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June 11, 2015, 9:30 a.m.
Mobile & Apps

Newsonomics: In Toronto, The Star is making its own big bet on tablets

Taking Montreal’s La Presse as its model, The Star is set to debut Star Touch — evidence of its belief that tablets offer higher engagement (and higher potential revenues) than smartphones or desktop.

Can The Toronto Star have it both ways?

Can it maximize the value of its print paper, continuing to extend that value proposition to advertisers and readers every which way — and find a new, large profitable audience with the launch of its La Presse-like tablet news product in mid September?

That looming question, which may take a year or more to answer, focuses our eyes northward, as part of the worldwide newspaper industry’s search for the holy grail of stability and prosperity.

Last week, I detailed the digital transformation of La Presse, Quebec’s second-largest newspaper (“Newsonomics: La Presse’s bet on tablets and its crossover calculus”). Now The Star, Canada’s largest local newspaper, takes that experiment and brings in into sharper focus. The Toronto market, fourth largest in North America, is crowded with lots of news competition, print and broadcast. And the fact that it publishes in English makes its foray more immediately comprehensible for American publishers and those of us who watch them.

Star Touch, the name the paper is giving to the new product, takes a big page from La Presse+, and then begins to write its own story. La Presse is supplying the platform, its first foray into being a technology vendor as well as a publisher. La Presse’s tech staff is now working with The Star to smooth the Star Touch launch in Toronto, as the parties finalize an ad-selling partnership in and around the product. While both publishers give full-body hugs to the tablet as a print-like, high-engagement, advertiser-attractive product, The Star detours from La Presse’s strategy: It intends to keep its print operation as strong as possible, while La Presse execs clearly want to move beyond the world of newsprint and trucks ASAP.

“It’s one-third tech, one-third people, one-third transformation,” says Ali Rahnema, The Star’s chief operating officer for digital. He makes the point that the current initiative is a transformation project, with the tablet at its first point. Why? While we know readers and reading is moving profoundly to screens, we can’t see beyond the near future on the what and when of that. “We can’t say, ‘The tablet is going to be the platform for the next 20 years, and we can just focus on that.'”

Before we get down into the strategy of The Star, let’s address one good question that has popped up on social media about last week’s column: Haven’t we seen this movie before? Didn’t Rupert Murdoch get the jump on all his peers creating “the first tablet newspaper,” The Daily, way back at the beginning of 2011? Indeed he did, and he had the experience many digital pioneers do, closing the innovative but money-losing operation about two years after he opened it. Four big differences separate then and now:

  • The U.S. installed base of tablet users when The Daily passed into history at the end of 2012 was about a quarter of U.S. adults. Today, just three and a half years later, it has doubled, with about half of Americans having one in their living room or on their bedside tables. Toronto Star publisher John Cruickshank “projects penetration of tablet devices in English Canada by fall 2015 to be 61 percent.” Even though tablet sales have markedly slowed, that translates to “1.2 million tablets in the hands of current readers and 1 million in the hands of current non-readers,” offering a significant market.
  • Advertisers’ adoption of the tablet was nascent.
  • The Daily was a paid subscription product, priced at 99 cents a week or $39.99 a year.
  • As a startup, The Daily had no brand recognition nor readership, to bring along to the new product. What if News Corp had tried it with its New York Post — or tried it now?

The Star and La Presse both enjoy a bigger potential audience and more advertiser sophistication. They also recognize how hard to build a large-enough market for advertisers for a new paid digital product, so they both offer it without any paywalls.

Adds Barry Graubart, who led product strategy for Crowd Fusion, which provided the platform underpinning for The Daily: “There are lots of similarities, yet some differences between LaPresse+ and The Daily. And while there have been big advances in some areas in the past few years, there has been a remarkable lack of change in others.” One area of advance: “La Presse can leverage almost five years of iPad knowledge to drive their UX.” While Graubart, who blogs at Content Matters, sees the strength of La Presse’s advertiser partnering, he still wonders about the richness of the ad experience:

For most ads, the only interactivity is a link to a website. Some ads have a bit more — a number of auto dealers have implemented a carousel-like feature where the user can scroll through multiple vehicles. It takes what might have required a two-page spread and puts it into a small ad. Cute. But hardly innovative. Another car dealer allows you to see prices by wiping away the covering text, like a scratch-off lottery card. You might do that once, but the novelty wears off before you’ve finished with that one ad. When will advertisers figure out clever ways to leverage the multimedia capabilities of tablets? Where is The New York Times’ “Snow Fall” of iPad ads?

In these transitions, and would-be transformations, we’d find it tough to count the number of moving pieces. Let’s pick apart The Star’s thinking here in 10 points, to highlight what is and isn’t changing as The Star finishes the run up to its big move.

1. Maximize audiences on each platform.

Clearly, print and tablet offer the highest engagement, as measured by time, of our four main platforms today, including smartphone and desktop. The Star believes that there is relatively little overlap between those who mainly consume via print and those on mobile devices, buttressed by the fact that La Presse measures only 6 percent weekly overlap between the two. How much might Star Touch accelerate print loss? Cruickshank believes that the “the hit will be less than 10 percent in the first year,” and less thereafter.

“The audiences are quite discrete,” he tells me. ” People use devices quite differently. People want the media they grew up with, which is why we now do this for younger people.”

So the strategy is to keep those high-dollar print subscribers as long as you can — knowing their unceasing and inevitable decline — and monetize them. The math is fairly simple. “We make money on each print reader, and La Presse loses money on each one,” says Rahnema. That’s due both to The Star’s more aggressive pricing over time and its ownership of its presses. Cruickshank has eschewed day-cutting strategies in print, saying such cuts are “antithetical to how we think about what we do. If you don’t need it on Monday, why do you need it on Tuesday? Why do you need it on Wednesday?”

Further, The Star has been aggressive and innovative in offering readers three (so far) paid niche products, which we detailed last year (“Inside the Toronto Star’s $10 million niche print business”).

2. Bring the advertisers along early.

The Star has taken its tablet act on the road, touring to major advertisers, initially to improve familiarity with the new product. Then it will follow up in negotiations with agencies and other buyers, all with the intent on showing “how this is a brilliant environment for brand advertising.” Brand advertising forms the big target here, followed by retail. The Star, with its substantial non-tablet traffic, can still offer targeted programmatic ads as part of a larger package. What’s interesting here: Not only is Star Touch intended to retake some lost print revenue, it’s positioned to take money from broadcast as well, as digital disruption hits that industry more bracingly.

That piece — advertiser inclusion and acceptance — is a huge key to success. La Presse gave major tablet credit to existing print advertisers to speed their testing and usage of La Presse+, offering hundreds of thousands in “free” tablet advertising in mid-2013 as the product rolled out. La Presse also worked with the Alliance for Audited Media, the main company now certifying circulation in North America. In December, “La Presse+ becomes the first tablet-based news platform with ad impressions certified by the AAM,” further legitimizing the product.

3. It’s a major strategic investment.

Figure this is more than a CAN$9 million annual operating investment for the company, plus capital expenditures. Overall, The Star is adding 104 staffers to its ranks, though a minority of those are temporary positions to see it through the complicated launch. About 65 designers and producers join, says Rahnema, as do 12 project managers. With its focus on native tablet advertising, The Star is starting up its own 15-person ad studio as well.

4. It must be free.

The big pot of potential new revenue here is higher-priced digital advertising. The only way to get that is to recreate, as in the best days of print, a big mass market. Paid subs won’t get you there, as La Presse’s Pierre-Elliott Levasseur points out: “We just don’t believe that a lot of younger people will pay for news.”

Cruickshank was never a big fan of paywalls, but his paper implemented one and had the same middling, digital-only subscriber results we’ve seen from other metros. It found the added revenue underwhelming. With its plan to launch Star Touch, it dropped its paywall in April after an 18-month run: “Nobody felt good about the paywall. It went against what we were doing for 25 years. We would rather provide it [the news] for free.” Reader revenue now runs in the mid 30s as a percentage of total revenue for The Star; that’s one key metric to watch.

5. The newsroom moves to a tablet-first mode.

“We’re retooling and remaking our newsroom to be tablet-first,” says Rahnema. The Star — made famous south of the border by its dogged pursuit of crack-smoking Toronto Mayor Rob Ford in 2013 — is home to 220 journalists. They will now be asked to concentrate on the tablet — or, more precisely, on “screen-based storytelling.” If a story can best be told via video, video it will be, says Rahnema, and then text may follow — if there’s time. That’s a huge mindset change, and shows the large bet The Star is placing on Touch. What kind of product will Star Touch be? “Half TV, half newspaper,” says Cruickshank.

6. Once a day is enough.

Star Touch, like La Presse+, won’t be a breaking news product. Readers get one edition a day, seven days a week. The breaking news function, The Star believes, remains with free smartphone and desktop web; Star Touch will link to The Star’s site for live files. Why? Research showing readers want editions — the old Economist bookends theory — and, in any event, the complexity of tablet presentation would require even more labor for a continuously produced product.

7. Repeat: This is not a replica.

Most regional/local dailies have limited their tablet ambitions to replica products. Perhaps surprisingly, they do well among older readers who love the newspaper format, but also own tablets. Yet, they’ve been a minor part of the revenue picture, often thrown in with all-access subscriptions and generating little additional ad revenue. Star Touch, of course, will be something different, with its high production values. Comparing replicas and what Star Touch intends to be, Rahnema makes this point of great value to the whole industry: “We do things poorly [replicas], and we’re surprised when they don’t work.”

8. Smartphone traffic is vital — but it’s a lead generator.

Like its peers, more than 35 percent of The Star’s traffic comes from smartphones. That’s low-time, low-engagement traffic, tough to monetize well. So in The Star’s schema, the smartphone remains a priority, but one whose financial importance is tied strongly to its ability to drive readers into Star Touch. Only a smaller percentage of them may become regular Star Touch readers, but they’re the makings of a new, younger “newspaper” reader base. In this strategy, the smartphone widens the top of the reader funnel. It is, though, the desktop Star reader who is the likeliest Touch convert, Rahnema believes; they’re the most loyal digital readers The Star now has.

9. Watch the dollars, not the percentages.

The Star’s financials parallel those of its peer North American metros, unfortunately: high single-digit print ad loss each year, ebbing print circulation, middling digital ad performance. Star Touch aims at building a second, high-CPM business, parallel to what The Star and others have long achieved in print. If The Star can achieve the kind of digital ad rates La Presse has seen, $40-plus CPMs, that monetization would be four times or better than what digital readers now fetch. Given its print steadiness, The Star doesn’t want to approach La Presse’s current revenue splits, in which 70 percent of its advertising dollars are now digital. What it wants: new millions in digital advertising revenue, paired with that still-substantial print ad and reader revenue business.

10. Engagement isn’t just about selling advertising.

Engagement is now the word on everyone’s lips, but mainly in relation to making money by subscription or advertising. We may remember another reason we thought newspaper (companies) were important, and John Cruickshank points to it. If the engagement on tablets is as real in Toronto as it is in Montreal, Cruickshank thinks it might even help out the wider democracy: “How deep can we take people into public policy matters?”

Photo of Toronto Star building by petmutt used under a Creative Commons license.

POSTED     June 11, 2015, 9:30 a.m.
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