Guesstimate Example #1— Estimate the revenue of the Hindu Newspaper

Firstly, to approach this problem we need to channelize different revenue streams that are coming to our mind and create a framework before diving into the calculations. What are the quick revenue sources that come to our mind? Paper distribution revenue, paper advertising revenue, and digital revenue shall be coming to our minds. Now we must be comfortable calculating the revenue from paper distribution from the population-based approach. But the question is how to calculate the revenue from the advertising and digital revenue. In digital revenue, there can be two components, one is from subscription-based revenue and the other is from digital advertisements.

Now to calculate the advertisement revenue find the closest relationship variable which in this case will be the size of the advertisement area. So it will be the total advertising area * revenue per unit area. In the case of digital advertisements, it will be dependent on the click-through rate. So the framework will look something like

Now let's first calculate the revenue from the direct sales.

• Total population of the India = 1.3 crores
• Considering the average family size of 4, there will be 32.5 crore families
• Since the Hindu is an English newspaper, so let’s divide the population into English literate population and Non-English literate population. Let’s assume that 40% of families have at least 1 member which is literate in English. So we are left with the 13 crores families.
• Out of these families, let’s assume 30% of the families gets an English newspaper at their home since now a lot of people prefer reading news online. So total newspapers going to the households will be 3.9 crores.
• Since The Hindu is one of the most prominent newspapers and among the most costly in the Indian market, let’s assume their market share to be 20%. This left the total Hindu newspapers sold to households to be 0.78 crores approx.
• To make things easier, let’s assume that additional 20% circulations are to the corporate/business offices. so total circulation becomes 95 lacs.
• Total revenue will be 95 lacs * avg earning per newspaper, let's assume it to be 4 per newspaper, total revenue becomes 3.8 crores from direct sales.

Second, we need to calculate the revenue from the newspaper advertisements.

• We will be using a simple formula of total advertising area * revenue per unit area.
• Total advertising area will be #of pages * area of the page *% area for advertisements, usually, one column is almost 1.5 inches wide and in total there are almost 8 columns so width is almost 12 inches and length is generally twice which can be considered 24 inches. So the total area will be 288 inches.
• In a newspaper, almost 30% of the area is covered with advertisements.
• Now here is the thing, if you are not aware of the advertising revenue per inch, you can ask the interviewer. Again here we will be considering average advertising revenue per inch otherwise if you want you can differentiate it based on the front-last page and rest of the pages.
• Now let’s assume it to be 25000 INR per sq inches.
• Total revenue = 20 * 288 * 0.3 * 25000 = 4.3 crores

Thirdly, we need to calculate the total digital revenue.

• We can use the formula of total visitors * # of ads * click-through rate * charges per click for calculating the digital advertisement revenue
• From our last calculation, we have calculated that 13 crore families are literate in English. Now out of these total individuals of 52 crores, 50% will be having smartphones, out of which 20 % people would be reading English news online. So almost 5.2 crore people would be reading news online.
• Since the Hindu offers a limited number of free articles in comparison to other news providers who let users read for free. So The Hindu will be a small share of these viewers. So let’s assume 15% of total people come to their website which will be 76 lacs. Out of this, 50% will be paid subscribers which will be 38 lacs.
• Total advertising revenue from digital will be 76,00000* 5 * 0.1 * 10 = 3.8 crores
• Total digital revenue from the subscription-based model per day will be 38 *2 = 76 lacs

TOTAL ESTIMATED REVENUE BECOMES = 3.8 + 4.3 + 3.8 + 0.76 = 12.66 crores