Nine Entertainment Co. has confirmed that traffic to its digital properties is likely to drop by more than a third when its redirect agreement with Microsoft ends in five weeks' time.
Currently sign-out traffic from Microsoft properties such as Outlook, the email service used by 4.5 million Australians, redirects to Mi9 properties such as Ninemsn.
In Nine's investor briefing this morning fronted by CEO David Gyngell, the company confirmed that the transition of Microsoft log-outs and homepage defaults will potentially impact "up to 35% of Mi9 traffic".
Mi9 will continue to sell ads for the yet-to-be-announced replacement Microsoft property, set to launch some time after July, which will also feature content from Mi9 and Ninemsn.
However, Nine wouldn't put a number on how the reduction in traffic might impact on its digital display revenues as the 35% figure was only a "projection".
An Mi9 spokesperson said: "This [35%] is simply a projected number and we look forward to working with Microsoft on delivering this new product to market later in the year."
According to Nielsen's Online Ratings for the month of April, Ninemsn's news websites (Ninemsn, ACA, Today, Wide World of Sport, Finance and Weather) were the third most-visited news destination after News.com.au and SMH.com.au, with a unique audience of 3.179 million.
While traffic and unique audience cannot be compared like-for-like, hypothetically, a 35% reduction in Ninemsn's news audience would give it a unique audience of 2.066 million, dropping it down to seventh place, between MailOnline and Herald Sun.
*Clarification: The unique audience for the total Ninemsn network portal is 6.6 million. A 35% reduction to the total network would bring it to 4.26 million.
The reduction in traffic will not affect Mi9 joint venture MailOnline, which, while run out of the Mi9 offices in Sydney, does not benefit from the Microsoft redirects.
The company first outlined the risk in its IPO prospectus, although sources at the time played down the potential impact by suggesting redirect traffic from Microsoft properties was substantially less than the 35% remainder from 65% direct entry.
In February at NEC's first earnings briefing since going public, Gyngell was more direct, acknowledging the end of the Microsoft arrangement was "expected to result in a reduction of web traffic, amongst other things".
In its prospectus, NEC noted: "This could result in a reduction of revenue for Mi9. However, if Mi9 sells advertising for the Microsoft products to which Microsoft redirects traffic formerly directed to Mi9 websites, there will be less of an impact as Mi9 will continue to receive some revenue (albeit at lower yields and margins than if that traffic had been redirected to Mi9 websites)."
In October, Nine confirmed it would take full control of the digital joint venture Mi9 ahead of its IPO, ending a 15-year partnership. Nine is understood to have paid US$39.1 million for Microsoft's 50% stake.
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