Watching the rise of the Observer

The current economic climate may be taking its toll on the newspaper industry but the Observer is hoping that the appointment of Mother to its advertising account will help the paper sustain its resurgent circulation (MW last week).

Sales figures for the Observer, which was acquired by Guardian Newspapers (GN) in 1993, are at their strongest for a long time – in the six months to November, sales were up 8.22 per cent on last year, averaging 477,045. Sales in November fell slightly, by 0.37 per cent on October, perhaps due to war fatigue among readers.

However, while recent falls in circulation seem to have been reversed, the figures mask the Observer’s financial position. GN is a subsidiary of Guardian Media Group (GMG), which is in turn owned by The Scott Trust. In the year to April GMG saw pre-tax profits fall from &£73.5m to &£67.3m. Reports suggest the Observer lost &£10m, although GN would not comment.

But the Observer could be better placed than its rivals to take advantage of any economic recovery, thanks to sustained investment. The financial figures cover the period before the paper added the Observer Food Monthly supplement to its successful Observer Sports Monthly. Both products have brought in new advertisers and help to differentiate the newspaper from its competitors.

The Observer was also the only title to record an increase in display advertising for the year to October. Display income is up 1.4 per cent, while the market as a whole saw a decline of nine per cent (MMS). The paper also claims that 80 per cent of its sales are at full price.

Observer advertising manager Chris Pelekanou believes the paper is now very attractive to advertisers and says: “People want to work with us on sponsorship and association.”

He points to the Sainsbury’s-sponsored Italian food supplement and the MG Rover-sponsored Extreme Sports supplement as examples, and lists Prada, Dolce & Gabbana, Merrill Lynch and the Australian High Commission as some of the latest clients to come on board.

But in order to build on these foundations, the paper has to tackle several issues, including defining its identity, retaining new readers and battling the increasingly bulky Saturday newspapers. New supplements and strong war coverage have given non-core readers a reason to purchase the Observer and the task now is to keep those people buying the paper. As one print buyer says: “It has got to keep enticing the reader in with new things and not become stagnant.”

The Observer is often seen as a “worthy”, left-leaning paper – or even worse, a paper that no longer has an identity. GN marketing director Marc Sands agrees that the paper “does not have a particularly defined voice” but says this is an advantage, as potential readers don’t have the “love it or loathe it” attitude they display to rivals such as The Sunday Telegraph.

He points out that a close look at the publication will reveal a lighter, wittier read than might be expected and that while the paper takes a “liberal with a small ‘l’ stance over major issues” it does contain diverse voices. He suggests the neutral tone means the paper can poach readers from both The Sunday Times and The Independent on Sunday and adds: “The idea that people still buy papers according to their political agenda is a mistake.”

Competition for weekend reading time from The Guardian’s Saturday edition is also an issue. One print buyer says: “What was one of the weakest days a decade ago is now the strongest. There is so much added value in Saturday papers that people are not buying a Sunday newspaper.”

Sands argues that while Sunday is no longer a day of pure relaxation, people still want “something to luxuriate in” and a Sunday paper contributes to that atmosphere.

He adds that cross-readership with The Guardian is less than 50 per cent, “so from that point of view the Saturday edition is not cannibalising our market”.

Sands believes that excellent editorial every week, combined with promotions, will bring sustained growth which is not just skewed to the monthly supplement weekends.

MindShare group press director Steve Goodman agrees that the Observer is in a good position to capitalise on recent growth: “It’s been quite innovative in the past few months and this has gone down very well in the market.”

One print buyer suggests that it would make sense for the Observer to have a special supplement each week of the month, to keep the product fresh. But while Sands agrees in principle he says there is “no mad rush” to add any more supplements.

He believes the way to attract new readers is by using “intelligent, adult marketing”. The Observer didn’t choose Mother for its young and trendy image but for the quality of the work presented and the calibre of the agency’s staff. There will be no return to the brand advertising of the past, but campaigns will focus on the product and its offers. This chimes with the observation of one agency source familiar with GN, who says: “One of the things about The Guardian and the Observer is that they have undergone a fantastic renaissance over the past few years and public perception lags behind the reality.”

Mother’s challenge will not be to turn the paper into a trendy young product, but to encourage people to try it and discover its editorial strengths for themselves. As Sands says: “We are an established brand and we are not about to behave like someone’s little brother, or to turn into Loaded.”