Mail Online Won’t Be Profitable Until 2013, As U.S. Investment Drags

Associated Newspapers’ digital operations, comprising Mail Online, Metro’s website and ThisIsMoney, lost £900,000 ($1407127.19) in the year to October, after the publisher invested in building a U.S. team.

“We would’ve broken even this year without the investment in the States,” parent DMGT’s CEO Martin Morgan told City analysts.

“This is an early-stage business. We’re still in a moderate investment phase, not really throwing much money at it in the total scheme of DMGT.

“In the last few weeks, we seem to be gaining traction on selling advertising space in the U.S., but it’s early days.

Profitability on a meaningful scale is not going to be until 2013 or so, to be realistic.”

“I’m cautioning you not to get too excited about the potential scale of U.S. revenue too soon. If it doesn’t work in the U.S. and we don’t start to see traction on the revenue line, we’ll adapt the cost base accordingly.”

Being loss-making is expected from many businesses that are investing in growth opportunities. Netflix expects to make large group-wide losses from its foray to the UK and Ireland.

Many online news departments would be considered loss-making in isolation, though breaking their profit/loss out from overall figures is considered difficult. In 2009, Guardian editor Alan Rusbridger said: “Since 2002/3, our spending on has exceeded revenue by just £20 ($32.19) million.”

Mail Online revenue grew 65 percent in the year to October 2011. Digital revenue across Associated – comprising Mail Online, Metro’s website and ThisIsMoney – grew 56 percent to £19 ($29.71) million. Digital costs were not stated.

Mail Online’s U.S. audience grew 48 percent over the year to 1.1 million daily unique visitors or 26 million per month, against a 51 percent rise in domestic UK visitors to 1.7 million daily uniques.

Morgan said there is “small numbers but phenomenal growth rate at Mail Online” while Metro is “beginning to find a way to move successfully in to digital on iPad“.

In DMGT’s unit of digital-only classifieds businesses (the former Associated Northcliffe Digital), which is run separately from either national or regional news, profit fell slightly to £6 ($9.38) million despite five percent higher revenue of to £89 ($139.15) million. Jobs and property classifieds sites showed growth, but cars and holidays dipped.

Morgan said “impressive growth from digital is offsetting pressure on print advertising”, which fell four percent.

Associated Newspapers’ operating profit fell 15 percent to £76 ($118.82) million on two percent lower revenue of £862 ($1347.72) million, because overall Mail revenue is down and because it spent money selling and closing titles.

Mail Rewards Club, launched in May to build sales and retain readers, already has 600,000 members.