Guardian Media Returns to Profit Going Against the Grain on Ads

Guardian Media Group Plc, which owns the U.K.’s Guardian and Observer newspapers, returned to a full-year profit as a 29 percent increase in digital revenue helped offset declining newspaper circulation.

As competitors such as News Corp.-owned The Times of London have opted to restrict access to online content through a paywall, Guardian Media has focused on what it’s dubbed an open journalism advertising campaign, drawing eyes to its website by encouraging exchanges between reporters and readers.

“The Guardian’s approach to digital advertising goes against the grain and it is paying off,” said Daniel Knapp, director of ad research at IHS Screen Digest. “The Guardian is positioning itself as a global media brand.”

Guardian Media’s profile in the U.S., where it began operating in 2011, has been boosted by its coverage of Edward Snowden’s intelligence leaks. A video interview with Snowden was viewed over 7 million times. The group’s jump in digital revenue exceeded the decline in print revenues this year, which was limited by a 20 pence increase in the cover price of The Guardian.

Guardian Media Chief Executive Officer Andrew Miller said rising American readership has exposed the group to a much more vibrant spending environment, supplementing its core U.K. market.

“In the U.S. we’re seeing a much more bullish advertising sector than in the U.K., where there are definitely still concerns over the outlook,” Miller said. “Clients over there are embracing digital advertising at a much faster rate.”

‘Think Twice’

Guardian Media reported pretax profit of 22.7 million pounds ($34.3 million) in the year ended March 31, recovering from a 19.8 million-pound loss a year earlier. Digital revenue reached 55.9 million pounds.

Despite charging more for paper copies, The Guardian and Observer newspapers recorded a loss before interest and taxes of 30.9 million pounds last year. The circulation of the newspapers dropped by around 10 percent.

Guardian Media’s “digital advertising revenue grew more than twice as fast as the rest of the market,” Knapp said. “This should make critics think twice.”

Guardian Media has resisted selling printing assets to offset this decline, with Miller saying “if we want to innovate across the paper, it’s good to own the assets.”

The company’s biggest cost remains its staff, and the decline in circulation means further job cuts can’t be ruled out, Miller said. There’s no current plan for significant cuts, he added.

“We’re trying to move to a new business model and if we can’t work within the constraints of the plan that our board signed off to, then sadly a reduction in headcount would be inevitable,” he said.

To contact the reporter on this story: Sam Chambers in London at schambers7@bloomberg.net

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

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