Why FREE is no big deal for The Evening Standard

October 2nd, 2009 — Mark Littlewood

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The Evening Standard announced today that it would be moving to FREE circulation thus becoming the,

“the first leading quality paper to go free.” Alexander Lebedev

This is not such a radical move as some have made out and certainly does not herald the collapse of the newspaper industry as we know it. Rather, it represents one response among the many being tried out as publishers move towards more diversified business models.

With a circulation of 250,000 and a cover price of 50 pence (although it has also been sold at the promotional price of 10 pence recently), it is not hard to work out the potential revenue from sales. The Standard must be calculating that by increasing circulation significantly (to 600,000), it can increase revenue from other commercial activities to more than compensate.

The Evening Standard, like most newspapers is far more than just an advertising and newsstand funded publication. You only need look at their commercial website www.esadvertising.co.uk/ to get a feel for how they are making money. Advertising is a small part of the complete solution they offer marketing people – from website visibility, inserts and onserts in the paper, sponsorship, events, on-street ‘solutions’ and sampling, alongside revenue-sharing partnerships and the list goes on. The price a consumer pays on the newsstand should be a small part of the overall revenue that a well run organisation can extract from a reader.

But, as Peter Wienand, IP Partner at Farrer & Co noted, it is a step that goes in completely the opposite direction of News International‘s The London Paper, which closed last month with heavy losses. It could be interesting to see what policy The Evening Standard adopts on-line, given the plethora of publishers announcing plans to start charging for content on-line.

Andy Viner, Head of Media at BDO, notes that the primary advantage the Evening Standard has over the London Paper is that it has a strong brand which give it better chance of succeeding. The key question is whether it can achieve the higher circulation it needs to bring increased profits? Will consumers be turned off by greater advertising if that is what occurs?

At our Future of Publishing Discussion Dinner, held in partnership with BDO, Farrer & Co and Merrill Lynch, this week,  it was noticeable how upbeat the attendees were. With CEO level attendees from businesses including UBM, Incisive, DMGT, Associated Northcliffe, Dennis Publishing, Archant, Newsquest and others, the mood was combative. Held under the Chatham House Rule, one of the key points made was that one publisher talked about the seven ways that they have of monetising a user who visits their website.

Whilst many individuals in the blogosphere have talked about the imminent collapse of the newspaper industry, it is too easy to write ‘the old ways’ off. IBM was widely ridiculed in the late 1990s by the dot com generation for being an industrial behemoth in the computer industry that was on the brink of collapse. Meanwhile it was reinventing itself as a giant of the computer services industry. Of course, other businesses did not make the shift and withered on the vine. The same will be true in publishing.

It is exciting to see innovation in the industry.

Giving publications away for free is not a new idea – business-to-business publications do it on the basis of what they call ‘controlled, free’ circulation. This means that you are asked for some information about yourself and if they feel you are useful enough to them , they send you their publication at no charge.

The Evening Standard’s move is really just a logical extension of this concept into consumer publishing. They have calculated that their money-making marketing solutions machine is powerful enough to generate higher profits by increasing the reach of their consumer base. This is actually a very exciting time to be a publisher.

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8 Comments Feed

The price a consumer pays on the newsstand should be a small part of the overall revenue that a well run organisation can extract from a reader.

While I’m loath to predict what’s going to happen to mass-media publications, I think this is a really key insight. Media outlets are, in a sense, a way of aggregating and focussing audience attention so that you can train it on things which make money for you.

Chris Dixon wrote about this – he’s phenomenally sharp and everyone should be reading him – and said:

Almost no one decides which products to buy based on Google searches or affiliate referrers. They decide based on content sites – Gizmodo, New York Times, Twitter, etc. Those sites generate intent, which is the most important part of creating purchasing intent, which is directly correlated to high advertising revenues.

The problem he points out is that it’s very, very hard to capture that intent value through advertising; a lot of it winds up bleeding into what he calls “intent aggregators”. In other words, search engines: particularly Google (and in the near future, Twitter).

I think a discussion which needs to happen, and you allude to it when you refer to the “seven ways of monetizing a user”, is whether there are other ways of exploiting the purchasing and information-seeking intent which you get in website traffic than simple CPM-based advertising, and which (interestingly) you also get in free newspaper distribution. I believe there are, and clearly the Evening Standard believe there are. On the Internet, that’s going to be rooted in tighter demographic focus and targetting, through cross-sale to related products and services, through affiliate marketing, and a number of methods we haven’t even thought of yet. (I don’t believe in micropayments – mostly because of the psychology of them – but that’s a whole other debate.)

The Evening Standard sound like they’re going for engagement marketing, events, and exploiting their huge street-level logistical advantage over potential rivals. Good luck to them!

Andrew Walkingshaw — October 2, 2009

Clay Shirky wrote an interesting piece analysing his local paper for news, advertising, sport etc. Clay Shirky

I am surprised that he is surprised that of the 59 people on the staff of his local paper, only six were journalists. Sometimes I think that some people feel that newspapers exist to employ journalists. Sadly for them, with the possible exception of the BBC, most media has to be run, and is run, as a business.

My first publisher once sat me down and pointed to a horrible advert in his magazine. “See that”, he said, “that makes me money”. “See that”, pointing at a great article, “that costs me. My job is to make sure we have as much money with as little cost as possible. Otherwise we go bust.”

Mark Littlewood — October 2, 2009

Absolutely agree with your points – it’s a smart thing for the ES to do. Having been at the dinner, and also just returning from Stream 09, the talk about newspaper publishing is right now at the top of the digital agenda.

The newspaper brands have a couple of really powerful things that most (online) pretenders don’t: a strong brand, and loyal customers. Those, however, are eroding away – so now is the time for the news guys to strike.

Rather than focus on offline models (exposure advertising), news really needs to “do a Google” – find ways of monetizing content that are actually useful for the end user. Most people find GoogleAds useful and relevant (which is why they get up to 40% response on them next to search), so news needs to find a magic solution. It’s not linked keywords that have annoying hovers, it’s not recommendations for other news articles, it’s probably something more fundamental than that.

Either that, or they need to accept that the role of newspapers diminishes to analysis of news content. News itself is now a free commodity, real quality analysis is still justifiably a chargeable premium service. But only just…

Alex Kelleher — October 3, 2009

Interesting. The Manchester Evening News tried something very similar a couple of years ago. There they gave the paper away for free in town but sold it in the suburbs. However it wasn’t a success.

When you give a paper away for free you immediately lose the sales revenue and you dramatically increase your printing costs. For it to work you have to bet that advertisers will be willing to pay more. Only, in MEN’s case they weren’t. So MEN is stuck with higher costs and lower revenues. Not a very bright move.

For the Evening Standard I think the result may be similar. Although there is a possibility that they roll it out across the UK like the Metro have done. In the medium term that could work but long term the economics of free printed papers aren’t great.

Nigel Eccles — October 5, 2009

And in today’s news:

News International launches Times+ as a paid for (£50 per year) loyalty card for readers. A trial Culture+ card has gained 90,000 members in the first year. Katie Vanneck-Smith, MD of News International’s Customer Direct said, “We are moving away from the traditional model of volume in favour of developing more direct relationships with our customers based on their interests and passions.” More evidence that publishers understand their businesses a lot more than some commentators might think. http://thebln.com/news/

Mark Littlewood — October 5, 2009

The claim that out of 59 people on a paper only 6 were jounalists is based on a definition so narrow as to be completely misleading. There were also 11 sports journalists (this is the first time I have ever encountered the idea that they don’t count). 2 city editors, the main editor, and an unspecified number of columnists, not to mention the publisher, the copy chief (who may have assistants), and the librarian, who all perform traditional print journalism roles directly relevant to content, whether or not one chooses to call them journalists. In other words probably more than half the staff are producing content, not 10%. The impression given that 90% of the staff bean counters and marketeers is false.

Oliver Chettle — October 5, 2009

Martin Sorrell says that Pay Walls are the future.

Sounds like a pretty Jurassic point of view from an old school advertising agency guy to me. Newspapers of the future will combine powerful elements of DM, relationship marketing, advertising, ecommerce, affiliate marketing and offline activities – events. Agencies don’t really get this so will be hoping for a simpler life where they can contirute.

Simon Downs — October 5, 2009

Disagree.

Whilst I think that Pay Walls are not the ultimate answer, they will play a part in helping papers understand where value lies in content. They will have to produce real value add content if they are to monetise their content to any meaningful degree.

Recycled news is everywhere. Insight is hard to find.

Pay Walls will become a very useful tool for publishers to understand and test where the perceived value is. You will need to have some content outside the Pay Wall and FREE. Premier League football results are unlikely to sit behind a Pay Wall on their own account but could people be persuaded to pay for analysis?

I think Martin Sorrell is taking a posiiton but you can also guarantee that he is looking at other ideas across WPP group.

Mark Littlewood — October 5, 2009