The captains of Israel's most circulated newspaper, Israel Hayom, are concealing from the Israeli public information about its fundamental business model – and they have very good reasons for doing so. Evidence about the scope of Israel Hayom's income flow keeps piling up, raising doubts about the newspaper's alleged business model. The Seventh Eye's investigation reveals that advertising rates in Israel Hayom, which it claims are identical to those of its main competitor, Yedioth Ahronoth, are in fact lower by tens of percents, if not more.

From our investigation it appears that asked prices in Yedioth Ahronoth's advertisement department are significantly higher than those of advertising in Israel Hayom ‒ as much as threefold and more at times. These findings not only contradict Israel Hayom's claims, but also go against the accepted business model which is characteristic of free newspapers across the world, according to which high distribution rates in densely populated areas permit them to charge higher advertisement rates which compensate for the lack of subscription fees. According to this model, we would rather expect prices of advertising in Israel Hayom to be higher than in Yedioth Ahronoth.

As part of their business model, free newspapers across the world are based on a lean newsroom, which produces lean papers. Israel Hayom, however, is different; its scope is equal and at times even greater than that of equivalent, paid newspapers. Moreover, contrary to free newspapers around the world, for a relatively low monthly fee (52.90 NIS versus Yedioth Ahronoth's discounted 93 NIS), subscribers can receive Israel Hayom daily to their doorstep. According to Israel Hayom, as for today, 40,000 subscribers receive the paper every morning. Some hundreds of thousands get it daily on the street.

Israel Hayom denies that its advertising rates are lower than those of its main competitor, Yedioth Ahronoth, despite the fact that according to a long list of advertisers who were recently interviewed by The Seventh Eye, Israel Hayom has become famous in the sector for its cheap rates, which play a central role in the continuous erosion of the printed press' share in the advertising pie.

In an article issued a week after the publication of the advertisers' testimony on The Seventh Eye, Hezi Sternlicht, Israel Hayom's editor and economics commentator, wrote that his employer "has a model, a winning model". "Israel Hayom is distributed to the public for free, but is funded by advertisers", argued Sternlicht. As aforementioned, and contrary to such explicit statements, our recent investigation demonstrates that Israel Hayom offers its advertisers a 'market disrupting' deal.

"More exposure – more income from advertisements"

Israel Hayom's numerous criticizers often argue that Multibillionaire Sheldon Adelson's free newspaper is not operating according to a standard business model – and perhaps not according to any business model whatsoever. The paper's determination not to offer any facts that would refute this assumption only reinforces it. Recently this claim was once again brought up by Minister Naftali Bennett, political opponent of Israel's Prime Minister Benjamin Netanyahu. A favorite of Adelson, Netanyahu's moniker Bibi has given rise to Israel Hayom's derogatory nickname: "Bibiton".

"Media outlets have two potential sources of income: subscriptions and advertisements", Bennett was quoted on the News1 website following his speech at his Party's conference at the Bar Ilan University: "There is an international model for free newspapers; it is acceptable and appropriate. This model dictates that you spend a certain sum on content and distribution, sell advertisements for a greater sum, and then live off the profit. This is not how Israel Hayom operates. Israel Hayom, as far as I know, does not have an effective economic model. They have no intention of making a profit, and in fact they are losing on an endless scale, because they are distributing the paper for free. On the other hand, in advertisements ‒ and I know this for a fact ‒ they are also breaking the market".

Bennett has spoken in favor of the bill meant to force Israel Hayom to charge a fee from its readers. Israel Hayom fought back: "Israel Hayom has an economic model," they wrote directly to Bennett in an article signed by Miri Eden, that took up most of the paper's third spread. The article's headline was unequivocal in linking Bennett to the competing tabloid's publisher, Arnon (Noni) Moses: "A brother, but of Noni's".

The criticism against Bennett was published in the framework of Israel Hayom's aggressive wide-scoped campaign meant to undermine the bill's legitimacy and at the same time convince the public that the free newspaper has a commercial expectancy. Alongside the attack, the article included a statement about the paper's so called business model. "By the way, you never turned to us for an explanation about our model", Bennett was reprimanded, "it is a fact, and this is how it works: more exposure – more income from advertisements", the article went on. However The Seventh Eye's appeal to Israel Hayom requesting an explanation about its business model remained unanswered.

Gonen Ginat, editor of the paper's political supplement and among its confidential business model's most adamant defenders, repeated the message hurled at Bennett. In a statement posted on his Facebook page, that was cited on Dvorit Shargal's Velvet Underground blog, Ginat wrote: "Naftali Bennett is deceitful (again): contrary to the lies that he's been spreading ‒ Israel Hayom's advertisement rates are identical to those at Yedioth Ahronoth".

One of the respondents to Ginat's claim identified himself as a client of Israel Hayom's advertisement department who is familiar with its advertisement rates: "All good, but the prices are far from identical. If you want I can send you an invoice", wrote Sagi Keisler, head of the Samaria Settlers' Committee to Ginat, who responded: "You are wrong. We make a point of it: the prices are identical (for the supplement / daily)". In her blog, Dvorit Shargal added at the end of the discussion what she had heard from an advertiser: "According to the evidence I've got, a page in Israel Hayom costs 25 thousand NIS and a page in Yedioth costs 3 times more. I don't have the invoice. Who is right?"

From The Seventh Eye's investigation it appears that Bennett, Keisler and Shargal are right, while Ginat, Miri Eden and Israel Hayom spread information that is far from realistic. Turning to Israel Hayom and Yedioth Ahronoth for a price offer for the same ad, on the same date, and on similar pages in the paper, unmistakably reinforced the claim that prices at Israel Hayom are significantly lower than those asked by Yedioth Ahronoth – despite the fact that, again, according to the conventional model for free newspapers, they should have been rather higher. Further appeals to Israel Hayom indicated that this is indeed their regular pricing policy.

Giant discounts at Israel Hayom

We turned to Yedioth Ahronoth and Israel Hayom on behalf of customers who have never advertised in neither newspaper, hence their offers did not take into account discounts often offered to regular advertisers. Our examination, that took place just before the initiation of Operation Protective Edge, made it clear that the two most popular newspapers in Israel automatically offer significant discounts on their official prices.

Thus, for example, the asked price for a whole page ad in Yedioth Ahronoth's news quire, on the left page and before the middle spread, is 120,373 NIS (the prices mentioned in this article do not include VAT). In a quotation given to The Seventh Eye, the price for the ad was 80,000 NIS – reflecting a 33% discount. A second application to Yedioth Ahronoth yielded somewhat lower prices: 70,000 NIS for a before-the-middle page ad, and 50,000 for an identical ad after the middle spread.

For the publication of the same advertisement in the daily magazine supplement 24 Shaot (24 hours), on the left page before the middle spread, we received a lower quotation of 40,000 NIS, which embodies a 50% discount from the list price (79,718 NIS). An ad after the middle page in the Mamon supplement was offered for 35,000 NIS, compared with the asked official price of 66,232 NIS – a 47% discount.

In Israel Hayom the gap between list prices and price offers is much larger: The cost of a before-the-middle page ad in the free newspaper is a mere 24-25 thousand NIS in comparison with the official 83,318 NIS – an automatic discount of over 70%. The price for an identical page ad after the middle spread may drop to 20 thousand NIS, compared with the list price of 66,654 NIS – a 70% discount. The price offer for a half-page ad is 17-18 thousand NIS, versus 30-40 thousand NIS in the price list. The advertisements department's representative made it clear that these were initial offers, and that negotiation and long-term advertising agreements may yield further discounts.

Israel Hayom has an increased distribution on Fridays. According to the paper's statement, on weekends its distribution exceeds 400 thousand copies, while on week days it distributes 320 thousand copies. According to Israel Hayom's proclaimed economic principle: "More exposure – more income from advertisements", on weekends its advertisement rates are expected to soar. This indeed is what appears from its list prices. However, in reality this is not always the case.

From the price quotation sent to The Seventh Eye on behalf of the paper, we learn that the price of a (before-the-middle) page ad in the Friday news section can be very close to its price on the weekdays – 25 thousand NIS; a picayune in comparison with the list price. According to Israel Hayom, the ad's official price is 166,635 NIS – over 6.5 times (!) more than that stated in the quotation – reflecting an 85% discount. Two other price offers we received from Israel Hayom were somewhat higher: 40-45 thousand NIS; but still very low compared to the price list, with a discount of 73-76%.

Israel Hayom does not issue daily supplements. But advertising on its weekend supplements too, as it turns out, is neither costly. For a coveted back title page advertisement on ShiShabat, Israel Hayom's equivalent of Yedioth Ahronoth's 7 Yamim supplement, the free newspaper sets a particularly low price of 30,000 NIS. In the price list, an ad in such a location is supposed to cost almost 8 times more ‒ 238,050 NIS at least ‒ a gap reflecting a discount of an exceptional 87% on the list price.

The prices of advertisements inside the ShiShabat supplement tend to be particularly low. Instead of the list price of 133-166 thousand NIS for a page ad, the quotation stated 23 thousand NIS only (an approximate 83%-86% discount). Further investigation yielded somewhat higher – but still very low – prices: 27-30 thousand NIS. Quotations received from independent advertising agencies that mediate between advertisers and media outlets, reflected a similar price level.

An exceptional model

Israel Hayom is not a conventional newspaper. Journalistic investigations about the goings on in the paper's newsroom – the most prominent of which was broadcasted in 2013 on Hamakor television program – together with a review of its sheets in the framework of The Seventh Eye's daily press review, illustrate a newspaper whose contents are meant first and foremost to serve the political and propagandist interests of Prime Minister Netanyahu and his entourage.

Sources within Israel Hayom with whom we have recently spoken, admitted that the paper's bias towards Netanyahu is so evident, that employees tend to joke among themselves about the ways its senior editors re-write items which they deem important.

Israel Hayom's uniform editorial line, unmatched by any other major Israeli outlet, has earned it a reputation of a propagandist pamphlet, tailor-made for Netanyahu. Unlike information of propagandist nature disseminated by various state entities, such as governmental offices and the military, personal propaganda is subject to the Political Parties Financing Law – which stipulates a limit to the sums political candidates may recruit and expend for their personal promotion. Funds invested in Israel Hayom, however, are not subject to any regulation.

Further issues that stem from the doubts surrounding Israel Hayom's confidential business model are related to legislation meant to ensure the market's fair competition. Adelson, the paper's publisher, is rated in recent years amongst the world's richest, with an estimated wealth of nearly 40 billion dollars (Forbes, February 2014). Predatory pricing of ads, as is apparently the custom in Israel Hayom, may break down competitors who lack Adelson's strong economic position – and thus illegitimately impact the market. In certain cases, such a pricing policy may be in conflict with several clauses of Israel's Antitrust Laws.

Like its competitors, Israel Hayom's publishing company is a private company, and its financial statements are confidential. Therefore, despite the fact that the newspaper's pricing policy raises doubts regarding its ability to operate independently, one cannot determine whether the company manages to make an adequate profit which would justify its existence, or is dependent on a permanent flow of funds from Adelson. Israel Hayom consistently avoids providing details about its revenue flow and profitability.

When asked about his motives for founding Israel Hayom, Adelson usually brings up the need for a new voice that is "fair and balanced" in the Israeli media map. For this end, Adelson and his partners could have established the paper as a nonprofit organization that works for the promotion of an openly proclaimed goal. They have, however, chosen to establish the paper as a limited company. A one-woman directorate oversees the company's management – Miriam Adelson's daughter, Yasmin Lukatz.

Alongside the paper's proclaimed public role, Adelson perceives its activity in the Israeli media arena as based on financial logic as well. From an examination conducted for The Seventh Eye by the market research company Dun & Bradstreet, it appears that Israel Hayom's publishing company operates in a seemingly healthy manner. According to the examination, Israel Hayom's suppliers are paid punctually. The company was therefore classified as "stable", and its engagement risk deemed "lower than average". In case those extremely low advertising rates are eating up the company's balance, someone apparently is taking care to fill them up, making sure the company continues to thrive.

Israel Hayom's stability seems all the more exceptional in face of the decision to purchase via its operating company a number of struggling entities: the unprofitable Makor Rishon newspaper, the unprofitable nrg website and Maariv's old printing press. Israel Hayom's investments in these loosing entities raises an inevitable question: what exactly is the economic model that enables Israel Hayom to thrive, and even expand, with potentially significantly lower incomes than those of its competitors?

Israel Hayom's response: the allegations are unfounded and defamatory

Israel Hayom's senior editor Gonen Ginat refused to provide reference that would back up his claims that Israel Hayom's advertisement prices are identical to those at Yedioth Aharonoth, and chose not to answer whether he had been exposed to the paper's rates or to its business model. "I have no intention of answering to those wacky characters who publish your superficial, mock pamphlet", he said in the only response he agreed to deliver at the end of our conversation. The reporter Miri Eden chose too not to respond.

Israel Hayom's chiefs, Publisher Asher Baharav, CEO Tzipi Koren and Editor in Chief Amos Regev, refused to provide any explanations about the company's fundamental economic model, nor about the sources and nature of the information spread by the paper's employees. When we asked for their response, they threatened: "From the list of questions you have presented us with it appears that you have been dealing with unfounded, groundless, defamatory allegations. We would hereby like to inform you that if you publish anything defamatory of Israel Hayom, its editors and/or anyone on its behalf, you and all those responsible for the publication will be deemed fully liable for defamation and Israel Hayom will act to exhaust its lawful rights".

This Article was first published on The Seventh Eye. English translation by Shira Marom. Read it in Hebrew here