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November 28, 2014

The Newsonomics of the British Invasion

First published at Nieman Journalism Lab

With the United Kingdom one of the countries suffering the economic doldrums more than the U.S., maybe it’s no surprise that we’re witnessing a British online invasion. In short order, the Guardian, Mail Online, and the BBC, among others, are targeting American eyeballs and wallets in the urgent search for growth.

With Independence Day (from you know who) upon us, and memories of the Beatles’ assault on America rapidly fading into history, let’s look at the newsonomics of this new invasion. It tells us reams about the precarious states of news companies. As they scrape for revenue in the traditional home markets, and transition from print or broadcast to digital, they’re looking for new digital revenue building blocks. And they’ve got company, including Reuters (“The Newsonomics of Reuters’ Americanization“).

The arithmetical imperative is crystal clear: The huge audiences that the distance-defying Internet has given UK news companies has not yet, largely, been accompanied by huge, even significant, pots of revenue.

Companies like the Guardian have seen this phenomenon: A third of its traffic comes from the U.S., a third from the UK, and a third from elsewhere. I’ve heard that tale widely, from the pre-wall Times, the Telegraph, and the FT, among others. When we first spotted big numbers for UK publishers among U.S. audiences, a lot of people attributed it to George W. Bush, whose cowboy policies alienated some Americans from American media, the idea went, delivering them into the hands of the more trustworthy Brits. But the big U.S. population — a population five times greater than the UK’s — is, W or no W, is still embracing non-national news sites. Maybe the math is fairly simple: We’ve got about a third of the English-reading people in the world, so serving up a third of the audience makes some sense.

While America provides the audience, it doesn’t provide much revenue for most UK news companies. The Guardian derives all but a couple of points of digital revenue from its home market — leaving two-thirds of its audience, in the U.S. and elsewhere, effectively un-monetized. That’s largely true of the other UK-based general news dailies, with the Financial Times much more effective at driving print and digital revenue in the U.S., and the Wall Street Journal, conversely, having figured out how to drive non-U.S. revenue as well. Both, in addition to The New York Times’ long-established sales operations in Europe, are the exceptions that prove the rule about foreign market digital monetization.

As the Guardian, BBC, and Daily Mail plan new offense, each reacts to its woes back home.

The Guardian is in danger of running out of cash within three to five years, at its current trajectory, Guardian CEO Andrew Miller said plainly in mid-June. So he’s leading a top-to-bottom reappraisal of the outfit’s 190-year-old enterprise. On the examination table: a restructuring of the entire company, reducing the number of pages in the six-day-a-week print paper; rethinking (under digital innovator and Guardian editor Alan Rusbridger‘s leadership) what readers expect in print and what online; upping its re-commitment to its open platform strategy led by Matt McAlister; doubling its digital revenue (which currently stands at 17 percent of its total revenue); and getting more money out of the U.S. market.

The Guardian’s U.S. plan includes the deployment of a revitalized editorial staff under Guardian vet Janine Gibson, and a re-strategizing of ad sales in the States.The Guardian’s new plan follows on a failed one, the Guardian America plan, tried and abandoned over several years. The new idea: Don’t put an American face on the trusty Guardian; keep the British face, but offer more British perspective on and from the U.S. The thinking: The Guardian’s very Britishness is why American readers come to its site.

For the Daily Mail, it’s about finding growth in a national news business (Associated Newspapers) that struggled toward revenue break-even last year, even as its parent, the diversified, global DMGT (events, B2B publishing, and institutional investment products), produced £320M in profits.

Mail Online, of course, is the new darling of those who religiously follow Big Numbers. It has surpassed HuffPo to claim the #2 unique visitor trophy globally, behind the New York Times, and a few days ago claimed 77 million global uniques, about a third of those from the U.S. The outlet’s rocket fuel is a heady mix of tabloid gossip fodder, great SEO, aggressive mobile productization, and, now, expanded commercial and editorial staffs in New York and L.A.

The BBC, funded by household TV licenses back home, has seen significant public funding cutbacks and staff reductions, buffeted both by UK politics and by the deep recession. While in the UK, the BBC can’t sell advertising, it can do so outside its home territory. Consequently, it has placed a first big target on the U.S., where it now claims about 18 million uniques.

The BBC’s American build-up is well underway. Herb Scannell, ex of Viacom, and Ann Sarnoff, ex of Dow Jones, joined to head up BBC Worldwide America as president and COO, respectively, last year. Seven weeks ago, Nick Ascheim, ex of the AP and The New York Times, became senior vice president for digital media. Back in 2008, ad veteran Mark Gall began building out the BBC Worldwide America ad sales team, focusing on multi-platform (BBC America TV  + BBC.com) revenue.

Ascheim identifies two major initiatives, as BBC.com — the BBC’s first separate-from-the-mothership website — tries to leverage and build on its found audience. One is video — a core strength of broadcaster BBC, which dominates much of online news video in Britain with its iPlayer — and the other is feature verticals, building beyond the Travel section that BBC built out, with its Lonely Planet acquisition, last year.

Let’s take a quick look at what it will take for the new invasion to be successful, doing a little handicapping of these three entrants:

  • Ad revenue: All the newbies face hyper-competition in the world’s most competitive digital marketing marketplace, one built both on the seemingly paradoxical tricks of leveraging long-term buyer/seller relationships and satisfying the dreaded “23-year-old” media buyer, one who may never have heard much about these foreign brands. Here, give a big lead to the BBC. It’s got a couple of years’ head-start on U.S. sales, and the brand that is most recognizable — and it can sell multi-platform, TV, and digital. Mail Online has a tough effort here, with comparatively little brand recognition and the suspicion that its pageviews are less-than-premium, more TMZ than NYT. The Guardian has a good story, but a history of failed ad attempts, including a Reuters network deal that fizzled. For all three of them, breaking through the noise — and providing more actionable audience analytics — is key.Beyond the sales infrastructure, these companies have different experiences monetizing their UK traffic, and that informs what may happen in the U.S. Compare the digital ad revenue per unique visitor for the Guardian and the Mail Online, and we see a differential of four-to-one, in the Guardian’s favor. (The BBC doesn’t break out digital ad revenue well enough for comparison.)The Guardian took in £37.5 million in digital revenue in 2010. Using the December ABCe number of 39 million uniques, each unique is worth about £.96, or $1.53 at today’s exchange rates.

    For the Mail, I extrapolate about £16 million in digital revenue for last year. Using the March (aligning with its reporting period) ABCe unique number of 66 million, I figure each unique visitor is worth about £.24, or 38 American cents, to the Mail.

    That’s a 4x greater yield for the Guardian than Mail Online, relating to some combination of brand, sales packaging, and engagement beyond simple unique visitor metrics. How much would/could that differential carry across the sea?

  • Brand: It’s clear that both the BBC and the Guardian have real brand meaning among certain news followers, but it ‘s not clear how growable the brands are. Are they second or third reads, or can they break through top-of-mind? Yes, they may both believe that Americans want a Brit take on things, but just how much of one do they want? Mail? Online? Wasn’t that the one with Meg Ryan? Does having a dot.com domain make a big difference? BBC and Mail have them; the Guardian doesn’t.
  • Digital circulation: That’s a big N/A — not applicable. The Guardian has been one of the most outspoken proponents of “open,” and while that doesn’t equate with free, it’s a close cousin. As the outlet moves away from print, it faces a huge question of where it is going to get “circulation” money. In the short-term, in the U.S., look for Guardian to try app or niche vertical reader revenue streams. The BBC’s news play is high-end mass and free, while Mail Online plies the pop free market.
  • Video: Hands down, the BBC has the edge here. Ascheim talks about adding new original U.S.-produced video to the riches of what BBC produces daily. In a coming 4G world, video may be BBC.com’s major point of differentiation in the States.
  • Mobile: Consider this the wild card. As mobile, especially the tablet, reshapes what we think is true about news reading (“The Newsonomics of the Missing Link“), it re-levels the field. So newer entrants, like all three of these invaders, can establish new habits for readers. Mail Online is already attributing 15 percent of its UK uniques to its new iPhone app. Guardian’s Eyewitness iPad app has seen a half million downloads and good sponsorship money from Canon. BBC has seen more than two million downloads of its BBC.com iPad app. As new habits form for iPad news reading, listening, and watching, these new contenders all have new shots at the American audience.

It could well be we’re reaching the end of the line for a much-cited quote often attributed to Churchill: ”England and America are two countries separated by the same language.” Well, he or G.B. Shaw may have said it, but marketers believe the differences are becoming more minor. It’s not just news people who grok the revolutionary economics in re-using and redistributing the same content you’ve already paid for; both Netflix and Hulu are moving to license more Brit TV for the same reason. In strong part, the new Brit invasion is just a re-stating of the produce-once, distribute-many core digital principle. In this case, though, it’s produce-once, (profitably) distribute overseas as well.


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