Though the publisher saw substantial digital ad revenue growth, investment in the sector weakened overall operating profit.
"The reduction in operating profit for the year was due to our strategic investments in digital and severance costs associated with our long-term focus on cost reduction," Thompson explained. "We intend to continue to invest in digital growth but will also bear down on costs to defend our profitability."
“Despite print decline in both our advertising and circulation revenue streams in the fourth quarter, the momentum in our digital business led to revenues that were up slightly overall,” said Times CFO James Follo during a call with investors. “We’re begging to see the benefits of our strategic initiatives in transforming our organization. Digital advertising continues to see a boost from paid posts as well as mobile and video."
The Times is working with 40 advertisers through its sponsored content arm, T Brand Studio, running about 50 campaigns for a broad rage of advertisers, including luxury brands, automotive and financial services, and expects to further diversify its advertiser base across verticals in 2015.
But with growing interest in native content, investors wanted to know about the distribution of inventory and any changes to pricing that may cause.
Thompson explained that paid posts are additive to existing digital advertising inventory, and said the company expects to more than double its capacity to produce sponsored content through T Brand Studio.
“Paid posts are self-generative of inventory, so they’re creating new inventory as they go,” Times EVP of Advertising Meredith Kopit Levien explained during the call. “In general, we have not seen tremendous pressure on CMPs. In both print and digital, our product is significantly differentiated that we should be able to maintain that CPM.”
In terms of the ad revenue breakdown between mobile, video and paid posts, Levien said mobile accounted for slightly more than 10% of the publisher’s digital ad revenue for the year, and video was a “smaller number” but had a similar growth trajectory. Paid posts, she added, was inside of 10% of the overall business.
“We expect these to be three of the four or five things that will keep driving digital growth in 2015,” she said.
Looking forward, the publisher expects total ad revenue for 2015’s first quarter to decrease in the mid-single digits compared to 2014’s first quarter.
“In 2015, we will remain focused on using our unique journalism and brand to broaden and deepen our audience and to monetize that audience more effectively through innovation in both digital and print,” Thompson said. In the near term, the Times will focus on the relaunch of its magazine, as well as vetting new talent in the marketing, digital product and technology departments.