Will Gannett Pull It Off?

I wrote several pieces on the newspaper industry: Newspapers, Roll Up, Newspapers, Wake Up, and the Pro-Am Debate.

Gannett (GCI) publishes 90 daily newspapers, nearly 1,000 non-daily publications and 23 television stations in the US. In the UK, Gannett publishes 17 daily newspapers and around 300 non-daily publications. Gannett’s popular newspaper USA TODAY with a circulation of 7.3 million is the US’s largest-selling newspaper. USA WEEKEND is a weekly newspaper with a circulation of 2.3 million. The company’s 23 television channels cover approximately 18% of the US and have a market reach of 20.1 million households. Gannett also operates a number of web sites.

Shift in industry dynamics
Circulation of US daily newspapers declined by 2.8% during the six months ended September 30, 2006 (Audit Bureau of Circulations). Newspaper revenues of the vertical segments (jobs, real estate, travel and classifieds) have moved online, causing a decline in the newspaper industry’s fortunes.

Strong growth in Gannett’s internet business
Gannett is one of the few publication houses, however, that has managed to develop an internet business around its various publications and monetize them. According to Nielsen//NetRatings, unique visitors to Gannett’s internet sites in the US stood at 23.2 million in January 2007, 14.8% of the total US internet audience. Gannett’s 2006 Internet advertising revenues were $400 million. USATODAY.com, broadcast online and CareerBuilder contributed to the strong growth in revenues.

Gannett’s year-on-year online revenue growth was more than 25%, driven by USATODAY.com, which experienced 42% growth, TV Internet (broadcast online) which grew at 50%, Newsquest at 37% and domestic sites a healthy 22%. I bet many of you were not aware of this fact. Remember, the “popular” social networking companies are yet to earn advertising revenues remotely close to this.

Strategic investments in internet businesses
Gannett has made a number of strategic investments to grow its internet businesses. A case in point is PointRoll, which provides online advertisers with rich media marketing services. Gannett has also invested in PlanetDiscover, which aids the company’s local sites with a robust local search technology, clearly a growth sector that all the major portals are chasing aggressively, and where a company like Gannett has advantages due to its existing local media properties.

Of the verticals, CareerBuilder is the No. 1 online site for job postings in 2006. According to Alexa the website is ranked 376 and is estimated to have over 18 million unique visitors. The site earned $329 million in revenues in the first half of 2006 and managed to overtake its largest competitor by $6 million. The site is estimated to earn well over $600 million in 2006 and with forecasted growth of 30% year-on-year in revenues and increased unique visitors the site is
well poised for the future. Topix.net is a news content aggregator and is ranked 1,437 by Alexa with over 8 million unique visitors. The site, owned by Gannett, McClatchy, and Tribune, witnessed over 43 million page views and 3.3 million unique visitors by the end of 2006 and fish4, which is 25% owned by Newsquest is UK’s most popular employment site with over 2.5 million unique visitors per month.

ClassifiedVentures includes the auto and real estate advertising sites (cars.com, apartments.com) of Gannett. ShermansTravel is an online travel service site, ShopLocal is an online marketing solution site for local, regional and national advertisers and 4INFO is a mobile phone search services provider. The company owns less than 50% in all the above companies. McClatcy and Tribune are the other investors in CareerBuilder, ShopLocal.com and Topix.net.

Conclusion
The company is working on replicating its vertical business on the internet and Gannett seems to exhibit the will to pull off the transition. Don’t be surprised if it does a News Corp. in the next 2 years.