AP Circular App Coming to Help Print Compete With Coupon Pure Plays

After the Web Cost Them Classifieds, Newspapers Don't Want to Lose Important Revenue Source on New Platform

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NEW YORK (AdAge.com) -- The Associated Press is developing an app it hopes will help newspapers keep their hands on a key source of their print revenue -- circulars and coupon inserts -- as readers increasingly read papers on iPads, smartphones and other devices.

The AP's app, tentatively dubbed iCircular, is actually meant to work in conjunction with the AP's white-label app platform, which member newspapers can use to publish apps under their own brands. Jane Seagrave, senior VP-chief revenue officer at the AP, confirmed iCircular, which is being built in collaboration with Verve Wireless, but declined to elaborate, saying the development process wasn't far enough along.

The question is whether consumers see circulars as an inherent part of newspapers, enough to peruse them in newspaper apps, or whether they'll migrate to rapidly proliferating digital coupon services -- much like consumers began to turn to Craigslist and other sites for classifieds.

It's an important question for newspapers because circulars remain so popular with both advertisers and consumers. The first half of this year saw newspapers' print ad revenue, excluding Sunday magazines, fall 3% from the first half of last year, according to Kantar Media estimates. But spending on inserts, which is tracked separately, grew 7.6%, Kantar said.

"Ad circulars ... are extremely important to almost every newspaper," said James Moroney, CEO and publisher at the Dallas Morning News. "With the decline of classified print advertising, as far as printed newspaper ad-revenue categories go, it is, if not the largest for a lot of papers, always going to be one of the two or three largest categories."

And because many readers buy the print edition partly or largely for the coupons, coupon apps such as GroceryIQ and Yowza Mobile Coupons could undermine the popularity of newspapers -- in print or in app form.

The AP isn't alone in trying to bring circulars and coupons to newspaper apps. The Toronto edition of the free newspaper Metro offers an iPhone app, built by a Toronto company called Spreed, that lists an "mFlyer," for "mobile flier," among its regular news sections. Clicking it last week let readers swipe through 18 pages of H&M clothes, prices and discounts, accompanied by social-media tools, a store locator and a button that opens H&M's mobile site within the app.

Then there's Zip2Save, the digital couponing service created by Suburban Newspapers of America, a trade association, and subsequently spun off as a separate business. Zip2Save sells national ads and uses the sales forces of 1,200 partner papers to seed local deals. The service, which launched online first, is testing mobile in five markets, with dozens more on the way. Its success would benefit its partner papers, although it could also help wean coupon-clippers from the association with newspaper brands and train them to use pure-play coupon apps.

And there are plenty of pure-play apps already moving in. Coupon apps like Yowza, no to mention text-services like Placecast, are inking deals directly with retailers and beginning to amass audiences. At barely a year old, Yowza has more than 5 million users. Couponing has also been borrowed by check-in apps such as Foursquare and Loopt Star; those services, too, already have millions of users.

A lot of the outcome will depend on execution -- how effectively, for example, a coupon app uses a consumer's location to deliver a relevant deal. Placecast uses text messages to serve deals when consumers are within a certain radius of a store. "The strength in mobile couponing is the ability to tie location to that coupon," said Alistair Goodman, CEO of Placecast. "Is the AP going to do that with their coupon technology?"

Mr. Goodman reports redemption rates from 24% to 65%, depending on the category. That's leagues above the average redemption rate for coupons across media, just 2%, according to Borrell Associates, the local-media research and consulting firm.

"It's unclear at this point who is going to win in the coupon game," said Mr. Goodman. "It comes down to the reach you can bring to the retailer.

Circulars and newspapers could continue their profitable relationship on tablets and smartphones, said Rusty Coats, a consultant in interactive media who works with Spreed. Even news-hounds among Sunday newspaper readers don't stop when the articles do, he said. "Once you get to the rear of the book, so to speak, your hand starts to wander over to the advertising, and the next thing you know you're reading the Best Buy," he said. "That translates very well to what you're doing on the tablet and how that might be laid out."

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