Newspaper Advertising: Sizing up the future

By Alasdair Reid, campaignlive.co.uk, Friday, 26 January 2007 12:00AM

Urged to adapt or die, what does the newspaper industry need to do to safeguard its future and flourish in the digital age?

Occasions when the national newspaper medium finds itself assembled under one roof - rival publishers, senior executives and editors all present and correct - tend to be somewhat special, not least because they are so rare. But the gathering at St Bride's Church, Fleet Street, in October, to celebrate the centenary of the founding of the Newspaper Publishers Association, felt charged with added significance.

Understandably, there was an undercurrent of nostalgia - the choice of location guaranteed that. The very name, Fleet Street, still stirs powerful memories. And yet, this was not the day's dominant or defining mood. No, what was striking about the event was not the manner in which the industry looked back, but rather the quiet determination with which it vowed to face the challenges of the future.

With chancellor Gordon Brown having given the reading, it fell to the next speaker, Les Hinton, the chairman of News International, to lay down a marker, as he underlined one particular lesson to be learned from newspaper industry history. "We have confronted crisis after crisis and thrived," he said. "The revolution of talking pictures. A radio in every home. Television. And now the digital age - the most profound challenge of all."

Fighting talk, and it was further amplified by the next speaker, Murdoch MacLennan, the chief executive of Telegraph Media Group, who spoke vigorously of the courage needed to take bold and tough decisions. Both men know what they're talking about, obviously; they're right in the front line where this "most profound challenge of all" is concerned.

Telegraph Media Group was, after all, still bedding in its move to offices in Victoria, the showpiece of which is a 24-hour digital newsroom, where journalists have the facilities not just for filing traditional newspaper copy, but also for creating audio-visual content to be distributed on digital platforms.

As for News International, it has been at the forefront of this since Rupert Murdoch's landmark "adapt or die" presentation in April 2005. It was a sentiment he repeated even more forcibly in a speech made the following March in London. "Power is moving away from those who own and manage the media to a new and demanding generation of consumers - consumers who are better educated, unwilling to be led and who know that, in a competitive world, they can get what they want, when they want it," he said. "I believe newspapers have many years of life left, but equally, I think that, in the future, newsprint and ink will be just one of the many channels to our readers."

Adapt or die; we've entered the world of Web 2.0 (where internet users are determined to create their own virtual communities, rather than merely consume what they are fed by established content providers), and every single major publisher is now more than alive to that fact. But how far and how fast do they have to move to survive? Do they have to start again from scratch with totally new business models? Or can the old ones be "tweaked" to make sense in a new century?

Newspapers can no longer be thought of as just a print medium. Media owners are increasingly renaming what were known as newspaper divisions to reflect this. The Telegraph Group is now known as TMG or Telegraph Media Group; Newsgroup Newspapers changed to News Group Media; and Guardian Newspapers became Guardian News and Media. This change reflects the variety of ways in which the medium's content is now distributed - podcasts, vodcasts, e-mail, mobile content, blogs, etc.

It's true the circulation and reach of the medium remains impressive. Every month, The Sun online gets 2.5 million unique visitors to go with the millions of readers of the printed format. Similarly, Guardian Unlimited averages 2.6 million unique visitors every month, dwarfing the readership of its print product. Research from The Guardian demonstrates that the net weekly reach in the UK of the national quality press (combining online and print) has risen from 12.1 million in 1994 to more than 15 million in 2006. Not bad for a medium perceived to be in decline.

In fact, despite the growth of the internet and the fragmentation of mass-market media, national newspapers in their printed format are still going strong. Despite circulation and readership decline, national newspapers still reach 62 per cent of all adults on an average day - that's more than commercial TV (55 per cent), and a long way ahead of ITV, which reaches 42 per cent of all adults per day.

What's important for many advertisers is that 56 per cent of the newspaper readership is ABC1 social grade and, perhaps surprisingly, nearly half (46 per cent) are under the age of 45. These are figures commercial TV would be happy to deliver - its actual numbers are 40 per cent for ABC1s and 38 per cent for 16- to 44-year-olds.

As Guy Zitter, the managing director of the Daily Mail and commercial director of Associated Newspapers, points out, older age groups will be of enduring interest to advertisers, too: "If you were to take a contrarian view about this, you'd argue the generation currently aged 45 to 65 is the luckiest generation there's ever been. They will live for ever and have decent pensions.

"The generations that follow will not be so lucky. If they merely want to get on the property ladder, they'll have to spend a huge proportion of their disposable income on their mortgages, and the rest, if there is any, on their pensions. Today's 50-year-olds will continue to have substantial disposable incomes until they are 80 or 90."

Zitter also cautions against falling for over-simplistic (and over-dramatic) views on how the industry's basic business models will evolve: "In ten years' time, it is easy to predict a situation where newspapers may be making slightly less money than they are now, but the contribution from associated online activities has multiplied five-fold or more. But there are 12 million copies paid for each day and two million free copies put into the hands of consumers. That's an awful lot of people reading newspapers. There will be people making a lot of money from news print for a long time to come."

And the compact revolution has helped revive circulations at the quality end of the market. The Independent was first to move some of its print run to tabloid format in September 2003. The Times followed and, by November 2004, the entire distribution of both papers had evolved to compact format. The Guardian refrained from a knee-jerk reaction, eventually moving to Berliner size in September 2005. Guardian News and Media has been a digital evangelist longer and more consistently than any of its rivals. Stuart Taylor, the group's commercial director, points out that we will never go back to the days when publishers took 60 to 65 per cent of their revenues from advertising (display and classified), with the rest coming from cover prices.

"We are now looking at a very different future, with revenues coming from a wide variety of new products and services that we can offer our readers," he says. "It is still the case that audiences follow content and that advertisers will follow audiences, and our challenge must be to continue to service the needs of our audiences in a way that is distinctive and valuable to them."

It goes almost without saying, he adds, that these are exciting times for media owners who can deliver on this promise and who genuinely relish a greater level of engagement with their readers. Second-guessing the future, however, is a dangerous business. Publishers should remain open-minded as they feel their way forward. For instance, television and radio might end up suffering a more painful loss of revenue than print media. It's possible the position of print in the advertising market could actually be strengthened.

"The transition to a new model or models will be a turbulent time for most of us. We will have to be prepared to experiment with many new models without knowing which will fail and which will succeed," Taylor reasons.

But where are advertisers in all of this? How keen are they to shift money out of the traditional paid-for titles? Jeremy Found, COI's head of media, reckons newspaper publishers continue to offer a compelling proposition. On the other hand, he would like to see more integrated thinking from media owners. For instance, he'd like them to commission more research into how freesheets are read, and whether or not readers engage with them in quite the same way as they engage with a paper they've actively purchased.

He'd also like to see a more coherent sales strategy where digital brand extensions are concerned. He explains: "Sometimes the approach seems to be that, if you are buying a page, you might as well try this other online opportunity, too. We all know that online formats or podcasting will bring in a different audience. If we assume the advertiser is targeting all those audiences, the question then is about how valuable various sections of that audience are and how engaged they are. Perhaps in the past the internet has been sold as something of a bolt-on."

Needless to say, every single publisher is looking at this. In November, for instance, News Group Media restructured its sales teams to sell across multi-platforms - a move orchestrated by Mark Chippendale, the division's media director. Print and digital are now sold simultaneously.

Alison Brolls, the global marketing and media manager at Nokia, agrees that publishers have no cause to panic: "Before we all get carried away with the online medium, the show-stopper for national press is that it allows an advertiser to get its message in front of the majority of UK adults overnight, which is something online simply can't claim to be able to do. That's enough, at least in the short-to-medium term to protect traditional print ad revenues."

Unfortunately, the trouble with the short-to-medium term is that it doesn't last for ever, and advertiser spending patterns are already changing, almost by the week. There was a big fuss back in October, for instance, when it was revealed that Google's ad revenues (mainly search) were set to outstrip Channel 4's. Associated Newspapers, for instance, can foresee a situation where its main online news and features sites are relatively poorly supported in ad revenue terms, but they more than pay for themselves in terms of the traffic they are able to direct to the company's satellite online brands.

But, as has been pointed out, there are neither precedents nor rules here. Like Associated, News International has been buying a portfolio of online brands that currently have minimal branding links to newspapers in the group. In contrast, The Guardian has pursued a decade-long plan of organic extensions to its Unlimited brand.

One way or another, however, there's going to be an inordinate amount of attention paid to events at Telegraph Media Group. The decision to position itself in such uncompromising terms as a multiplatform brand has involved an awesome act of faith on the part of its owners, the Barclay brothers, and its (still relatively new) management team, headed by MacLennan.

But MacLennan is convinced fortune will favour the brave. He believes the rejigged operation can attract new audiences, both young and old, by tailoring the delivery of news and features 24 hours a day - via online, iPod, mobile phone and video - while still producing the traditional paid-for print titles. The hope is that the print products will not only continue to inform and entertain the readers in their traditional, eclectic way, but persist in attracting impressive levels of advertising.

And his final message is: "Beware the Jeremiahs of doom." MacLennan explains: "During the past 70 years, newspapers have survived, despite the radio and TV revolutions and the throttling grasp of the trade unions. In 1963, Cecil King, the then chairman of the Mirror Group, predicted the end was nigh. By 1970, he said only two newspapers would remain in existence, The Times and the Daily Mirror. Today, newspapers are fatter, more diverse and more entertaining than at any time in the previous century."

This article was first published on campaignlive.co.uk

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