with which it can make profits. Typically, too, the distance between the fortunate and the unfortunate always widens at economic turning points.

As a result, life at ITV and Associated Newspapers currently feels very different from existence at Johnston Press and Reed Business Information. The distance between winners and losers will probably contract if a double-dip recession takes hold. But it could expand further, too.

Retailers & national newspapers: Too big to fail?

Posted by Peter Kirwan on 11 August 2010 at 12:43
Tags: Associated Newspapers, Daily Mail & General Trust, Media, News International, Trinity Mirror

Is the advertising recovery we’re witnessing as unbalanced as anything that occurred in the City of London during the run-up to 2008?

That’s what I’m starting to wonder. Take DMGT’s Q2 numbers, which disclose that retailers once again outperformed the broad advertising market, increasing their expenditure Associated Newspapers by 19% YOY. Overall, ad revenues at Associated climbed by 15% during Q2.

At Associated, retail is almost certainly the largest vertical sector in terms of ad revenues — bigger than cars, telecoms and IT or financial services. Anecdotal evidence suggests that retailers have become similarly important at Trinity Mirror’s nationals and The Sun.

The slide at the top of this post, taken from a recent presentation by Guy Zitter, the MD of Mail Newspapers, shows that retailers bought roughly £80m-worth of display advertising from The Mail and Mail On Sunday last year. This year, the retailers’ contribution could rise to £100m. This represents a big proportion — perhaps one-third — of the display ad revenue generated by Zitter’s newspapers.

Drill down a little deeper, and you find that almost half of Mail Newspapers’ retail advertising — nearly £40m-worth of it last year — came from supermarkets. Remarkably, the supermarket have more than trebled their expenditure at DMGT during the past five years.

A few obvious questions, then. What is propelling this huge expansion in retail advertising? Food price inflation? The simple fact of intense commercial rivalry? Or is press advertising itself a bargain that retailers crave to consume? (Perhaps it’s not the latter: Zitter’s presentation also proudly points out that the Mail and Mail On Sunday have been increasing revenue per page at a rapidly increasing rate — well beyond the rate of inflation — for at least the past decade.)

Moreover, the supermarkets have behaved like no other sector during the recession. Unlike everyone else, they continued to spend more and more on press advertising. (Other retailers, by contrast, slackened off a bit, but certainly didn’t hit the breaks in panic mode.) Among the nationals, the supermarkets’ behaviour put a floor under the worst effects of recession, blunting its impact.

In the end, the really important question for publishers is how much longer the big retail chains will be able to increase their expenditure at this rate.

No-one knows. And therein lies the problem. If the supermarkets’ priorities change in the context of a double dip recession, or for any other reason, things could very rapidly start to look ugly for the national press.

Look further ahead, and a bigger challenge looms. Most retail advertising is tactical, price-based, stuff designed to pull shoppers through the doors. When it comes to this kind of advertising, the web hasn’t dealt a death blow to newspapers. Quite the opposite, in fact.

But mobile advertising could be a very different proposition. Geolocation-based offers that appear on shoppers’ handsets as they wander down the High Street, or in advance of a planned shopping trip, won’t spell the end of newsprint. But they will hit newspapers where it hurts.

Mail blasts BT for “eavesdropping” on Facebook users, but fails to mention its own Big Brotherish efforts

Posted by Peter Kirwan on 7 June 2010 at 14:43
Tags: Associated Newspapers, Daily Mail & General Trust, Media

See update to this story, added below, after conversation with John Bromley, managing director of Mail Online, this afternoon. . .

+++

The Daily Mail let fly with one of its periodic complaints about Big Brotherism on the world wide web this morning.

Jason Lewis, the paper’s security editor, accused BT of eavesdropping on the comments of disgruntled customers who use Facebook.

A source had described BT as “a bunch of unaccountable, business shafting, useless b*******” on the social networking site.

Within hours, the source was contacted by a BT representative who asked: “Is there anything I can do to help?”

The point, of course, is that BT, like many other companies, has taken to scanning social media platforms for negative comments. To do so, it uses software called Debatescape. After harvesting negative comments from Twitter and Facebook, BT then tries to do something about them. It gets in touch with disgruntled customers and attempts to sort out their problems.

In the face of this well-established trend, we’re bound to ask what troubles the Mail so deeply. In a bid to let us know, the paper quotes Simon Davies, director of Privacy International:

This is nothing short of outright spying. . . It may not be illegal but it is morally wrong. And it is unlikely to stop there. If the regulators decide there is nothing wrong then political parties are sure to use it, along with lobbyists and firms trying to sell us things.

Firms trying to sell us things? Heaven forbid. Among their number, of course, we might count Associated Newspapers, publisher of the Daily Mail.

According to Andrew Bruce Smith, a PR professional who spends much of his time working with social media, Associated Newspapers — like many other national news sites — uses an application called Sophos3 to track and analyse the behaviour of users. Sophos3 describes its software as follows:

“Sophus3 has the capability to identify visitors who come from online campaigns, how they behave on your website and whether they turn into a lead or buy after that. With our analysis tools we can determine the effect of online advertising on consumer interest.”

Analytics software like Sophos3 is a major component of news sites’ efforts to prove the usefulness of online display advertising. It follows users beyond the last click they make on Mail Online, in a bid to prove that users purchase stuff as a direct result of being exposed to specific online advertising campaigns.

Without technology like this, online display advertising will remain a ghetto. And if that happens, journalism itself will become ghettoised as print revenues shrivel up and die.

Eavesdropping? Spying? Big Brother?

Some of you might find the surreptitious behavioural tracking of Mail Online users far more Big Brotherish than BT’s efforts to improve customer services by acknowledging conversations that are, in any event, being held in public on the world wide web.

But don’t worry: the chances of reading a scare story about behavioural targeting in The Daily Mail amount to approximately zero.

Hammering BT for its use of social media is so much easier. Best of all, it obviates the need to answer all kinds of awkward questions about your own organisation’s propensity for spying on web users. . .

+++

UPDATE: 07/06/2010:

James Bromley, managing director of Mail Online, tweets that this blog post is “factually incorrect”.

We talk, and he tells me that Sophus isn’t actually “contracted individually” by Mail Online. Instead, it works for the Newspaper Marketing Agency, gathering data on visitor numbers across national newspaper sites.

The information gathered by Sophus isn’t behavioural either, says Bromley. Sophus might well be able to track readers “beyond the last click”, but it doesn’t do so for either the Mail Online or for the NMA.

So where does this leave us? Bromley won’t specify exactly how Mail Online tracks its users (although we know the site uses Omniture and Google Analytics). “We’re only doing what any news web site is doing,” he says. We discuss behavioural targeting and the last click problem, but he’s still reluctant to give anything away.

He admits that some advertisers who buy space on Mail Online may be using more sophisticated techniques. This in itself suggests that users of Mail Online are being tracked in ways that might surprise them.

“It’s not really the publishers that hold they key to the information that is captured,” says Bromley.

Arguably, it should be. As Addiply (Rick Waghorn) asked Bromley on Twitter this afternoon: “If the Mail *isn’t* analyzing behaviour of its online readers, then why not?”

So the central conundrum remains. The “awkward questions” I referred to in the original post remain, well, awkward.

In the newsroom of the Daily Mail, BT’s practice of responding to public complaints made by customers is anathema. In the online engine room, there’s a reluctance to discuss how Mail Online currently tracks its own users, or could track them in the future. The tension between between these different approaches remains palpable.

+++

UPDATE: 08/06/2010: And finally. . . another irony, one of those you don’t spot when it’s looming right in front of you. But which others see perfectly well. Here’s Martin Belam on yesterday’s Tweet from James Bromley of Mail Online:

What is this? A brand contacting someone who had written something negative about them via Twitter to try and put things right? Isn’t that exactly what the article was complaining about

Er, yes: I think that’s about the size of it. . .

Best case scenario: editors to start hiring by Christmas

Posted by Peter Kirwan on 2 June 2010 at 10:02
Tags: Associated Newspapers, Daily Mail & General Trust, ITV, News International

If anything stops the cuts, and prompts new hiring, it’s going to be advertising (not slowly declining circulation revenues). Or as Peter Williams, the finance director at DMGT, put it last week: “Advertising is probably the thing which is going to move the numbers at the margin.”

So what do DMGT’s half-year results, published in the middle of last week, tell us about advertising markets?

How is Associated Newspapers doing by comparison with ITV (ad revenues up 8% YOY in Q1)? How is it faring against The Sun (which led a YOY ad revenue rise of 10% at Wapping during Q1)?

Answer: a rising tide lifts all boats. Between October and December, underlying ad revenues at Associated fell by 7% YOY. Between January and March, they rose by 11%.

That’s very similar to what we’ve seen at Wapping and ITV. In parts, Associated may even have done better. Metro, in particular, seems to have done brisk business during Q1.

The slides accompanying last week’s presentation to analysts suggest that display revenues at the Mail, Mail On Sunday and Metro rose by 15% YOY in January and by the same amount in March.

Peter Williams, finance director at DMGT, told analysts that April was “a bit sort of choppy” but May has been “perfectly OK again”. Like others, he blames the General Election for a slight slowdown in ad spend.

Later, he elaborated, talking about YOY increases in ad revenues:

On a month by month basis, [advertising at Associated Newspapers in] March was actually well into double digits, April is actually quite low, single digits, but I think you’ve got to put those two together, that’s our view, and then May is actually looking, will be back into double digits.

So: growth is coming along nicely at ITV, Associated Newspapers and News International. Speaking in person talking to analysts on Wednesday morning, DMGT’s executives sounded chirpier than the dour earnings release they issued beforehand.

Their joy wasn’t unconfined, however. Williams, for example, warned that Associated “will not get a big bounce in June from the World Cup in the way that ITV does” because this “just doesn’t happen in newspapers”.

He added that the number of ad pages being run by Associated Newspapers “remains some way below 2008”.

And you needn’t expect that Associated will start hiring in a big way any time soon. In the words of DMGT chief executive Martin Morgan, Associated and Northcliffe have “quite a way to go before we need additional resources” to handle the upsurge in ad sales and pagination.

As profits start to surge inward over a much-reduced cost base, there’s a strict hierarchy of needs at quoted companies.

First, bankers get what they are owed (if they weren’t already). After the bankers, it’s the shareholders’ turn to benefit from resumed, or enhanced, dividends. Next come investment bankers touting hot takeover prospects. (As Martin Morgan of DMGT noted last week, media M&A markets seem to be returning to life.)

Last in line come the wage slaves. Even if recovery remains on track, many newsrooms will spend the next six months dealing with a rising tide of pagination on the basis of depleted resources. With any luck, some editors will be hiring again — albeit very cautiously — by Christmas.

DMGT: Revenues down, profits up, Tigger goes AWOL

Posted by Peter Kirwan on 27 May 2010 at 11:11
Tags: Associated Newspapers, Daily Mail & General Trust, Northcliffe Media

Here’s an odd one: Daily Mail & General Trust reports a 10% YOY decline in revenues but operating profits rise by 20%.

How come?

The answer is simple: at the end of every downturn, there comes a point when cost cutting starts to outpace revenue declines.

Traditionally, this is the point at which media companies and their shareholders congratulate themselves on a job well done. After sustained cost-cutting, they’ve lowered the bar so far that even declining revenues rush in over it, creating additional profit on the bottom line.

DMGT’s latest results cover the six months to early April. The entire group experienced the end-of-recession effect. But nowhere was the effect more marked than at Associated Newspapers and Northcliffe Media.

At Associated — home to the Daily Mail –- revenues came in at £427m, down by 6% against the same period last year.

Back then, recession looked like an unstoppable forest fire, consuming everything in its path. Now, however, you can see the true scale of the response, which included selling off the loss-making Evening Standard.

Yet even though revenues fell, operating profit more than doubled –- from £18m last year to £42m this year.

At Northcliffe, the regional newspaper publisher, the picture is similar. Revenues were down by 9% to £150m. But operating profits (once again) more than doubled, from a paltry £6m to £14m.

Delve a little deeper, and the end-of-recession effect looms larger. Northcliffe generates slightly more than one-tenth of its revenues overseas. If we disregard these, and focus only only local newspapers published in the UK, the profit growth story looks even more impressive. Northcliffe’s UK newspapers generated £12m in operating profits between October and March, which represents a fourfold YOY increase. (You’ll find the numbers here, on slide 48.)

More often than not, media companies come powering out recessions, gushing profits in a way that seems counter-intuitive after so much misery. Overnight, the tone of management turns Tiggerish, with much discussion of how a flattened organisational structure can “take advantage” of markets that are “bouncing back”.

Look, though, at DMGT’s language this time around. Tigger has gone AWOL. Operating margins at both Associated and Northcliffe might have doubled to around 9%, but both divisions “remain focused on cost control”. Even as profits increased, DMGT’s newspapers shed 680 employees between October and March.

The message is mixed and grim. The combination of continuing job losses and increasing profits will confuse employees. What we’re hearing is the voice of a company that has little or no confidence in our economy’s anaemic recovery.

The numbers might be improving, but the mentality isn’t. DMGT is one company that will not need to change course if a double-dip recession materialises between now and Christmas.

Stop the presses #2: A long way to the all-digital future

Posted by Peter Kirwan on 26 May 2010 at 14:45
Tags: Associated Newspapers, Daily Mail & General Trust, Guardian Media Group, News International, Telegraph Media Group, Trinity Mirror

To say the least, the notion of “switching off the presses” is simplistic. There will be complicating factors we can only vaguely imagine. Here are a few that might emerge:

1) Print could generate profits after digital revenue streams mature

Fickle investors who buy shares in the likes of DMGT, News Corp and Trinity Mirror on the public markets will see no reason to halt print production if it remains significantly profitable.

As others go digital-only, quoted groups may hang around, mopping up the last print-based profits. As competition declines, these could prove hard to resist.

The risk, of course, is that these businesses begin to resemble Big Media’s very own rustbelt. The last men and women standing will need to be dedicated to cost-cutting. They will continue to feel the old urge to protect print at the expense of digital.

2) A two-speed national news market?

Focusing 100% on the digital future as soon as possible has its attractions. Pushing all of your resources and talent in one direction could produce impressive results. A big gulf could open up between digital-only and print/digital publishers.

Privately-held operations like Guardian and the Telegraph Media Group may find themselves free to dive headlong into a digital-only future.

3) Are conservative readers more resistant to change than liberal readers?

Some readers will never be ready for the end of print. But does the Daily Mail (for example) attract more late adopters to its ranks than the Guardian?

Logic suggests that liberals are just as likely to resist the passing of the old medium as conservatives. But the Mail’s editorial campaigning against most (all?) things digital suggests that it believes anti-digital sentiment runs deep among its readers.

Demographic trends might encourage some publishers to hold on to print for longer than others. The Sun still sells around 2m copies a day. . .

4) Print as a break-even platform dedicated to marketing the brand

Some publishers may choose to maintain dwindling print editions as a marketing tool, to promote their brands and drive readers to digital sites. For this reason, too, the death of print may be a lingering affair.

5) The ultimate mopping up operation: print editions go free

The experience of the Evening Standard suggests that free distribution could become the ultimate means of extending the lifespan of the nationals’ print editions.

The infrastructure required to distribute in huge numbers will be daunting. So will the costs. But you’d have to bet that someone will try. The Independent could become a test bed for bigger future efforts.

6) What happens to the huge build-out of print capacity?

Good question. In the run up to 2008, News International spent £650m on huge new printing facilities in Broxbourne. John Witherow of the Sunday Times suggests that these presses “were supposed to last 30 or 40 years” (ie: until 2048).

News International spent big. But lots of its rivals invested in new print plants at around the same time.

It’s too early to argue convincingly that these investments represent an industry-wide miscalculation of strategic proportions.

But what does lots of spare capacity suggest? All other things being equal, it suggests that the cost of printing newspapers, on an outsourced basis, at places like Broxbourne, can only decline. This may represent good news for local newspapers who contract out their printing to vast print plants owned by others.

Alternatively, all of that spare capacity might be dedicated to printing huge runs of a few free national newspapers.

There will be plenty of twists and turns on the road to an all-digital future. Yes, a few broadsheets might switch off the presses by 2015 or 2020 or even 2025. But their exit from the market will open up opportunity for others. Taken as a whole, the transition from print to digital still looks like a lengthy affair.

Rare species alert: Mail Online bosses optimistic about online advertising

Posted by Peter Kirwan on 20 April 2010 at 18:32
Tags: Associated Newspapers, Daily Mail & General Trust

Bird-watchers go crazy when they spot an avocet or a bittern. Me, I’m always on the look-out for newspaper executives who are optimistic about the future of online advertising.

Yesterday brought two presentations from executives at Mail Online — accompanied by two (apparently) slightly different perspectives on digital display advertising. Both, ultimately, were positive.

The first presentation came from James Bromley, the managing director of Mail Online, who spoke at an ABC conference in London yesterday.

Bromley appears to have spent some time discussing what needs to be done to sort out the mess that is online display advertising.

Forget the moaning about Google. Forget the bleating about rock-bottom CPMs. Forget, too, Donald Trelford’s complaints about web sites that “bring little revenue”.

Instead, let’s pay attention to what Bromley says about the way in which some national newspaper sites are published. His message is simple: publishers aren’t trying hard enough. Here’s my colleague Oliver Luft’s account of Bromley’s presentation:

Advertisers [have] already started measuring the value of users in different ways, he added, and online publishers needed to catch up.

[Bromley] said: “To be frank we are a long way behind the buying sector where people are buying behavioural [ad slots], they are buying into very fragmented and segmented audiences.”

Bromley said changing user behaviour was not being accurately measured and newspaper websites, as a result, were not able to extract real value from their audiences.

Here, Bromley nails the problem identified by Rob Grimshaw, the managing director of Ft.com, when I talked to him nearly a year ago:

There are some very prominent [newspaper] brands that . . . haven’t thought much about selling [online display]. They can’t differentiate their audience. That audience becomes part of the undifferentiated vanilla mix out there on the web. It’s a toxic combination.

You need to reclaim inventory from the ad networks, then find a way of differentiating — by investing in targeting technology and demographic data. Then you need to go through the long haul of establishing a premium. It’s a project that will take a couple of years.

I’m glad to see at least two publishers pointing out the truth. Too many news organisations have failed to invest in the tools and data that will allow them to profile and segment their audiences properly. Yet this remains the industry’s best hope of boosting online revenues.

But if James Bromley’s presentation sounded a tad downbeat, compare and contrast it with the aggressive presentation delivered by his colleague Martin Clarke at yesterday’s investor’s day over at DMGT.

You can look up Clarke’s deck here. Suffice to say that it starts off by suggesting that Mail Online is “in a different league” from the competition and continues in a similar vein for 18 slides. The cumulative effect is so bullish that it made me smile, then laugh.

Particularly intriguing is the graph on slide 4, which suggests that UK-based readers of Mail Online spend twice as much time on the site as do online visitors to the Guardian, the Telegraph, the Sun or Times Online.

And the finale? This involves Clarke’s claim that Mail Online is “unique” among UK newspaper sites in being able to “make the [online] advertising model pay”. This claim will no doubt cause plenty of irritation elsewhere.

As if this wasn’t enough, Clark also takes a predictable swipe at News International’s paywall plans. “A paywall might make a little money,” he admits. But Mail Online “will make a lot” by remaining free.

No doubt the Mail’s rivals can, and will, pick all sorts of holes in Clarke’s supporting arguments. I’d be interested to hear the objections. But it’s heartening, for once, to see a publisher talking so positively about the an advertising medium that remains crucial to the future of journalism.

Consumer ad recovery is coming along nicely

Posted by Peter Kirwan on 16 April 2010 at 16:27
Tags: Associated Newspapers, ITV

Goldman Sachs is predicting good things for ITV.

The broadcaster’s ad revenues should rise by 10% during 2010, say Goldman’s analysts.

By the end of 2010, this will push ITV’s net advertising revenues up to £1.42bn. This is within spitting distance of what the company achieved on the eve of recession in 2007 (£1.49bn). On top of that, we can expect a further 6% increase during 2011.

Game over? Not quite. ITV still has big problems, including a ridiculously underdeveloped online business, which brought in £24m last year. Archie Norman, the company’s new chairman, is keen to emphasise that ITV’s ad revenue base is still “below where it was in 1999”.

But let’s be grateful for small mercies. VAT’s return to 17.5% in January hasn’t dented advertising investment (perhaps it simply encouraged more expenditure).

Encouragingly, ITV’s success is being replicated elsewhere. In late March, Associated Newspapers reported an 8% YOY rise in underlying ad revenues for Q110.

The Sun, we’re told, experienced a 50% leap in ad revenues from supermarkets and DIY retailers during the Easter holidays.

In the consumer-focused ad markets, you can set your watch by following the movements of Procter & Gamble, the world’s largest advertiser.

The company fired the starting gun on recession in Q208, slashing its US ad expenditure by 20% YOY. Now we learn that P&G is planning to boost its 2010 UK advertising budget by more than the rate of sales growth.

Quite how fast the company’s sales are growing remains a subject for speculation. Almost certainly, sales aren’t growing as fast as unit volumes. These, we’re told, are rising by a “high single-digit” percentage YOY. Meanwhile, quite naturally, P&G is talking about extracting “efficiencies” from media owners.

Yet the news looks good and it’s getting better. Hopefully, the rising rate of investment in advertising will generate the kind of returns that encourage marketers come back for more, even in the face of rising public sector unemployment later this year.