Size does matter for the Indy

The Independent is now wholly tabloid, its sales are a healthy 15 per cent up yearon-year in a declining quality market and the latest surveys show plenty more young and affluent readers are taking it - just the kind advertisers lust after.

Yet circulation and readership success has not translated into extra advertising revenues - indeed some say ad revenues are down. I would estimate the lost revenue so far to be nearer to £10 million than £5 million.

The Indy has partly itself to blame. As its tabloid strategy gathered pace it rather high-handedly told advertisers that it would charge the same for a tabloid as for a broadsheet page. No chance, said the media buyers on behalf of their advertisers, who refused to place their ads in a tabloid paper, even a quality one, at broadsheet rates.

The more the Indy insisted, the more the advertisers dug in their heels; the loss-making paper's finances suffered further and have not yet recovered from the stand-off.

The reduced revenueraising power of its compact edition came as a surprise to proprietor Tony O'Reilly, which is one reason why he was relieved when the paper went entirely tabloid: if going compact produced a (probably temporary, see below) setback to ad revenues then best not to have the substantial cost of producing both a tabloid and a broadsheet.

The advertisers' reaction was entirely predictable, as was The Independent's inability to make is demands stick: when you're the weakest kid on the quality advertising block, you simply don't have the leverage to charge broadsheet prices for a tabloid page.

It is also easy to see why advertisers baulked. A tabloid page does not have the impact of a broadsheet page, so why should they pay the same money? Newspapers will rightly argue that a tabloid page has more than 50 per cent of the impact of a broadsheet page; but they will struggle to get the same revenues for a tabloid as a broadsheet.

A tabloid double-page spread takes up the same space as a single broadsheet page but that means changing the artwork from a portrait to letterbox configuration, which means extra costs for the advertiser (and your ad no longer faces editorial, which advertisers like). Ad agencies will eventually go down this route but it will take more than the Indy to lure them to offset the costs.

The Times, which is only partly tabloid and likely to remain that way for the foreseeable future, has been more realistic. Its ad team has been trying to achieve 55-70 per cent of a broadsheet page's revenue for its tabloid pages and is aiming eventually for 75 per cent.

What is true for full-page ads is true for every other size: the tabloid strategy means negotiating new and probably reduced rates for each ad shape. So why go down the tabloid route?