VistaPrint Revenues Will Exceed NY Times Ad Revenue for 2011

In a December 5, 2008 interview with WhatTheyThink.com staff, VistaPrint (VPRT) CEO Robert Keane expressed his opinion that he is “extremely pessimistic about the economy”. VistaPrint is a leading online supplier of high-quality graphic design services and customized printed products to small businesses and consumers to 16 million customers worldwide with over $400 million in annual sales as of the last fiscal year. The company caters to small businesses and its average order generates just $33 in revenue. I recommend reading the entire WTT interview here but to summarize Keane’s comments,

1. It seems the world is leveraged to rates never before seen since the 1920s.
2. If this is true then expect it to take decades to grow out of this funk
3. Even businesses that are doing well and growing will have a hard time getting funding from banks
4. More than ever, cash is king and debt will kill your company
5. The companies who survive will be the ones, which understand deeply the needs of their customers and focus exclusively on those needs.

VistaPrint Limited operates as an on-line provider of marketing products and services to small businesses worldwide. It offers a range of complementary products and services comprising printed business cards, brochures, post cards, apparel, invitations and announcements, holiday cards, calendars, creative design services, copywriting services, direct mail services, promotional gifts, signage and Web site design, and hosting services.

It is my opinion that VistaPrint and companies like it are capturing revenue which traditionally has gone to newspapers in the form of advertising revenue. This revenue will NEVER RETURN TO NEWS ORGANIZATIONS. Increasingly, smaller amounts of money will be spent in the future on what we now consider “advertising” and more money will be spent on marketing, specifically items such as those offered by VistaPrint.

According to the VistaPrint 2008 10-K, for the year ended 2008, “our website sessions grew by 47% to 193.0 million, conversion rates grew by 7% to 5.9% and our average order value remained constant at approximately $33″. What are the conversion rates for newspaper print advertising? .05% ? 1% ? It just does not make any sense at all for businesses to continue pumping money into ads on general information websites or printed newspapers.

VistaPrint’s Numbers for the last 3 fiscal years:

New York Times’ Numbers for the last 3 fiscal years:

Projections:

THE WAY AHEAD:

In order to survive, newspapers must break up their single destination website (nj.com, nyt.com, freep.com, etc…) and parse out all the content into niche sites. This will drive up advertising rates on those sites, eliminate the losers, and increase the community feel of the sites to further build the brand and revenues.

The glacial movement of newspaper companies to adapt to the new information paradigm leads me to believe that a better move would be to simply buy a company like VistaPrint.

Disclosure: I do not hold any positions in either company. I have used the products and services of both companies in the past.