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FSIs Still Holding Strong For Newspapers

Free-standing inserts (FSIs) are stable and retailers still get good return on investment, says Nancy Lane, president of the Local Media Association. Lane says the big preprint package in the Sunday paper is one of the most effective forms of advertising. Erica Sweeney looks at FSIs.   
By
NetNewsCheck,

As the push to digitalize many aspects of traditional print media continues, the free-standing insert, or preprint, is holding steady in its original form.

Free-standing inserts (or FSIs), which include coupons and retailers’ circulars, typically account for 30% to 50% of newspapers’ retail advertising revenue, says Jim Conaghan, vice president of research and industry analysis for the Newspaper Association of America. But, he says, that number that can vary by season and the newspaper’s size. (Editor’s note: An earlier version of this story erroneously stated that FSIs accounted for 35% to 40% of newspapers’ annual advertising revenue instead of retail advertising revenue. This statement was also incorrectly attributed to Nancy Lane, president of the Local Media Association. NetNewsCheck regrets this error.) 

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How much FSIs account for overall newspaper revenue is not tracked by NAA, Conaghan says.

According to Brian Costello, former VP and GM at Valassis Direct Mail and now owner of Costello Group, a marketing consulting firm, 90% of coupons still are sourced through print. He says preprints are doing well as a newspaper revenue source, with only about a 1% to 2% annual decline, while other revenue sources are declining more significantly.
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 “The FSI is very economical for retailers,” Costello says. “It’s an incredibly efficient way to market services. Digital hasn’t figured out how to have the kind of reach with that kind of pricing.”   

Industry insiders say there are no roadblocks for preprints in the near future, mainly because digital applications are not yet able to come close to reaching preprints’ audience of an estimated 50 million households per week.

Nancy Lane, president of the Local Media Association, says the importance of FSIs as a revenue source for newspapers doesn’t appear to be changing.

“FSIs are stable now, and I think retailers still get good [return on investment],” Lane says. “It’s [been] a big part of their ad budget and continues to be because it works. The big preprint package [in the Sunday paper] is one of the most effective forms of advertising. That model doesn’t easily translate to a digital model. There’s no platform to compete on the digital side.” 

In 2012, Valassis Direct Mail attempted to overtake the FSI business after it announced a negotiated services agreement with the United States Postal Service, but the impact was minimal.

Over the past few years, companies have attempted to launch competitive digital preprint alternatives. These included Zip2Save, led by Lane, which launched in 2009 but shuttered in 2013. A few more enduring successes include Gannett Co.’s ShopLocal, which provides incentives, coupons and other offers, and Wanderful Media’s Find&Save.

Wanderful is owned by consortium of media companies, including Gannett, Hearst and others, which recently invested another $14.5 million in the company, bringing the total investment to more than $50 million. Wanderful works with more than 500 newspapers to offer an array of apps and Web platforms digitizing the preprints distributed via local newspapers and attempting to “solve problems that traditionally had been solved by FSIs and retailers,” says company CEO Ben Smith IV.

The company launched in November 2011, added its Web presence in April 2012 and rolled out its Find&Save apps on Black Friday in November 2013. Smith says Wanderful’s products allow retailers to frequently market consumer specials and allow consumers to forgo picking up bundles of coupons and circulars. 

Wanderful’s annual revenue is between $5 million and $10 million, Smith says. The company operates its partner newspapers’ online shopping sections, where consumers access the content in circulars. There are also mobile Find&Save apps, which can be personalized.

Smith says Wanderful’s apps have about 1 million users, nowhere near the 50 million households reached by preprints weekly.

“Print FSI has not had decline as some of other ad categories,” Smith says. “The market has not fallen off, and that parallels with emerging companies like Valassis and direct mail. It’s hard to find another advertising opportunity that accomplishes the same goal.”

The future, Smith says, lies with mobile devices, rather than websites, but the apps capable of overtaking preprints are just beginning to emerge.

“We’re still looking for an audience with apps,” he says. “No one has an audience today that’s big enough [to match] what they’re able to do in print. Things that crushed other parts of the print business didn’t really occur with this market on the Web.”

In the next five years, Smith says he sees a portfolio of apps, with smartphones at the core, to help consumers on different levels of a shopping experience. Personalization and geolocation will allow users to tailor content to their needs and find the best deals in their area.

“It’s just a matter of when digital will have enough of a product or service that’s going to put a dent in the traditional preprint business, as it put in the tradititional newspaper business,” Costello says, explaining that preprints remain inexpensive for retailers.  

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Comments (2) -

nancy lane posted over 2 years ago
Just wanted to clarify that I never gave the 35-40% number stated at the top of the article. I told Erica that we don't track that information at LMA but to check with NAA. I told her that some larger papers may be that high but the average LMA member would be lower. Would love to see a correction at the top. THANKS.
Gordon Borrell posted over 2 years ago
Thanks for the clarification, Nancy. The number did look high. Actually, the share of newspaper advertising revenue from inserts was at 8.3% in 2000 and peaked at 17.9% in 2011. It has been trending downward, slightly, ever since, and this year should be around 14%. At midyear 2014, non-grocery FSI revenues were up about 3%, according to Kantar.

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