CHISHOLM

The relationship between the Internet and UK newspaper circulations

An analysis of the relationship between the consumption of news on the Internet and its consequential effect on newspaper sales.

With special thanks to ABC

© C H I S H O L M, October 2010

The impact of the Internet on UK newspaper circulations For publication.

Summary This report concludes that in the UK at least, there is no correlation between the success of a newspaper’s website and its decline in circulation. This is true at both a micro-level in terms of UK newspaper titles and groups, and a macro level comparing national Internet adoption with circulation performance. Indeed the opposite case could be argued, that newspapers that do well on the web also do better in print. This confirms previous analysis by this author. This is important, not just in terms of strategy, but in terms of confirming to still understandably-worried, traditional journalists that the Internet is not a threat. However it is also the case that most newspaper companies are still not realising the full potential of their digital opportunity. This report will argue that there is a lot newspaper people can do to increase their audience and commercial performance online, without further harming circulation. The analysis goes on to show that some newspaper companies are more successful than others in exploiting the digital opportunity. Part of this is demographic; part is due to the international complexion of their audience. More up-market newspapers have the benefit of exploiting their audiences’ wealth and education to create their online market. But the reality is that smart players can demonstrably generate both growth and scale relative to their print audience, both in audience and in revenues. The analysis shows that if the average newspaper could achieve “best-of-breed” performance on three measures, it would dramatically increase traffic. They are: Factor  Conversion of circulation to visitors  Conversion of monthly visitors to daily visitors  Page impressions per visitor Impact Six fold increase 20% increase 80% increase

The geometric impact of this is a thirteen times increase. For publishers the economic considerations are even greater, because for the greater the value of the reader/user, there is not only a exponential value in their advertising return, but there is also an exponential decline in their loyalty. Yet there is little evidence that publishers are learning the lessons of the traditional CRM world in its application to their online marketing strategy. Chisholm has over thirty years experience in analysing and delivering media audience loyalty programmes, in print, in digital and between the two. Special thanks to ABC who provided most of the data.

© C H I S H O L M, September 2010.

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Content Summary .................................................................................................................................... 2
 Content ....................................................................................................................................... 3
 1
 Introduction .......................................................................................................................... 4
 1.1
 Past facts........................................................................................................................ 4
 1.2
 Current truths................................................................................................................. 4
 2
 Analysis................................................................................................................................ 5
 2.1
 Growth rates .................................................................................................................. 5
 2.2
 Ratios of online audience to print ................................................................................. 5
 2.3
 Visit frequency and activity .......................................................................................... 5
 2.4
 The impact of demography ........................................................................................... 6
 2.5
 Regional mornings v Regional evenings....................................................................... 7
 3
 Discussion ............................................................................................................................ 8
 3.1
 From a news perspective ............................................................................................... 8
 4
 The message is all about geometry ...................................................................................... 9
 5
 Conclusion.......................................................................................................................... 11
 5.1
 Newspapers’ Internet activities continue to have no direct impact on circulation...... 11
 5.2
 The driver of future success is traction at three levels ................................................ 11
 5.3
 Publishers must embrace loyalty and frequency programmes .................................... 11
 6
 How Jim Chisholm can add value...................................................................................... 12


1 Introduction
1.1 Past facts

Most weeks some learned columnist or analyst makes the assertion that the Internet is the cause of accelerating decline in newspaper circulation. But is it true? I’ve undertaken four previous studies in various markets of the relationship between the two factors, all of which showed no statistical evidence of a relationship. I’ve searched the industry and the web for factual evidence of a relationship. Yes, there are subjective surveys of editors who claim there is a relationship, but none are backed up by facts. So what does the data say today?
1.2 Current truths

I’ve just taken a look at the relationship between newspaper websites in the UK, and their print circulations. If newspapers’ digital activities were affecting their circulations, as many editors continue to fear, then one would expect the success of their online activities would be reflected in the declines of their circulations. There is no correlation. I’ve looked at the correlation between the growth in a newspaper’s web audience (measured in the widely used measurement of “unique visitors per month”(MUV’s)), versus circulation performance for both national newspapers, and regional newspapers where data is available. There is no correlation. I also looked at the relationship between circulation decline and the ratio of online audience to circulation – i.e. the scale of conversion. A slight correlation1, but a dubious one, in that it is more driven by the rate of circulation decline than the growth of the digital audience, and the statistic is obvious rather than illuminating, and even then its statistical validity is questionable. Finally I’ve examined the macro level relationship between a country’s Internet growth and its relative circulation performance There is no correlation. Indeed, those countries where Internet usage is highest are also those with the highest levels of newspaper readership.

1

Correlation coefficient of 0.31 for the Nationals – slight significance. 0.17 Regionals - virtually no significance.

2 Analysis
2.1 Growth rates

In terms of growth in the last year of monthly unique visitors (MUV’s) the clear leader has been The Daily Mail, a late entrant into the digital space, with a growth rate of 63.3%. Next were The Guardian and Telegraph, which both achieved growth rates around 27%. Among the regional groups, Newsquest showed the most significant growth at 30%, while Trinity Mirror achieved 18.3% growth and Northcliffe 16.6%.
2.2 Ratios of online audience to print

One interesting factor is how the ratio of unique visitors to circulation varies from country to country, title to title, and genre to genre. For example in a study of a basket of newspapers in a range of European countries2 the market with the highest ratio of MUV’s to circulation is among the UK Nationals3 at 21.1. This is followed closely by Spain with 19.8. Further behind are the UK Regionals at 9.6, but still well ahead of many countries who are perceived as being leaders in digital innovation.

TABLE 1. Ratio between monthly unique visitors and circulationi. UK nationals 20.4 Spain 19.8 UK regionals 9.1 Ireland 7.8 Norway 7.6 Sweden 6.3 Finland 6.2 Germany 2.2

Within the UK, the statistics are also very diverse. The Guardian has by far the highest MUV/ABC level at 125, far higher than any other identified newspaper in Europe4. (The New York Times shows a level of 188.) The Guardian is followed by The Telegraph (51), Independent (56) and Times (405). The Mail shows 21 while the Sun5 and Mirror, each at 7 are further behind, but still ahead of many other country national averages. Among the regional groups, the highest ratio is at Johnston Press at 12.2, while the lowest is at Northcliffe at 7.1. To an extent this reflects the international audience of the UK nationals, but there is no correlation. 33% of The Guardian’s audience being UK based, compared with 26.8% of the Mail’s and 46% of The Mirror’s6. But what is most telling is that The Guardian generates 344 UK page impressions relative to its circulation, whereas The Times and Telegraph generate just over 100, The independent 73, Mail 36, and The Sun 42.
2.3 Visit frequency and activity

Finally what is interesting is the issue of frequency and loyalty. Here it is possible to calculate the percentage of monthly unique visitors to national titles who visit on an average day7. The data shows a remarkable consistency both across titles, and over time. Across the Nationals and Regional titles the spread is relatively small. The highest percentage of monthly visitors visiting daily is 6.8% at Northcliffe8. The lowest is 4.6% for The Independent.
2 3

Data from World Press Trends, and eABC for UK, for titles where data is available. The UK is the only market that differentiates between National and Regional daily newspapers. 4 There may be newspapers with a higher ratio, but this limited analysis hasn’t identified one. 5 Data from February 2010, before News International stopped the ABCe audit. 6 Source Alexa. It is accepted that there are questions about Alexa data. 7 For the Nationals this data has been available for some time, for the regionals, for the H110 reporting period. 8 Of the 50 regional titles measured by ABCe the top three were Northcliffe sites,

The impact of the Internet on UK newspaper circulations For publication.

On the Nationals, the percentage of daily visits has risen only 3.7% over the last 30 months9. As is the case – and one that newspapers worldwide do not take seriously enough – the issue is not one of total audience, but of frequency and loyalty. And here in online, as in print, newspapers are great at attracting readers from time to time but they don’t attract them often enough, and they don’t hang around.

For example an analysis of the number of page impressions per unique user for the Nationals shows that levels of page impression are firstly low, and also vary greatly from one title to another. The Sun has the highest levels of page impression per unique visitor at 16.1, while The Independent has the lowest at 4.610.
2.4 The impact of demography
Comment Of course publishers must seek a combination of converting current print buyers, and attracting new consumers. But this writer’s experience is instructive. As a Scot, living in France and unable to receive a printed UK newspaper, I rely on the Internet. My starting point is Google News, to follow subjects that matter to me. This covers UK publications but also the US, and many titles from around the world. Then I generally flit from the Guardian, Telegraph, FT and Glasgow Herald sites for more detailed stuff. I may spend 30 minutes browsing news. But I don’t spend more than a few pages with any one of them. If it wasn’t my job, my interest levels would reflect the average statistics. I have the Herald Tribune delivered every day, and read it from cover-to-cover, but I only ever visit the website if a relevant New York Times story comes up in my Google search, or one of my newsletters, or I want to mail a story to a friend. The UK Times was doomed for me from the day they introduced registration, never mind the pay-wall. When a story appeared of interest, two weeks ago, I got a friend to email it to me.

It’s well established that the more-upmarket the reader, the less loyal they are to their brand. It’s obvious. More educated people tend to seek out a wider range of opinions. In the uniquely diverse UK national market, up-market readers move from brand to brand. Readers of quality newspapers tend to read around half the number of issues a week compared to popular newspaper readers. As the analyses below show, the digital world is very similar to the print world. As one would expect, richer online consumers tend to be more regular visitors to on-line services. So the quality titles enjoy ratios of of around 65 visitors per ABC copy, while The Sun and Mirror ratios are around seven. The Mail enjoys a MUV/ABC ratio of twenty, which is exactly where one would expect it to be demographically.
9

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The regionals only began collecting daily visit data from Jan 2010. Page impression data is unavailable for the Regionals and for the Mirror titles

© C H I S H O L M, September 2010.

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The impact of the Internet on UK newspaper circulations For publication.

However in line with the print models, more up-market visitors to digital services tend to have lower print impression ratios per visit, reflecting their need to gather from more sources. So a Sun visitor logs sixteen page impressions a month, where an Independent visitor logs around four.

2.5

Regional mornings v Regional evenings

One interesting peculiarity in the data is that Regional Mornings perform very well in terms of their MUV/ABC ratio. Traditionally UK regional mornings are the smaller sister to their evening sibling, and often tend to be more rural, with the evening being more dominant in the urban areas. They also occupy a higher demographic. Here their MUV/ABC ratio is over double that of their evening sibling at 17.3 compared with 7.7. While part of this will be demographic, it suggests that the regional morning brands also have significant online traction, which is potentially exploitable.

© C H I S H O L M, September 2010.

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The impact of the Internet on UK newspaper circulations For publication.

3 Discussion
3.1 From a news perspective

It is fair to argue that the competition from the Internet is from other services, not from a newspaper’s own web activities. In the USA, services such as the Huffington Post and Drudge Report are achieving levels of search activity of around 10% of the New York Times. According to the controversial Alexa monitor, The New York Times ranks number 28 of US websites, but the Huffington Post is at 38, not far behind in a country of over 16 million websites. However the scale of new-entrant news services in the UK is negligible. A potential threat……. or opportunity. Given the lack of any implicative evidence that the internet is damaging circulation, all newspapers can afford to be pushing their websites harder and promoting their value to their current print audience and beyond. Admittedly a high proportion of visitors, particularly to the quality titles, comes from overseas, which offers less monetary return. But even here international strategies are evolving with my French renditions of the UK sites featuring French advertisements. Table 2. Comparison between print and online The big challenge remains in audience behaviour11. maximising the UK audience, Print Digital through greater leverage between World World the print and digital editions. Newspaper companies have much Avg. daily reading time (mins) 30 4.4 more to gain by extensively developing and promoting their Reach of population (%) 45 10 online activities and they should 40 5.7 be working harder at both their Average pages read online competitive response to the Times read per month 20 8.4 digital world as a whole, without 1.2 4 fearing a loss of circulation, and Number of “legitimate” sources also building a more integrated relationship between the company’s print and digital activities. Why is it possible to email the star writers at The New York Times but it is not possible to email the majority of writers in the UK titles. The challenge is not about attracting readers on-line, but building a multipurpose, two-way interaction. It should also be noted that at one time The New York Times claimed that around 40% of their new print subscriptions came directly from orders from their website. Previous analyses have suggested there is some macro and micro evidence to say that good newspapers in print tend to be better performers on the web. It is logical that managements who are good at one tend to be good at the other. News is unlikely to become a revenue generator. But it is certainly an opportunity generator. The fact that newspaper sites can generate large audiences is a springboard to other opportunities.
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Data for the USA, but UK data is very similar. Sources: NAA, ABC VSS, Neisen

© C H I S H O L M, September 2010.

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The impact of the Internet on UK newspaper circulations For publication.

4 The message is all about geometry UK newspapers are doing well at attracting a digital audience. With an average MUV/ABC ratio of 20.4 for Nationals and 9.1 for Regionals, they benchmark well against newspapers in markets regarded as leaders in the development of online. In some cases, performance is world class. However the success in attracting a general online audience is not being translated into commercial success, with low levels of loyalty, and lower levels of online advertising conversion. UK newspapers are not making the inroads into Britain’s leading on-line advertising sector that their online to print performance would suggest they should be. The following charts present the strategic messages for all the major UK publishers. In the left hand chart, The Guardian is clearly enjoying the greatest online to print traction, with seven people visiting its online service daily compared to its number of copy buyers. Northcliffe has been less successful in converting its circulation base to online visits, but those people who visit the site are most likely to return in the following month.

The Sun and Mirror have a weaker ability to convert print buyers to their online service (partly due to demographics) but The Sun has a 50% greater ability to get visitors to return frequently compared to The Mirror. On the right, of the nationals only, The Sun clearly creates the highest level of page impressions per visitor, in part because of its conversion from monthly to daily, but also from daily retention. This pattern is very analogous to print behaviour. The online world is all about delivering a convertible, targetable audience. Facebook may be delivering more overall traffic, but Google delivers more visitors in a clearly targetable environment. Hence why Google’s revenue per visit is many times that of Facebook. Conversely, The Sun may deliver the highest number of page impressions, but it does not deliver the most valuable targeting.

© C H I S H O L M, September 2010.

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The impact of the Internet on UK newspaper circulations For publication.

Newspapers also have the ability to push their print audience to the web. Yet, despite the lesson having been known in print for nearly twenty years (I first wrote about this in the early 1990’s) few newspapers show an evangelist commitment to cementing the relationship between print and digital, or between today’s audience and tomorrow’s. This is why the “Geometry” of audience generation is so important? This analysis throws up three key measures:    The conversion of the average daily print buyers to average daily online visitors. The potential growth from monthly to daily visits The page impressions per visitor.

The Geometry is illustrated in the table below. Table 3. Geometric comparison of the impact of average news sites achieving best practice on visitors and page impressions. Average Best of breed Comparison DUV's / ABC 1.2 7.0 6.0 DUV's / MUV 5.7 6.8 1.2 Page imps / MUV 9.1 16.5 1.8 Visitor impacts Page imps impact 6.6 60.1 47.6 783.6 7.2 13.0

Here one sees the ratios for both the average UK national newspaper and the “best of breed”. What it shows is that if a newspaper can achieve the current best of breed performance it can:    Increase its average visitor levels per day by six fold, by encouraging more print readers to its online service. Increase the level of daily visitors relative to monthly by 20%. Increase the number of page impressions by 80%.

In other words, if an average publisher could achieve the best level in each of the three steps, they could increase their marketable page inventory by thirteen fold. And of course even the best players in the market can increase their revenue opportunities by focussing on increasing each of the market drivers. Such an increase would have a dramatic increase in available inventory, and therefore dramatically increase the newspaper website’s ability translate this audience into revenue. It could also if well executed perhaps enable the newspaper to convert some of its expanded print subscription – particularly given some newspapers’ new-found enthusiasm for print subscription.

© C H I S H O L M, September 2010.

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5 Conclusion The key conclusions and implications of this report are summarised below:
5.1 Newspapers’ Internet activities continue to have no direct impact on circulation

There is no statistical evidence that newspapers’ own digital activities are affecting circulation. It may be that competitive services, such as the BBC, are having an impact, but this is not measureable within a single country analysis12. This confirms previous analyses. The conclusion must be that newspapers must pursue their digital strategies, as a beneficial extension of their print activities and one that could actually sustain their print sales rather than hinder them. The debate is over.
5.2 The driver of future success is traction at three levels

Daily Unique Visitors compared to circulation

The number of page impressions per visitor

The percentage of monthly visitors who read daily

The difference between the average and best is six times. This largely reflects the demographics of the newspaper. Here best performers achieve nearly double the level by ensuring visitors “hang around”. This ratio at 1.2 between best and worst is extraordinarily consistent.

Newspapers must increase the traction between their print audience and their online audience. E.G. The Guardian and Scotsman. Newspaper websites must “invent” incentives to return.

OK, there are few role models. But the message is consistent. Loyalty is a key driver of audience and revenue.

5.3

Publishers must embrace loyalty and frequency programmes

The analyses shows that newspapers can generate online audiences, but the challenge is retaining them, and converting them to regular news consumers, against an increasing background of alternative suppliers, from broadcast, and new media entrants. But what is positive about the analysis is that those newspapers that aggressively pursue this agenda can achieve enormous traction in terms of audience conversion, which in turn can be converted into inventory revenues. However part of the weakness lies in publishers’ unwillingness to inter-relate their new news activities with their digital commercial strategies. In most cases there remains a need for a stronger inter-connect.
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It would be possible to measure the BBC’s impact in a cross country analysis, given funding and access to data.

The impact of the Internet on UK newspaper circulations For publication.

6 How Jim Chisholm can add value So where do the opportunities lie? How we can add value to your strategy, in all or some of the following steps?  Agree a geometric multiplier model A step, by step process for maximising your audience, and traffic. Introduce a monthly step by step monitoring system This simple tool enables managers to track each step and to identify the drivers and diluters by volume, medium, “category”, and activity. An integrated strategy to encourage linkage between the print and website, down to the level of subjects (e.g. sport, news). Analysis shows this two-way-street is an accelerator for both media. A key conclusion is that news consumers are very fickle. The challenge is retaining them. A retention communication model involving all party customer knowledge should be developed. The experience of many newspapers demonstrates that one can convert online users back to subscribers in either print or eReader form.

Print – digital integration strategy

Cross media retention plan

Reverse digital to paper action plan

These steps are offered both as a proposal or an action plan. All or part of this can be applied or adapted as required through discussion. While I work independently I rely on a world-class team of industry-experienced experts. This work draws on my 34 years industry experience including sixteen advising many of the world’s leading news media organisations in over 30 countries and delivering over 30 specialist industry studies on all aspects publishing. Much of this has been in the areas of print and digital audience development, both as a senior executive and as an advisor.

© Jim CHISHOLM. September 2010. For more information or clarification Email: jim@jimchisholm.net Phone: +447775817797 Skype: jpchisholm

© C H I S H O L M, September 2010.

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