The New York Times Company (NYSE:NYT) recently re-launched its mobile website as an initiative toward creating more responsive and engaging content across all its digital platforms.
This is the first revamp of its mobile site since it was first launched six years ago. The site is now perfectly angled to offer mobile users an extensive range of articles, which were previously only compatible with PC and desktop browsers.
I expect this change to have an escalated user count across its website; in addition, this will enable the company in incrementally developing on its subscriber base by acquiring more users through international markets. Moreover, the growing broadband penetration coupled with increased usage of smart phones is expected to bolster its revenues.
It must be comprehended by investors that online media is gaining in popularity, as it offers more information at a faster rate and cheaper prices relative to print media. I believe such developments in the online media space will make printed newspapers obsolete in the coming future.
According to a recent publication offered by eMarketer, as online reading through tablets and smartphones is easier for subscribers, both physical circulation and print advertising will witness a massive decline. Social networks such as Facebook and LinkedIn will drive the future growth of this segment.
How will the revamped website add to earnings?
In order to comprehend how the new revamped website will contribute toward the overall earnings, it’s imperative to examine the revenue streams of The New York Times Company (NYSE:NYT). The company generated approximately $2.0 billion in revenues during the previous fiscal year, out of which highest percentage of revenues was generated through Print Circulation & Digital Subscriptions at around 48%. This was followed by Print Advertising and Online Advertising at around 34% and 17% respectively.
The new revamped website is expected to bolster revenues generated through online ads. It should be noted that the $340 million in revenues generated by The New York Times Company (NYSE:NYT) through online advertising during fiscal 2012 primarily depend on the unique user count and number of page views. The revamped mobile site is expected to increase the unique user count with consistently growing popularity of smartphones and tablets. Furthermore, the increase in users will be spurred through the access of desktop compatible website content on the mobile platform.
As more and more users access its new website, the number of page views will increase exponentially, translating into a higher number of ads viewed. The higher number of ads on its website will increase The New York Times Company (NYSE:NYT)’s RPM (revenue per 1,000 impressions) in the future.
The print circulation and digital services contributed $956 million to the overall revenues during the previous fiscal year. As per the valuation offered by Trefis, this division holds approximately 46% value in The New York Times Company (NYSE:NYT) present stock price.
With the launch of the new website, the mobile and tablet users can access the same content as desktop users. Therefore, the new revamped website will enable the company in charging a premium by offering digital subscription services to users that access its website content through smartphones and tablets.
According to the projections made by Trefis, by the end of 2012 the online subscriber count stood at around 668,000; however, the new website is expected to escalate the user count close to 1.4 million in the next few years. In any case, if the new initiative to revamp the website manages to grab even more appreciation resulting in the user count blowing past the 2 million mark, then there may be a huge upside to its stock price. This clearly exhibits the significance of its new mobile website.
Competitive landscape
New York Times operates in a highly competitive environment, therefore it becomes essential for investors to comprehend the competitive landscape of the industry. At present its key competitors are The Washington Post Company (NYSE:WPO) and Gannett Co., Inc. (NYSE:GCI). Unlike New York Times, The Washington Post Company (NYSE:WPO) has transformed itself from an exclusive newspaper service to a diversified company, where a large portion of its earnings are generated through the educational division and television broadcasting.
However, during the previous quarter, only its broadcasting segment witnessed growth, while the newspaper publishing division continued to incur losses. Similarly, the educational division also struggled to report any growth in revenues and the rising restructuring cost added more pressure on the company’s earnings. During the previous quarter, the flagship newspaper of the company suffered from a significant decline in circulation and print advertising, as earnings fell by a whopping 85%.
The growing inclination of consumers towards the online media leads me to me believe that media companies that derive maximum revenues through online subscribers will continue to exhibit strong growth. In contrast, companies that are unable to make a smooth transition from print to online media will continue to struggle in this rapidly changing environment.
Relative to New York Times, the revenue growth rate for Gannett Co., Inc. (NYSE:GCI) has been surprisingly stable during the last three years. The revenue growth rate posted by Gannett during the first quarter of fiscal 2013 was the highest amongst its peers.
Furthermore, the company reported one of the highest returns on equity from 2010 until late 2012, which I believe makes it a hot pick in the printed-online media segment. The company has sustained healthy free cash flows in the past and will continues to do so, therefore, I keep a bullish outlook on its stock as we move deeper into 2013.
Even though Gannett operates on marginally lesser margins relative to its peers, which makes its earnings look weaker, it possesses robust fundamentals nonetheless. For the quarter ending in March, the company reported a 54% rise in its net income, while like for like revenues grew 1.6%. Going forward, the company is focused on incrementally developing on its all access content subscription model and digital marketing services, which has facilitated it so far in posting robust growth in earnings.
Foolish bottom line
Lately, New York Times has struggled to report any growth in revenue generated through advertising. However, the company is managing to sustain its profitability through several cost cutting initiatives and steady growth in its digital subscription services.
The new revamped mobile website ensures its approach of “moving with the time” as better monetization of its mobile website will enable the company in sustaining a healthy growth in revenues and earnings through online advertising and digital subscription services.
The article Can New York Times’ New Mobile Website Bolster its Earnings? originally appeared on Fool.com and is written by Ashit Gulati.
Ashit Gulati and Equity Dimensions have no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Ashit is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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