Vodafone Makes U.K. Front Pages as Newspapers Cede to Ads

British newspaper readers have to move to page three today to find the front-page headlines.

The parlous finances of local newspapers and the strength of Vodafone Group Plc (VOD) were thrust in readers’ faces this morning with advertisements in the phone company’s signature red occupying entire front pages. The wrapper-style covers of the Telegraph, the Guardian and the Independent proclaim the quality of a faster network the operator is building.

The newspapers ceded their most prominent section to an advertising client as they try to increase revenue with new marketing methods to counter a decline in print readership amid a shift of readers to Web publications. The print circulation of Britain’s national newspapers slumped about 9 percent in September from a year earlier and advertising clients are cutting spending amid the European debt crisis.

“It’s a reflection of the commercial reality today, the editor is totally superseded by the commercial director,’ said Alex DeGroote, a media analyst at Panmure Gordon & Co. in London. ‘‘What Vodafone is doing today wouldn’t have happened 10 or 15 years ago, but circulations were 20 percent higher.”

Vodafone’s ads, asking customers to wait for the start of its fourth-generation wireless network as competitor EE will be able to offer that service earlier, read “After being voted the best network, there’s only one way to go. Better.”

Declining Value

Daily Mail & General Trust Plc (DMGO), which publishes the Daily Mail newspaper, dropped 10.4 percent in the last two years through yesterday, Daily Mirror publisher Trinity Mirror Plc (TNI) slumped 42 percent and Johnston Press Plc, which owns more than 230 U.K. publications, fell 24 percent. In the same period, Vodafone gained 2.9 percent while the British FTSE 100 benchmark index rose 0.9 percent. The Telegraph, the Guardian and the Independent are published by closely held companies.

British newspapers, including News Corp. (NWSA)’s London-based Times, already sold front-page ads to Olympic sponsors this summer.

“If one of the U.K.’s biggest companies comes along and offers you millions of pounds for your front page, you’re going to take it,” DeGroote said.

Today’s ads allowed Vodafone, the world’s biggest mobile operator behind China Mobile Ltd. (941), to prominently advertise the Mobile Choice Consumer Awards, which said that the operator had been voted the best network by readers earlier this month.

EE, the No. 1 wireless company in the U.K., will begin selling its faster 4G offering in 10 cities on Oct. 30. Vodafone and others had tried to prevent EE from offering the service before they were able to secure the spectrum they need to offer their own. An auction of spectrum suitable for 4G traffic will be held early next year and Vodafone may be able to offer the service by the middle of 2013.

‘Still Relevant’

EE, the U.K. mobile-phone venture of Deutsche Telekom AG (DTE) and France Telecom SA (FTE), is starting its own ad campaign featuring the actor Kevin Bacon, which will appear during prime-time TV music competition X-Factor on Nov. 30.

To counter the slump in print revenue and circulation, newspapers have also been expanding their Internet offerings. Still, online ads generate less money for most publishers than their print counterparts.

As a result, newspapers are increasingly charging online users for content by putting up paywalls around some or all of their stories on the Web, a bid to offset the loss of advertising dollars to Internet companies such as Google Inc. (GOOG)

Charging Online

Pearson Plc (PSON) said in July that the digital subscribers to its Financial Times newspaper surpassed its print customers for the first time. The business publication was one of the first major newspapers to offer a metered payment plan. While some articles are available for free, readers need a subscription for unlimited access.

In the U.K., Rupert Murdoch’s News Corp. introduced online paywalls at the Times and News of The World newspapers and removed all news content from Google’s search engine.

Newspapers, which still get the bulk of revenues from advertising, are also under pressure as companies cut marketing spending amid the European debt crisis.

Publicis Groupe SA (PUB), the third-largest advertising company, today reported third-quarter sales that missed analysts’ estimates, citing a “sudden downturn” in ad spending in European economies. Britain’s WPP Plc (WPP), the largest advertising company, yesterday slashed its full-year sales growth target for the second time in two months.

Douglas McCabe, an analyst with Enders Analysis, said that the Vodafone campaign shows that newspapers are still relevant for marketers and indicates how publications need to offer new formats to attract advertising.

“Newspapers remain incredibly powerful as a tactical advertising vehicle,” he said in an interview. Vodafone’s campaign “would be described as a compromise in editorial rooms, but as a very good use of real estate by sales.”

To contact the reporter on this story: Amy Thomson in London at athomson6@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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