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Panpa Bulletin : April 2006
14 | PaNPa bUlletiN april 2006 internet revenues save fairfax It seems fairfax’s decision to invest in its online presence is paying off. Jack Beverley looks at the half-yearly fgures. the increasing depend- ency that newspaper organisations now place on their internet web sites to replace declining revenues from their traditional printed products came through clearly in the latest financial perform- ance figures released by John Fairfax Holdings. "Booming" was the word chosen by chief executive Dav- id Kirk to describe the internet revenues and profits from Fair- fax Digital's news and classi- fied sites during the first half of this financial year. "Exceptionally strong or- ganic growth" raised Digital's revenue total to $42.6 million, generating a profit of $12 mil- lion, Kirk reported. That was $10.8 million more than the profit in the previ- ous corresponding period -- a result that helps explain why the company, as reported else- where in this issue, has bought New Zealand's leading online auction website, Trade Me, for $625 million, one of the high- est-priced internet acquisi- tions in Australia's history. Against Fairfax's Digital rev- enue rise of 67 per cent, the 'take' from print rose by only 1.3 per cent. "The acquisition of Trade Me re-shapes Fairfax's earn- ings and business mix as part of our more aggressive push into the internet in all mar- kets in which we operate," said Kirk. Asked about the Trade Me acquisition on Nine's Busi- ness Sunday program, Fairfax chairman Ron Walker said it just meant that "we're going to have a continued diversity of income streams as we go forward, rather than rely on old media assets to churn out profit for our shareholders." Fairfax's half-yearly report said that revenues from its online operations grew "ag- gressively" across all news and classified sites, with significant market share growth in dis- play. Total traffic across all the Fairfax sites increased to more than eight million unique browsers per month, with the division enjoying the leader- ship positions in online news (smh.com.au and the age.com. au), online dating (RSVP), and holiday rentals (Stayz). It was also strongly placed in the mo- tor, real estate and employ- ment classified categories. Fairfax's total net profit after tax was $119.9 million -- a 4.6 per cent decrease. The figure included a one- off $13.3 million in redun- dancy costs for 135 employees and a gain of $4.4 million from AAP Information Services as a result of asset sales. Excluding those non-recurring items, net profit increased by 5.2 per cent to $124.8 million, Kirk said Fairfax's Australian publishing business had been affected by weaker economic conditions that affected ad- vertising, particularly in NSW. EBITDA decreased 3.9 per cent to $159.9 million and costs in- creased by 2.9 per cent. Fairfax's regional and com- munity newspapers performed solidly, but revenue growth had been tempered by the slow- down in real estate markets. Fairfax New Zealand Pub- lishing's EBITDA increased 3.7 per cent to $98.8 million as a result of good revenue and earnings growth. There are strong gains in classified and display areas, despite a slowdown in the New Zealand economy and the effects of the national election campaign. Heading for the niche MANY big newspaper chains is finding the growth driver is in smaller profits and niche publica- tions. "In the past, what news- papers did well was reach broad audiences, but that is not where the growth is," says Scott Flanders, CEO of Free- dom Communications, parent of the Orange County Register. "If we're going to get growth, it will come from capturing new readers, being able to segment them and being able to let ad- vertisers target audiences." For the Bakersfield Califor- nian, that means jeopardising its profits by launching free, online classifieds that could cannibalise its paid ads in its print publication - which cur- rently provide some 40 percent of its revenues. Battered by the free classifieds on Craigslist and Ebay, and free news every- where else on the internet, the Californian had little choice "If we do nothing, we're go- ing to die of a thousand lit- tle cuts," says Richard Beene, CEO of the Californian. His thinking is that the free ads, which it runs on a site called Bakotopia, will attract differ- ent (and younger) readers as well as new (and smaller) ad- vertisers. "We decided if we're going to grow, we have to go with the audience, so if the audience goes to digital or niche publi- cations we have to go there," said. Beene. "Our margins are going to be slim and we're go- ing to be losing money." But as Scott Whitley of the San Diego Union-Tribune not- ed, "This is not about making money. This is about growing readership." And that idea seems to be working for Ba- kotopia, whose free ads were quickly discovered by local musicians, who began us- ing the free site to find band members and equipment, or to advertise gigs. These were readers and advertisers who would never have advertised in the Californian and didn't appear to be cannibalising the newspaper's paid classified. The Californian also has also launched two niche newspapers: a free paper tar- geted at the suburbs called Northwest Voice and a weekly newspaper called Mas, aimed at English-speaking Hispanics with higher incomes. Both pa- pers are picking up advertisers that couldn't have afforded the Californian. Northwest Voice keeps its cost structure extra low by using reader-contribut- ed columns and photographs for content. Beene summed it all up with an apt comparison to the U.S. auto industry. "They keep building high-margin vehicles like big trucks, but their over- all market share is dwindling. That's a losing game. I want to be Toyota," he said. From Cool News of the Day, www.reveries.com “in the past, what newspapers did well was reach broad audiences, but that is not where the growth is,”