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Digital Thought Leader and exercise: Carolyn McCall, CEO, Guardian Media Group

The early years of web publishing in the UK newspaper industry were dominated by The Telegraph, but in 2000 The Guardian took over the baton in terms of innovation and audiences. They've held pole position ever since, being first to market with widespread blogs, taking innovative approaches to community and building out new digital offerings to help their acceleration into other markets. In this interview with Paid Content, Guardian CEO Carolyn McCall talks about their strategy, structures and goals. The newspaper is half way through a £15m rebuild of its internet properties and getting set for major launches in the USA. You can read the full interview here online, or listen to the transcript here.

Exercise: Read through the interview, download the case study and consider the implications for their audiences and for the loyalty to their brand (both for the web and print edition). Which elements of their model could your publication explore further? If you are a participant at our Digital Publishing Strategy Academy, then note down three to five areas you could explore - we may discuss these as a group in your management training.

Most know it for The Guardian alone, but Guardian Media Group also operates almost 40 regional titles, nearly as many radio stations, a TV channel and one of the UK’s biggest classifieds operations, all with a mission not to satisfy shareholders but to keep the flagship paper afloat. With U.S. launches for GuardianAmerica.com and blog portal Commentisfree imminent, and to mark the launch of our new site, paidContent:UK, GMG CEO Carolyn McCall spoke with our UK editor Robert Andrews about crossing the pond and buying survival in the web news business.

Interview

What’s new for Guardian Media Group? You posted some good numbers in your annual report recently although overall profits fell.

Profits were only down because of exceptional items and they were largely related to acquisitions; we made two quite large acquisitions in radio where we bought Century Radio from GCap and the four Saga stations and we’ve integrated those with our radio division and the integration has gone really well. We’ve got the Rajar last night (August 15), the radio equivalent of the radio surveys or comScore, Hitwise or whatever, and every single one of our stations, including the rebranded ones, have increased their listener hours and have increased their share. We’re very pleased with that. Those acquisitions have gone very well but they hit our profit, only because they were exceptional items.

We’re moving. The Guardian News & Media division and GMG are moving to King’s Place in King’s Cross at the end of next year, so we’ve started incurring costs on that, which is also in exceptionals The only reason profit went down is because of exceptional items - turnover’s up, EBT (earnings before tax) is up. We’ve had a good year and that’s in a climate of very tough trading; trading has not been buoyant, it’s been quite unpredictable and volatile. Furthermore, there has been quite a lot of structural change, still, in the industry; that’s not plateaued - we are pleased with our results.

Guardian Media Group is owned by the Scott Trust so it’s not motivated by profit for profit’s sake. How does that impact on what you do online?

I think it impacts very positively online. The Scott Trust owns us, its entire remit and purpose is about the long-term editorial and financial independence of The Guardian. The Guardian is profit-seeking but it doesn’t put profit first, it puts journalism first, the independent, liberal journalism it will put first. In every other division - the radio division, Trader Media Group and the regional division - they will put profit first and the entire reason for making that profit is not to give back to shareholders a dividend because we don’t have shareholders and it’s not to actually give back to the trust, it’s actually to reinvest in or to safeguard the long-term future of The Guardian by acquisition or whatever else we deem appropriate for that given time.

The way it impacts on digital is that, when there was the dot.com boom and then the bust, we just very stealthily and quietly continued to invest in our digital businesses. We didn’t have to knee-jerk to please the city to say ‘yeah, okay, we’re cutting back on our people or on our technology or our websites’ - and most other companies did, particularly media groups. We were able to take a long-term view and say ‘we believe in this, this is an investment for the long-term and therefore we will keep investing in it,’ although the short-term return was not visible. We could see the long-term return but you couldn’t see a short-term gain there. That is what this ownership allows you to do - it allows you to be more brave about some of those decisions where the visibility on whether you’re going to get a lot of money out of this quickly is not apparent.

How has that played out with Guardian Unlimited, one of your biggest online properties? Is it in profit?

Guardian Unlimited launched in 1999. When everything crashed in 2001, we kept growing it, we kept investing in it. It was in profit by about 2003 and it was in profit last year, it was making about two or three million quid. What now is becoming inappropriate is to look on it as a completely separate thing to The Guardian. Over the last two or three years in particular, and coming in the near future, the two things are going to be far more indivisible. We’re not going to integrate in the way you think ‘integration’ in other newspapers has occurred, but I think it’s going to be far more difficult to split the budgets out editorially. It’s one editorial budget, it’s ‘The Guardian’ content and that’s how we’re going to manage it. We’ve been moving towards that over the last two years. If you looked at it separately, I think Guardian Unlimited will be in profit in another year or two again because we’ve just put in a £15 million capital expenditure on the rebuild and redesign, which I think you will have seen. We’re rolling that out in to all our sites, it’s an 18-month programme and we’ve redesigned the front page, you can see that quite visibly, but actually it’s going to affect every single one of our sites. It’s much, much better. The investment on being more Web 2.0 and putting video in, which is imminent, and we’ve had audio from some time - those are improvements and enhancements which will make it a much better user experience. There are a lot of revenue streams behind video and audio. Even when you are investing, you can see there’s revenue attached to that everywhere you look.

A lot of newsrooms are fully integrating their staff to become 24/7 news operations. You say you’re not going fully down that road although you have said you are going to become a 24/7 rolling operation - what’s the difference?

We will evolve in to it. It’s not about integrating everyone to do the same thing. I think there will always be people who are absolute specialists online who really just dedicate themselves to what we’re doing digitally. That will be from a technology perspective, it will also be from a content perspective because, as you and I know, it is a completely different medium. However, there is no point having lots and lots of different desks - five or three different desks doing the same thing. So our integration will be about how we get the most out of our resources - whether it be sport, whether it be news, whether it be foreign - where you can still have voices that are different across the platforms but where you have a lot of your resource channelled and managed in one place.

You mentioned a £15 million, 18-month programme to redevelop Guardian Unlimited...

We’re actually halfway through that.

The previous incarnation of the site had been the same around for six or seven years. How did it get so long in the tooth and can you tell me what the new features will be?

You just have to look at it, you can see how different it is. The design, for instance, is much cleaner. If you look on Been There, it allows a lot of user-generated content, it’s allowing for video streaming and stuff like that. It’s fresher, cleaner, you must be familiar with it, it looks completely different to the old site. There’s a lot of tagging on the site, it’s much easier to search and navigate. Everything is now tagged, which we weren’t doing in the past. It is a very different experience, I think.

The Guardian has always been amongst the most gung-ho about ‘Web 2.0’ features, coming through the editorial - should I use the same term, ‘Web 2.0’, to describe the new site?

I think we’re evangelical, we absolutely believe it, we just believe it’s a fantastic medium for content and it allows you to do so much that is different to a newspaper. It doesn’t mean that a newspaper doesn’t have a purpose, it has a very strong purpose, but, in fact, when you are very strong on the web, actually a lot of things you can do on the web can feed back in to the paper. There are a lot of things in the paper that we’ve learned from being on the web - we bookmark everything, people can cross-reference all the time, they can go into much more detail. More than that, there’s a lot of user-generated content now in the newspaper, which never existed a year ago - launching Commentisfree 18 months ago was a fantastic thing for us - although it was not always easy. It’s quite a difficult thing for a newspaper who normally has a certain way of dealing with comment to suddenly open up and get a load of user-generated content, a lot of blogs in, and how you mediate that… we’ve learned an awful lot. But we’re using a lot of user-generated content in the newspaper now and we’re reflecting what readers think about various issues in a way we just never did before. I don’t like the word “gung-ho” because it sounds as though you’re not thinking about what you’re doing. We’re very positive about the power of the web for content. We experiment on it. Commentisfree was an experiment, it’s now becoming an established thing, it’s one of the most talked about things in the U.K., certainly, on the web. If we hadn’t been experimental or evangelical about it all, we wouldn’t have done that, we’d have been too worried.

Do you plan any changes to the way Commentisfree is run? Some of the debate there often gets quite heated.

I don’t think we’ll be planning any changes. We’re constantly looking at that. We’ve got our own mediators in-house; that, too, we’ve learned a lot from, we weighed up whether we outsource that but we do that in-house. Part of blogging is that you are going to get very heated discussions and I think we’ve become more experienced at handling that and how we respond to that. It tends to self-regulate and it’s a very different atmosphere, being on Commentisfree, to reading the Guardian Unlimited website or looking at the newspaper. You’ve got to let them be that without being over-controlling.

What do you think about the ways that some of your newspaper rivals have approached user-generated content? USAToday.com unveiled a pretty ambitious redesign giving readers the ability to write their own blogs and comment on absolutely everything, Telegraph.co.uk is developing something similar. Do you admire any of these features in particular, or do you think they’ve gone further than The Guardian has up till now?

I don’t think they have really. We were very early to embrace blogging and that whole area of user-generated content. Been There, our travel site, is entirely user-generated, is a fantastic website; we did that very early on, it’s only 18 months, or even more than that, old. People are doing things in their own way - we will continue to be innovative in our approach and we’ll continue to be very open-minded about the ideas that we get. It’s not fair for me to comment on what The Telegraph’s doing or what USA Today is doing, users are the best judge of that. We are way ahead, in terms of our users, to The Telegraph or to any other… we have more users in the U.S. than the LA Times, which is fairly extraordinary. It’s doing well - the way you can judge what you’re doing and if it’s got traction is what your audience is saying and how many people come to you.

It’s well known that a significant proportion of Guardian Unlimiteds’ traffic does come from the U.S., if not from overseas than from the U.K. itself. Can you just detail that for me?

We’ve got about six million uniques in the U.K. The U.K. audience is much, much more loyal than users from the States, for instance - they are much more likely to come to the front page and therefore they are very sticky, they stay on the sites a long time, they check the sites frequently. So those six million users are very, very loyal users. We have about 5.5 million coming from the States and the rest of our users, making up 16 million, are from other parts of the world including India, Australia, Canada.

But the U.S. is the other obviously material audience. What we want to do with our plans in America is increase the loyalty from the U.S. visitor base because they tend to find us on Google or links from blogs. In the latest Technorati rankings, we were the sixth most-blogged news source in the world, which is extraordinary - we never would have thought that in 1999, when we launched. In the US, our aim is to make them much more loyal users and to look at how we are promoting it. We appointed in May an editor for the U.S. website, Michael Tomasky.

GuardianAmerica.com is one of the next steps. Is this a ploy to give those U.S. users a front page destination through which you want to increase that loyalty?

Yeah, we want to build on the success that we’ve already got. We’ve got nearly six million users in the States without any effort - we just provided our content and people have come because they find our content distinctive and they want the range of views and difference that we bring. Michael is now working with a team of people in the States to enhance and build on the success and I’m pretty sure that in early September he will launch something. He’s also talking about launching Commentisfree out in the States; it’s a very exciting time. (Ed. note: Launch date was later revised from early September to around September or October).

How much resource are you allocating to the launch of GuardianAmerica.com and Commentisfree in the U.S.?

I can’t disclose exactly the kind of resource allocation. The thing when we talk about “launches"… it’s not like launching something in print, where it’s immediate and a big bang and if you haven’t got it right first go then you’re in trouble - the brilliant thing about the web is that you can launch it and then you can build and build and build and you can have an ongoing programme of promotion and activity and interest. Our approach will be quite stealthy rather than one big bang where we put a load of money behind a “launch”, it won’t be like that. But we will definitely put more resource behind America, both editorially, technologically and commercially.

The old adage is that U.S. consumers come to Guardian Unlimited for a kind of ‘liberal’ reporting they don’t get at home. Would you agree? What do you think they’re not getting at home that they do get from yourselves?

If you define what ‘liberal’, with a small ‘L’ means, no one in the States is going to say what you’ve just said, they wouldn’t see us as a liberal medium because they use the word ‘liberal’ very differently in the States I think. What we mean by ‘liberal’ is that we reflect a range of views, plurality is very important, fairness, accuracy, openness, transparency, depth of coverage, and presenting it from a range of different views and then getting the reader to make up their own minds - presenting the facts, separating fact from comment but, when you are presenting comment, giving a whole range of comment.

If you’ve been exposed to the American media in the last five years, particularly since Iraq, you are getting a very one-dimensional perspective of the news. And I think that is why we’ve had so much success - as a result, people are staying with it because they enjoy coming to Guardian Unlimited. We will continue to do what we are doing but just do a lot more of it.

Indeed, it would seem that part of the strength of the brand in the U.S. is that it’s a British newspaper. Do you think there’s a little risk in launching GuardianAmerica.com - can you retain that British identity over there?

I think it will. It’s very important that it doesn’t try to be American. The distinctiveness of what we are is not so much The Guardian newspaper as The Guardian content; it isn’t necessarily a “British” perspective - it has a very European perspective, I suppose - and I think that is very important, that’s why a lot of people come to us.

The Guardian’s editor Alan Rusbridger and yourself have long spoken about the demise of the print classifieds sector, having learned from the Craigslist experience. It seems like it’s coming through, not just for your titles, where classifieds were down 11 percent in the regional division. On the other hand, we’re seeing a big digital advertising boom. Do you see those two charts continuing to go in the opposite direction?

I do, really. The great thing for us and for Trader Media Group, which we still own 50.1 percent of - our experiences in both The Guardian for jobs and autos for Trader Media Group is that you can migrate your own classifieds if you have a very strong digital presence, that is what we’re doing with Guardian Jobs - it’s now doing millions, it’s double-digit revenues digitally - and, furthermore, Guardian Unlimited grew its digital revenue 50 percent year-on-year; it’s doing well ahead of the market. Trader Media Group now makes more profit from online than it does in print. So I think the key to success for media groups is having very strong digital assets where you can migrate your classified advertising to. You take a hit on yield, obviously - people don’t pay as much for digital as they do for print currently - but you have much less overheads, so the migration makes sense.

The issue for most media owners at the moment is that, in the spirit of the time where you’ve got print classifieds, you’ve got digital classifieds, you’ve got huge print base and you’re investing in technology and innovation in digital - and you have to be the best paper you can possibly be, because people still are buying newspapers in large, large quantities. The erosion of print circulation is minuscule when you think of how much more media there is in the market today - it’s actually a very marginal erosion of circulation - which means that we still have to do the best newspaper; we’ve got to promote it, we’ve got to market it, we’ve got to do everything can to be really good in print. We have to do the same thing in digital. So you’re running two businesses at very different stages in their life cycle - and that makes it a difficult environment in which to decide on investment opportunities and cost base and structure. That’s what everybody is grappling with, that is the big challenge.

To combat the migration of classified revenue from print to digital, some of your rivals like Trinity Mirror and Daily Mail General Trust over the last couple of years have been snapping up all kinds of recruitment, dating and car classifieds ads sites - you don’t seem to have done that at the same rate. Why is that, were they starting from a lower base?

We had Trader Media Group, which is worth £1.35 billion, and we just divested 49 percent of it and got quite a lot of money for that. Our strategy is different - we are looking at acquisitions because we have the money and the acquisitions will be about very profitable long-term businesses that can support The Guardian end. We’ve also set up a property services division and within that division we have something called Zebra, which is one of the leading software providers to the estate agent market, and we also have a portal called ThinkProperty.com, which is in the top five property portals in the U.K. - that was through four or five different acquisitions, we created a property services group. We will augment that, we will look to do the right things, but it will be relatively small because we will look to augment what we’ve already got. In The Guardian, we will also look at things that we can acquire that will either escalate what they’re doing digitally or augment, improve what they do.

It’s not to say we wouldn’t do it, we just have a different approach. We’ve got two levels of strategy in terms of acquisitions. The GMG acquisition strategy is about diversifying our portfolio and rebalancing it so we are not overly dependent on classifieds advertising or the U.K. economy or print-on-paper, because we’ve got a lot of those businesses - we are looking at other sectors we are not in, and that’s a high-level GMG strategy. Divisional strategy will be about escalation or augmentation of the position that we already have.

Trader Media Group was going great guns - according to the annual report, it brought in £104.6 million profit annually, digital was going up and up, and then you sold off around half (to Apax in March). Why did you sell? Wouldn’t it have been better to continue… ?

We wanted to rebalance the portfolio. If you look at Trader Media Group, it’s all classified advertising, either in digital and print. If you look at regional media, it’s very dependent on classified advertising - 50 percent of its revenues at least come from classifieds - if you look at The Guardian, about 40 percent of its revenues come in from classified advertising. (We were) heavily print-on-paper, heavily classified advertising-oriented and we just felt that was unbalanced in terms of our portfolio and we needed to rebalance it. That’s why we sold the 49 percent. We still have 50.1 percent so we expect benefit from the upside - and there will be an upside, it is going really well, it will show good growth.

You now have a pretty hefty warchest from that sell-off of £675 million for acquisitions. Are they going to be primarily in the digital space?

Not necessarily, no. We will define “media” in its broadest sense and we will be looking in the media industry, but as widely as possible. We will look at digital as well as other acquisition opportunities. We’re at a very early stage, because we only got the money at the end of June, so we’re doing quite a lot of work internally as to what sectors we should be in.

So that’s still ongoing - are you speaking with anyone at the moment?

We’re having lots of conversations, but they’re at a very preliminary stage, so there’s nothing material or tangible that I should talk about.

What kinds of companies would ally with Guardian Media Group’s philosophy?

I don’t know yet. That’s the interesting thing. You can look at sectors we’re not in, like business-to-business, and you can say that’s a very attractive sector for us, but I don’t know whether we will be able to acquire in that sector because it’s very a competitive sector in terms of acquisitions. You could look at web development and say there are obvious opportunities there, but one of our criteria will be low-risk; we don’t want high-risk because of the kind of group we are. You have to balance off all the criteria. But clearly, we know what the criteria are, we will have a very clear strategy for acquisitions and then we will pursue those acquisitions. And we are looking at anything that is interesting at the moment.

Lets hypothesise. With the kind of income you got from the Trader Media sell-off, you could even have considered buying something like Last.fm - is that something that would’ve piqued your interest?

I think probably not actually - we’re already in radio, we’ve got a strong radio division, we’re building it and creating long-term value there. I think Last.fm is a fantastic property but I don’t think would fit with us. And when you look at it, it’s not making any money at the moment and it will be interesting to see what that business model is going to be. So that would’ve been very high-risk for us.

What’s your general view of the U.K. digital media scene? There’s a lot of talk of “London 2.0” and how things are looking up - what’s the view from where your sitting?

My view is a very positive one. Web 2.0 is just brilliant for users, it’s also very good commercially, it gives you very good commercial opportunities. One of the things that people focus on too much is newspapers and the troubles and classifieds and structural change, but actually with those problems go great opportunities and digital at the moment is a really strong place to be. If you have strong digital assets, there is so much opportunity, whether you look at community, social networks, user-generated content, video - the fact we can do all this video online now, because we have the capability - we have a video editor, we have an audio editor - all of this just a year, 18 months ago, wasn’t even created. So I think it’s just a great place to be. As a group, we had an increase in digital revenue of 67 percent year-on-year - we’re making about £120 million revenues as a group in digital alone, which is more than a lot of companies make. As I said, GNM; up 50 percent year-on-year, 16 million unique users for Guardian Unlimited, eight million unique users for AutoTrader; this is really great. The brilliant thing is, so many people are coming to our sites that would never have gone to the printed version so it gives us a combined reach which is much, much greater than we ever would have had before if we were only print. I think it’s a great place to be and Web 2.0 has enhanced users’ experience, which can only be good for publishers.

As a commercially funded digital media organisation in the U.K., is it every difficult coming up against a rival with the resources of the BBC? The commercial sector has long complained that there are unfair advantages - do you agree that there are unfair advantages?

Yes. I think there is a competitive advantage which is just endemic in the BBC - it’s highly subsidised, it never has to think about profit, it can make a loss if it wants to, it can spend loads of money attracting talent and on content and technology. It is unfettered actually in that respect; it is an amazing advantage to be in that position. I also think it’s a brilliant website, I think it’s a great website - it’s done very, very well. But it is hard competing. For instance, in America now, they’re going to sell ads, so they will be competing head-on with commercial operators like us - it matters to us that we make revenue out of the States because it means we can invest more in our businesses. There is an unfair advantage for the BBC but it’s kind of endemic, it’s the way it is at the moment.

So, if you had your way, would they drop the plan to offer adverts on the international news sites?

Yes. I’d prefer that they didn’t do that, obviously.

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