Shares in Reach (RCH) fell 4.2% to 289p despite the news publisher announcing a positive trading update for the period from 28 June to 21 November, one that indicated revenue growth was ahead of full year expectations.
Today’s share price reaction is in part due to profit taking, as the business returns to a more normalised pattern of trading, following the relatively weak first half comparatives.
REGISTRATIONS BUILD
Last December, Reach launched an initiative that provided each registered user with a single ID connecting all their interactions across all Reach products.
The rationale for this initiative was twofold. Firstly, improved content targeting. Secondly, deeper data analytic capability provides more granular profiling of the audience base.
The number of customer registrations has increased from 6.7 million at the end of July to a current level in excess of 8 million.
On a two-year basis, digital revenue growth remains encouraging, up by 39% for the year-to-date, with average page views growing by 30%. This reflects management initiatives including the delivery of targeted content via personalised newsletters.
YIELD EXPANSION CONTINUES
Today’s trading update acknowledged that ‘a strong digital revenue performance in the period was driven by yield expansion’.
The increasing scale and granularity of Reach’s digital data is enabling the group to participate in more private marketplace transactions, thereby securing a higher yield for advertising.
A good example is the ‘inyourarea’ portal, which creates hyper local digital data that is immensely valuable to small and medium-sized businesses.
If you compare the advertising yield of open market sold slots (such as through Google auctions) with a private marketplace (advertising space which is sold directly), the latter can be several hundred percent higher.
Reach’s growing array of digital products coupled with the scale and granularity of its data is becoming increasingly valuable to advertisers. This is reflected in the improvement in advertising yields and the reduced reliance on Open Marketplace programmatic.
Reach is only just starting to reap the benefits of the investment in its digital transformation. This bodes well for future growth in an environment where data is becoming increasingly valuable. There is considerable scope to further monetize the groups 42 million-strong customer base.
