Feb 4, 2011

Can The Daily make some money?

Jeff Jarvis started, on his blog, a conversation about whether or not The Daily can make some money.  A few months ago, Frédéric Fillioux (Monday Note) crunched some numbers.

Here are three hypotheses. Don't hesitate to comment and make your own.

HYPOTHESIS #1: 1% penetration of the iPad market

- USA Today paid circulation (1.82M) is less than 1% of the adult American population (around 220 M of people 17+)
- Let's say that The Daily will get 1% of the 15M iPads. It is 150,000 subs x $40 = $6M/year.
- Let's say that they have a CPM like the USA Today app at $50 and that they have 10 ads a day for 365 days. So ad revenue will be = ~$27.34M/year. (150,000/1000= 150. Then 150 x50 x 10 x 265)
- Total revenue = ~$33.4M/year

HYPOTHESIS #2: 0.56% penetration of the iPad market
- How do we come up with 0.56%? I'm using Le Monde (the French daily) numbers. They have 7 million monthly UV. 39,000 of them pay to access the paid part of lemonde.fr. (39,000 = 0.56% of 7 million).
- In this case, sub revenue is = 3.36M/year (84,000 x 40). 84,000 is 0.56% of 15M iPad users.
- Ad revenue (if we keep the same $50 CPM and the same 10 ads/day) = $15.33M/year.
- Total revenue: 18.69M/year.

HYPOTHESIS #3: 0.33% penetration of the iPad market
- How do we come up with 0.33%? Le Monde sales ~300,000 print copies. 100,000 customers access to the paid part of lemonde.fr (39,000 pay only for the web + 61,000 print subscribers who requested access to it). So 100,000 is 0.33% of the 300,000 people paying for print.
- In this case, sub revenue is = $1.98M/year. (49,500 x 40). 49,500 is 0.33% of 15M iPad users.
- Ad revenue (if we keep the same $50 CPM and the same 10 ads/day) = $9M/year.
- Total revenue: $10.98M/year.

Of course the more iPad users, the more potential. On top of that, The Daily is probably going to have an Android and a windows version.

Operations are $25M / year, so it does not look impossible to make money (even if initial investment is $30M). But do you get any advertiser with 150,000 subscribers? The Daily team has put numbers together before launching the project for sure. I'll be curious to see their business cases. As a reader, I'm not the audience. I hope there is one for this hybrid. We'll see.

1 comment:

  1. Hi Jeff, I would start my comment saying the answer is not black or white.
    There are many answers -and subanswers too- to how The Daily can make money.

    1/ it is a transitional way to present new, press oriented, but multimedia too.
    2/ it is by many ways experimental, as it is the first tablet tabloid, but also as users are not used to pay on a mobile/tablet on membership base
    3/ therefore the subscription price is very agressive/low, which is why one can't just look at the basic business model, but have to consider other parameters like the the trust model (reputation).
    4/ about the business model, maybe the US national version will cost a lot, but Murdoch can lower the production cost if he develops other national newspapers.
    5/ considering the growing price of paper and shipment, ecology, and users habits to receive instant news, the price of the news may influence customers to buy a tablet to access the news, highly influenced by the gadget/tablet.
    6/ as I wrote today, media war has started on tablets -http://bit.ly/hnCs3R- and new media coverage on tablets seem to be part of the iOS and Android development strategy. Both operating systems are highly commited into the success of these respective news services. The quality of news service on the Tablet seem to be linked to people's perception of the Tablet itself... to make a parallel, like the reputation of a network is very linked to its news coverage.

    Talking about a future version for the other tablets/OS, I think this should be a mart move as Android's market is growing and taking marke shares.
    > each tablet offers its own user experience (for example, CNN iReport has been annouced to be developed only for Android)
    > The Daily's biggest weakness is that it does not acknowledge users' needs to be part of the media and contribute (which is the main reason of Twitter's success). And giving users the hability to interact and contribute is a main factor for user's fidelity to a service!
    > I must admit I have been really thrilled by Honeycomb's prez featuring CNN iReport (and I am 100% mac)