City AM reaches its critical expansion point

City AM, the 18-month-old London business freesheet, has reached what is perhaps the most critical juncture in its short life.

The paper has just made a profit for the first time and in March posted its best Audit Bureau of Circulations (ABC) distribution figure of 97,032. But it is this very success that is prompting questions over City AM’s future.

The magic 100,000 ABC figure is expected to be reached this month (April) and as premium-priced rivals like the Financial Times continue to battle in the declining paid-for market, City AM has been praised for its quick-to-digest content and the flexibility it offers advertisers.

But the men behind City AM, chief executive Jens Torpe and managing director Lawson Muncaster, have identified a circulation of 120,000 as the paper’s "saturation point" in London. Torpe says: "The growth will stop as City AM is a self-selecting paper."

Extension or sell?
The question now is whether they will concentrate on eking out further advertising revenues from their niche London title, extend the City AM brand to other cities, or even sell up as some have suggested.

But it seems that Muncaster is in it for the long haul. He is quick to scotch rumours of a potential sale, saying they have not received any approaches, and adds: "We were more keen to roll out to other cities ten to 12 months ago. But media buyers have told us that by extending to other cities there is a danger of diluting the brand."

Plans to launch City AM in cities such as Manchester and Bristol have been shelved, but Edinburgh remains very much on the agenda. Muncaster says: "Edinburgh is the only city that is close to London in terms of its financial community. I also think we can translate cultures and languages. It would be naive to assume we are not looking at cities such as Moscow and New York."

The outlay for international expansion, though, would be considerable and some question whether City AM, without the spending power of a large publishing group, has the resources to make such a move work.

Carat press director Dominic Williams says: "They should concentrate on London. I suppose the big danger of global expansion is the cost. They are not a Lord Rothmere. I think they should work on their content, and keep getting it right for advertising agencies. They offer cover wraps and are very flexible."

City AM was launched with a £10m war chest, provided by Muncaster, Torpe and three European entrepreneurs, although it remains unclear what funding is available for the future.

Muncaster claims advertising revenues are up 65% on last year and this year it is spending £100,000 – double 2006’s budget – on researching its readership in an effort to lure new advertisers to the paper.

Room to grow
Global brands such as Sony PlayStation, Nike and Nintendo have already advertised in City AM, but Muncaster says the paper is still only active with 40% of the media buying community – an issue he is keen to address.

In the short term, investment is likely to be geared towards developing the brand beyond the morning newspaper. To date, its launches include City PM podcast, which is available for readers to download from 5pm every day, and the City PM mobizine, which delivers news direct to mobile phones at 6pm (MW October 5, 2006).

More initiatives are likely to follow, along with the continued bolstering of its sales team, according to Torpe, who adds: "It is just like in football, where once you’ve reached 40 points you know you’ll escape relegation. For us, in terms of advertising, once you get that one ad, then you’re on course to get a bigger share of the budget."