Wanderful acquires AP's iCircular as media companies separate digital shopping from news

For more than a year, 12 major newspaper companies have been assembling assets for a new pursuit of digital shopping revenues, playing off their existing base of preprinted inserts.

Their new company, Wanderful Media, received little attention when it was launched with a $22 million investment in late September. It will operate under the name of an existing shopping site, Find n Save.

This morning, Wanderful announced that it has acquired iCircular, an attempt at bringing digital shopping to smart phone news apps ">developed over several years by the Associated Press. Wanderful has a broader aim with its enhanced Find n Save product scheduled for release in spring 2013. The company previously acquired Trevidia, whose specialty is a technology transferring print circulars to a digital format.

In a press release, AP CEO Gary Pruitt said, “AP has a long history of driving innovation in the industry and helping advance the mission of our member newspapers. ... The iCircular pilot provided deep insight into how digital circulars could help newspapers generate revenue and connect to consumers in an evolving marketplace. Wanderful Media has strong support from the industry and the market experience to take the concept forward and put it into widespread use.”

Wanderful's advantage

Wanderful will invite current news advertisers -- whose coupons can be found in Sunday inserts -- to offer deals (at no cost initially) to shoppers through the new product, which allows for "discovery shopping" on a tablet or desktop. The shopper can then load a selection of offers to a smart phone and take those digitally clipped coupons along on a shopping trip.

News has nothing to do with the multi-platform app, and that is by intention.

I spoke with Wanderful CEO Ben Smith IV 10 days ago, unaware of the pending merger, and asked how his product would be superior to iCircular's. ICircular made the mistake of "trying to add content to a newspaper site" he said, rather than treat shopping as a distinct, unbundled activity.

That gave short shrift to the discovery and social media element of shopping, which Smith and his sponsors expect will soon migrate to some substantial degree to tablets.

With the added kick of trading recommendations among friends, the tablet version will seek to recreate the pleasure avid shoppers take in going through a stack of Sunday inserts searching for ideas and bargains.

While it may seem that the Sunday news and features report and the circulars are a single product, Smith said, that is not exactly the case.  "Consumers don't read circulars and news at the same time"; they are separate activities.

In time, Smith aims at attracting 50 million users. But as is typical for such ventures, Wanderful will not even try to collect revenue from participating stores until 2014, when it can offer evidence of a substantial audience acting on the digital offers.

Smith compared the venture to CareerBuilder and Cars.com -- a pair of successful newspaper-backed competitors to Monster in the jobs field and sites like autotrader.com and edmunds.com.

If newspaper executives "don't reinvent the circular business in digital format," Smith said, "someone else will do it for them."

Wanderful investors include Gannett, The Washington Post, MediaNews Group, Hearst, Cox, Scripps, Lee and Advance -- a group that overlaps substantially with the newspaper owners of the Associated Press who sponsored iCircular's development. Gannett also owns Shoplocal, a similar banner-based adaptation of circulars, started years before the iPad and its successors came to market.

Financial details of the transaction were not revealed, but a Wanderful spokesman said it was completed within the original $22 million financing.

Success is by no means guaranteed. There are existing sites in the Web "discovery" business like the decade-old Stumbleupon, as well as shopping and couponing sites including those of big retailers like Target and Best Buy. And the digital giants like Amazon and Apple continue to build on the huge share of shopping traffic they have captured.

However, I see in the strategy echoes of what The New York Times and several hundred more newspapers are tying to accomplish with bundled subscriptions to news on multiple platforms. Not only is it a promising revenue source, but it could position the companies to make money off circulars if print and digital co-exist for many years or, in another scenario, if the transition to digital is more rapid.

I also think Wanderful marks a change in the industry's thinking about digital advertising.  For years companies have tried to develop effective ads on news websites with modest success at best. And as smart phone use and views of mobile news on those devices has soared over the last several years, advertising has not followed.

Wanderful, by contrast, can build on an existing base of big newspaper advertisers and be promoted from their existing and well-trafficked local web sites (or smart-phone and tablet versions). But it won't suppose that there are many readers eager to toggle back and forth between news and shopping.

A local shopping play

Coincidentally, I have been observing for some months a one-woman digital shopping start-up in Birmingham, Alabama -- a sort of David to Wanderful's Goliath. I am most struck by the common strategy, though, rather than the difference of scale.

Emily Lowery, who had served in digital management positions at several newspaper companies, returned to her hometown in 2010, surveyed 500 local merchants on their needs and launched a pair of websites -- Shop Birmingham and Magic City Post. The two are cross-promoted but entirely separate. Shop Birmingham is a presentation of stores and deals with no news content; Magic City Post is a community news website with just a sprinkling of ads.

Lowery added several ingenious twists; her service includes familiarizing stores and small companies with social media marketing and providing tutorials on how best to use it. She also advocates "shop local" as a community-building idea and told me that she would not accept ads from competing national chains.

The bigger national players, on the other hand, are the core of Wanderful's prospects' list, though Smith said that it could accommodate "the five gift-shop chain" that may not have the scale to afford preprints.

Lowery said that in a little more than a year of operation she had 117 takers for her basic service, priced at just under $1,000 annually and another 10 for full-service social media updates on their sites for which she charges $3,500.

While she has registered the domain name in 750 other cities, Lowery is self-capitalized, and her current expansion plans are modest. She is developing a second site in nearby Tuscaloosa, Ala., and working on tablet and smart-phone versions.

When we first spoke in August, Lowery told me that she has been working at newspapers since high school and wishes the industry well in its effort to find a new business model.  But she also said that her current ventures grew in part from frustration at trying to innovate from within.

"I would be fighting for a new product, trying to sell it [to bosses] who were focused on traditional core operations," Lowery said."It's the culture that holds newspapers back, and I never saw anyone who really wanted to change the culture."

If not culture change, the industry at least is embracing course correction by folding iCircular into Wanderful. It remains to be tested in the digital shopping marketplace whether this time newspapers and their tech collaborators have a breakthrough idea or at least a credible competitor. Or will they again be playing too late with too little?


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