Paywalls Helped Gannett In Q1 As Ad Losses Mounted

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Gracia-GannettFalling ad revenues hurt Gannett in Q1, even as the company enjoyed the fruits of its paywall strategy.

Digital revenues and the completed national rollout of its all-access content subscription model contributed to Gannett's 1.6% increase in overall revenue for the first quarter 2013. Total revenues were $1.2 billion, while advertising revenues accounted for $526.5 million during the first quarter, a drop of 4.5%. Press release.

As CFO Victoria Harker said during the company's earnings call today, "the publishing circulation benefits were significant enough to nearly offset all of the decline in advertising revenues during the quarter."

By the end of 2012, all 78 markets within Gannett had access to its new digital subscription model, and circulation revenue increased almost 9% to $286 million. It was the publisher's third consecutive quarter of higher circulation revenue.  "The driver of this growth is due almost entirely to the success of our all-access content subscription model," said president and CEO Gracia Martore. "That is just one example of how we are adapting to the changing habits of readers."

The digital segment, including CareerBuilder, reported revenue of $174.9 million, a 3.9% increase for the quarter. But digital revenues company-wide, including what other business segments generated from digital, was $350.3 million, a 28.6% increase over Q1 2012.

Of Gannett's 1.3 million home delivery subscribers, about 45% have activated their digital access, Martore reported. The company also boasts about 50,000 digital-only subscribers, plus nearly 4,000 previously digital-only subscribers who have added on a Sunday print edition. About half of the digital-only subscribers are under the age of 45.

"We've had younger people reading our content digitally before the subscription model was launched," Martore said during the call. "But what is different now is we can count them as subscribers, gain a better understanding of their news consumption habits, and use that knowledge to help our advertisers target and engage our readers more effectively."

Retail and national advertising was up compared to the fourth quarter 2012, but still down compared to the previous Q1 2012.

Gannett's purchase of social media marketing company Blinq in August 2012 is also starting to impact advertising.

"Blinq launched a social circular during the quarter that allows retailers to locally activate their circular connect at scale on Facebook," Martore said. "This solution, which is being integrated into Gannet Local, leverages the Blinq platform to deliver highly-targeted Facebook ads in an efficient, fully-automated manner."

Blinq's future social advertising solutions, along with Gannett's recent digital upfront, will continue to impact digital advertising for the company throughout 2013.

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