What if your board of directors handed you 40 million Canadian dollars (£24 million) to build a digital tablet version of your newspaper to give away for nothing?
Given the state of the online ad market, most publishers would consider such a plan crazy at best, but that's exactly what Canadian French language newspaper La Presse decided to do three years ago. But La Presse publisher Guy Crevier told the World Publishing Expo in Berlin today, the move is looking less crazy by the day.
The newspaper is between 18 and 24 months away from recouping that original investment, and is now within touching distance of being able to scrap its expensive printing and physical distribution costs.
"We wanted to grow again"
Crevier says the decision to invest so heavily in a free tablet edition was driven by key structural and technological trends: Print circulation decline, print ad revenue decline and the mass market adoption of tablets.
Crevier also argues that "news available free of charge is an irresversible phenomenon", with paywalls only a viable strategy for a few key players, such as the New York Times, and even then targeted predominantly at the over 55s: "This paywall subscription model is obsolete and that’s why we did not opt for it."
The immediacy of the threat is also clear. According to Crevier, US$25 billion left theNorth American print advertising market between 2006 and 2011, a reduction of 56 percent, and audiences, particularly among the young have shrunk rapidly.
As Crevier puts it: "Dailies are in trouble and when your numbers are dwindling in times of economic crisis, you really have to come up with a new model. In a shrinkage environment making money is a lot harder and we really wanted to grow again."
La Presse has already attracted more than 300,000 downloads, and were adding 800 new readers a day. They initially targeted existing tablet owners, but Crevier claims large numbers of people are buying tablets in order to get La Presse.
"We can prove our ads are effective"
Of the CA$40 million, CA$24 million went on staff costs. CA$8 went on software and consulting costs, with the rest, $CA2 million, going towards research.
The plan was to make an interactive product that took full advantage of its medium, but to build an advertising model that worked, La Press had to apply a similar ethos to its ads.
Some $2 million of the investment went on research into how consumers interacted with content and ads. One of the most important lessons they learned was that interactive ads captured a user's attention for an average of 9.4 seconds, compared to just 3.4 seconds for a static ad.
Ads in the edition, served every three or four pages, are designed with this in mind, such as a nail polish colour tester that enables you to try different shades on the model in the ad, or a slider showing tooth colour change.
The firm has also focused on measuring the impact of its ads from impressions through interactions to sending direct traffic to an advertiser's website. From January, it will begin offering guarantees on the number of interactions an ad receives and is working with advertisers to serve the right sorts of ads in the right parts of the newspaper.
They are also able to offer advertisers an attractive audience: with 35 percent are in the hard-to-reach 19-34 age range, 51 percent have an income in excess of $100,000 Canadian, and 42 percent have a university education.
The pitch La Presse now takes to advertisers is that their ads cover the whole marketing funnel, from building brand awareness with high impact campaigns, to active consideration as a consumer interacts with an ad, through to purchase as they follow through to buy things online. Crevier claims the newspaper is now able to charge around $16,000 (Canadian) for an ad.
La Presse's model is far from proven. Even if they are successful in recouping the cost of investment and cutting their print costs out entirely, they still have to make enough from online ads to cover other production costs, in particular the 300 journalists they employ.
Crevier says going digital means they can scale up with barely any costs, but the question is what sort of scale do they need to avoid firing staff and start making money once print is gone completely?
Nevertheless, as a response to the decline of print advertising, it's a pretty ballsy move which aims to make the most of what digital production and distribution has to offer.