While many media writes obsess with the efforts to newspapers to install online paywalls, the revenue battle may be going on in the arena of preprint inserts, those Sunday circulars that have been a cash cow from so many newspapers for decades. Along with retail display advertising, these preprints have been slowly declining over the years as more and more advertising switch to digital alternatives.
But these inserts are a vital part of the revenue picture for newspapers, accounting from a large chunk – 35 to 40 percent – of newspaper retail advertising (and with classified advertising continuing to fall, this revenue category grows in importance.)
But the trickle of advertisers leaving the Sunday paper may become a flood if Google and other media alternatives can convince more retailers to explore the value to digital catalogs read through tablets and e-readers.
Some retailers, such as Target (see at right), Nordstrom and Ikea have launched branded iPad apps for their catalogs. While Target for iPad was launched under their own name, the Nordstrom app, Nordstrom The Catalogs, was released by Synapse Group. (Ikea's app, seen in this post, appears under their own name in the App Store.)
The move to tablet versions of retailer catalogs has tremendous momentum because in addition to developers who are looking to create branded apps for the retailers, big names like Google are pushing to have retailers include their catalogs in their own apps. Google Catalogs was released into the App Store a few weeks ago and is an attractive iPad app, though the app does crash and is in need of an important update as the app is essentially unusable in its present form.
Catalogue by TheFind.com is also digitizing retailer catalogs and recently updated their app, which now includes the circular from Best Buy. This app has many of the same retailers in it that the Google app does showing that their is both duplication and a lack of barrier to entry in the platform.
The problem facing newspapers (and the postal service) is that retailers have been building their own databases through loyalty programs. But while these programs allow them to market directly to their customer base, they can not act as a substitute for their printed catalogs which can reach new customers and a mass market.
But the decline in newspaper subscriptions means the Sunday paper may be a less attractive vehicle for retailers. This may explain the move by the Chicago Tribune to use Groupon to try and drive Sunday subscriptions by offering a very cut rate Sunday only subscription. The loss in circulation revenue, while important, pales in comparison to the prospect of losing insert advertising.
But the newspaper industry's reaction to the digital threat to its inserts has been slow and runs counter to the efforts of many newspapers to drive online subscriptions. In the end, free models will have a distinct advantage over paid models here if the key criteria is market penetration. On the other hand, market penetration will remain a huge barrier to climb for the new digital catalog distributors, as well. That gives newspapers a small window to come up with their own alternatives before Google or others finally take this business permanently.
Like many newspaper and magazine publications being converted to the tablet platform, the retail catalog products are mostly replica editions of their print products. Some catalogs are attempting to enhance the reader experience by adding more native features in order to assist the potential buyer in making a product decision, while others simply add a few web links to their digital catalogs.
The Target branded app, for instance, can find your local store in order to deliver the proper circular, and contains some other features like Daily Deals. But circular itself is difficult to read due to the lack of a zoom capability. To get a better look at a product one has to tap on the product which pulls up the same information and picture in a new window – hardly improving the experience.
The Nordstrom app does have pinch to zoom, however. It also has a "Show Products" button which allows buyers to get more information on the products.
Just like digital newsstands, I think we will see some of new features found in the native apps move over to the replica apps soon as retailers demand more than just digital reproductions of their print catalogs.