Quarterly Report

McClatchy Print Slide Offset By Digital Gains

While ad revenue continued to slide during McClatchy Co.'s fourth quarter, the company said its print declines were partially offset by 2.2% growth in direct marketing and total digital advertising.
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The McClatchy Co. today reported total fourth quarter revenue of $344.7, down 8.4% from the same period a year ago.

Ad revenue continued to slide at McClatchy, hitting $238 million during the quarter, down 6% from the same period last year. The decline was partially offset by a 9.1% rise in circulation revenue to $92.7 million.

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The company said its print declines were partially offset by 2.2% growth in direct marketing and total digital advertising.

Total digital-only revenue, which include digital-only revenue from advertising and circulation, was up approximately 15.8% compared to the same estimated 13-week quarter last year, including a 19% rise in digital classified advertising.

The company expects double-digit growth in digital-only advertising to continue during 2014.

“The digital success that we are experiencing now is directly related to our focus on growing our digital audiences,” Pat Talamantes, McClatchy’s CEO, said during the company’s fourth-quarter conference call with investors on Thursday.

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Indeed, digital audiences continued to grow despite the company’s rollout of metered paywalls last year. The number of monthly unique visitors during the fourth quarter rose 19.7% compared with the same quarter a year ago.

The paywall effort, known as the Plus Program, generated $8.8 million during the fourth quarter and $31.4 million for the total year. The company said it had 32,400 digital-only subscriptions from the Plus Program, bringing its total digital-only subscriptions to 60,300.

“We do think there’s some opportunity through marketing, through testing our thresholds on the paywalls a bit more, we do think there’s an opportunity to increase that number a bit and that would generate some additional subscription revenue as well,” Talamantes says.

Mobile monthly uniques rose 83% compared with the fourth quarter of 2012. Mobile users represented about 40% of total monthly unique visitors during the quarter, according to McClatchy.

Talamantes confirmed that pure digital mobile revenue — revenue tied specifically to a mobile ad buy — was less than 5% for the company. However, much of McClatchy’s mobile traffic is coming from users visiting the company’s sites from tablets and smartphones, who see the same ads that desktop users see.

Talamantes said the company this year is working on changing how it tracks mobile revenue. “We’re looking to track better for investors and internally the revenue that is coming from any advertising that is being seen by users who are on a mobile device,” he says.

Chris Hendricks, VP of interactive media, says with the company’s rollout of standardized news apps during 2013, McClatchy is boosting its efforts to generate revenue from its mobile products. “As a result of that, during the year we saw about a 42% increase in our native mobile advertising revenue,” he says.

Hendricks adds that the company is looking at what it is going to do with responsive advertising moving forward “to make sure that as we transition to a responsive design environment that the dollars that are associated with traditional browser-based revenue move over into the mobile space.”

Despite the digital gains, Talamantes says the company still sees print as a very important part of its business.

“What we don’t believe at McClatchy is that the digital transformation means that we go to 100% digital and direct marketing,” he says. “We think there will be a profitable print product for a long time to come.”

He did acknowledge that print — which is still very important for a significant portion of the company’s customer base — will gradually become a “smaller and smaller percentage of our total revenue,” but it would not disappear entirely.

“Over time it will become more and more the case that we regard print as a very profitable part of our product line and not the big focus which it has been in the past,” he says.

The fourth quarter also saw the completion of the rollout of McClatchy’s impressLocal digital marketing service solution. This year will be the first full year of impressLocal sales across McClatchy.

Mark Zieman, VP of operations, says feedback from impressLocal customers has been encouraging, adding that the program will add meaningfully to the company’s digital-only growth in the future.

The company also said it is expanding sales reach through audience extension partners, including Yahoo, Centro, Simpli.fi and other ad networks and exchanges.

For the year, total revenue dropped 5.1% from 2012 to $1.242 billion. Advertising revenue was $838.4 million, down 6.7%; and circulation revenue rose 5.4% to $354 million. Total digital-only revenue, which include digital-only revenue from advertising and circulation, were up 12.8% compared to the same estimated 52-week 2012 year.

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