The Guardian office

The Guardian‘s decision to launch an Australian edition of its phenomenally successful website is likely to drain advertising dollars from existing online players and put further downward pressure on ad rates, according to a top media buyer.

The Guardian, the third most popular newspaper website in the world, announced overnight that it will launch an Aussie edition this year backed by an investment from Wotif founder and Greens donor Graeme Wood. Deputy editor Katharine Viner will head the local operation, to be based in Sydney, and has said that positions will soon be advertised. The paper opened a digital newsroom last year in the US with a staff of around 40 people.

Mat Baxter, CEO of media buying agency UM, says The Guardian‘s arrival down under poses a threat to online players — especially Fairfax’s popular smh.com.au and theage.com.au sites.

“This could be a serious blow to Fairfax,” Baxter told Crikey. “The Guardian would appeal to your quintessential Fairfax reader … I’d expect them to attract an influential, well-off and well-educated audience that advertisers are typically keen to reach.”

The Guardian already boasts a local audience of 1.3 million unique browsers a month compared to around 6 million for the SMH, 4 million for The Age and 1.8 million for The Australian.

Baxter, whose firm recently won News Limited’s media agency account, says The Guardian‘s arrival is bad timing for Fairfax given the metro sites are due to launch metered paywalls in March.

“You can imagine that when Fairfax puts up a paywall it will be met with a degree of resistance and people will be looking to see if they can get similar content for free. That doesn’t matter if there’s nothing similar out there. It’s different if a competitor enters the market with a similar style and gives the content away for free. That could push a large number of existing Fairfax readers into The Guardian,” he said.

“They’re going to have to be even more on top of their game when it comes to rolling out the paywall strategy.”

Despite the vogue for paywalls around the world, The Guardian has so far stuck resolutely to the strategy of giving all its content away for free.

Baxter says The Guardian‘s arrival will make it tougher for online media outlets trying to squeeze money out of advertisers given its already a “buyers’ market”.

Private Media, which publishes Crikey, targets a similar affluent demographic as Fairfax.

Fusion Media analyst Steve Allen, however, says Fairfax websites will retain significant advantages over their new competitor — especially in terms of news breaking and coverage of local sports.

The New York Times has also kept its audience numbers intact while going behind a paywall despite The Guardian ramping up its US presence in recent years.

It’s unclear how much money Graeme Wood has invested and how his involvement will impact on his troubled local philanthropic venture The Global Mail. The Guardian‘s announcement does not mention any collaboration between the sites although Global Mail CEO Jane Nicholls tweeted this morning that they will be working together.

Crikey understands staff have been assured that Wood, who did not respond to requests for comment, will have an arm’s-length relationship with the venture and will have no say over editorial or operational decisions. The Guardian has also flagged to staff that it will seek out partnerships over coming months with other media outlets, blog networks, cultural institutions and big brands.

The Guardian‘s CEO Andrew Miller has described the Australian expansion as “an innovative and effective way of leveraging local partnerships, investment and expertise to fund our content responsibly, reinforce our global brand and harness the full power of open journalism”.

The Guardian embarked on another round of cost-cutting late last year, announcing in December it would cut a further 70 editorial jobs on top of the 30 voluntary redundancies it accepted in September. Despite lifting digital revenues by 16.3%, The Guardian and sister paper The Observer — which are heavily subsidised by profits from UK used car magazine Auto Trader — reported losses of 44.2 million pounds last July.