The idea of creating a service that could alienate two of your biggest advertisers is not the sort of thing that usually gets off the drawing board.
But Mirror Group will next month launch Mirror Online, a free Internet service to its readers. It’s a direct rival to Dixons, one of Mirror Group’s key advertisers which recently launched its free Internet service Freeserve. And BT, another advertiser, has made recent adjustments to its pricing structure which means it is now a free Internet service provider (ISP).
Some suggest this a cynical attempt by Mirror Group to bolster its share price and take advantage of the City frenzy over Internet stocks.
“If you look at Dixons, Freeserve has added value to the share price and I think Mirror Group is just jumping on the bandwagon,” says an agency source. “Also, your Internet types are ABC1 people whereas Mirror Group readers represent a more downmarket audience. Are the two spheres really compatible?”
However, others are hailing this as a savvy, forward-thinking move that could open up a new market of Web surfers. Bullish observers believe that Dixons, BT and Mirror Group will have more than enough share in a market that is growing exponentially. They say that a free Internet service will help the company build its brand, create added value for advertisers and pave the way for lucrative e-commerce relationships with companies wishing to reach Mirror Group’s audience.
There is no doubt that Mirror Group has succeeded in stealing the march on the competition as the first newspaper group to offer free Internet access. News International is known to be working on a similar idea, but refuses to be drawn on details. Its LineOne service, run in conjunction with BT, currently has two per cent of the business use market, according to market research company BRMB, but it will not like being upstaged by its rivals.
And the move will give players such as Demon, Easynet and Compuserve a few sleepless nights. They charge a monthly subscription fee of 5 upwards for Internet access and will have their work cut out to counter this threat.
Rob Norman, chief executive of CIA’s Outrider, the new media holdings division of Tempus Group, says there are advantages to being one of the first providers in the market because it takes a considerable effort to wean surfers off one service provider onto another if the product has proved reliable.
He also points out that companies will be keen to appear on free sites where their names can be seen by a huge audience.
“You corral a certain amount of traffic and get lots of eyeballs coming to your service if you’re a free service provider. And that’s an attractive proposition,” he says.
And there is a real potential for a big audience. The Mirror alone has a circulation of 2.2 million while its regional newspapers have a circulation of over 4 million. And while many readers currently do not have the hardware to run the service, this may well change in a few years as computer prices fall. The Mirror Group may yet convince sceptical readers that the Internet, e-mail and e-commerce is for them.
Chris Rayner, media director at BMP Interaction, says : “The advantage of this is that the service is appealing to Mirror readers who tend to be in the C1, C2 and D bracket.
“The current audience of Internet users tends to be ABC1 and in the 18-44 age range. And this C1C2D market is an attractive sector for potential advertisers.”
Some newspaper groups are actually paying Internet service providers money just to be online. Associated Newspapers has signed a deal with AOL to run its Evening Standard Website, This Is London. One observer comments: “Any newspaper owner looking at this situation in the light of recent events must think this is an example of collective madness.”
But there is a downside. The possibility of a break-up of the Mirror Group is bound to have an impact on the Internet service. Trinity International Holdings or Regional Independent Media, which are in takeover talks with the Mirror, may hive off different interests and the economies of scale that now seem so attractive will not be as strong. And promoting the service across a narrower range of titles will not have such a great impact.
There is also a suggestion that telecoms watchdog Oftel may make it harder to offer free Internet access. Oftel is to issue a consultative document within the next month on free Internet access, having heard complaints from telecoms network operators.
But the fact that the Mirror Group got this project off the ground so quickly shows nimble thinking. And if there is enough room in the market to sustain a number of different players it is unlikely that the Mirror Group will steal share from BT and Dixons and all parties will be happy.
But it is another matter whether the Mirror Group, or any other company, jumping on the free ISP bandwagon, will be able to generate significant revenue from the Web to make it a profitable standalone proposition.