Chinese-language free newspapers could be one of the winners from the current downturn in advertising given they have a higher circulation than some paid rivals and have gained greater acceptance from readers. According to Nielsen Media, free newspapers were among the city's leading titles in terms of readership in the first six months of the year. Sing Tao News Corp's free Headline Daily became the third-largest newspaper in town, with 20 per cent of readership, while its competitor am730 ranked fifth with 11 per cent. Hong Kong Audit Bureau of Circulations figures show am730 circulation was maintained at 300,300 for the three months to September while Headline Daily had a daily average circulation of 720,463 for the same period, down from 730,400 in the previous quarter. Among the paid titles, Oriental Press Group's Oriental Daily News and The Sun achieved a daily readership of 33 per cent and 11 per cent respectively, ranking first and fourth. Next Media's Apple Daily ranked second with 31 per cent. Flash back to three years ago, and many industry watchers believed Headline Daily and am730 would not make it as mainstream publications. But today they rank among the city's leading newspapers in terms of both readership and circulation. Industry watchers say readers no longer treat free newspapers as a 'free lunch' or with a perception that they are doing worse than paid newspapers. 'Our readers focus group shows only one out of 10 of our readers threw away their copy of am730. The rest were willing to bring it back to their office for further reading,' said Alan Lo, publisher of am730. 'Half of those taking the newspaper back to the office said they also took it home to share with family members.' Advertisers have been quick to spot the improving readership profile of free newspapers, which mostly comprises young executives with higher income and consumption power. 'Free newspapers in fact are not a free product,' Mr Lo said. 'Readers need to wake up early and pick up a copy at a specific distribution point every day. A Nielsen survey shows we have a higher number of readers with a monthly household income higher than HK$30,000, than paid newspapers like Apple Daily.' Mr Lo said the newspaper's advertising rate was revised upward in October and that although the recent financial turmoil may have affected advertising income, he was confident advertisers would continue to choose his publication. He also said am730 had not cut rates to lure advertisers. 'In fact, our per-page advertising rate was maintained at more than HK$20,000 on average,' Mr Lo said. Media monitoring firm admanGo said gross advertising revenue at am730 was up 21 per cent in October year on year, while that of Headline Daily was up 30 per cent. Launched in July 2005, am730 was the smallest free newspaper in the city compared with rivals that were supported by local and global headquarters. However, the title, founded by property agent boss Shih Wing-ching, has recorded a monthly profit since June last year and even in November, at the height of the financial turmoil. Its staff are also looking forward to a bonus in the second half of next month. The free newspaper business model has proven to be a successful one, especially considering higher newsprint and staff costs during the current tough conditions. 'Paid newspapers, which target to sell more copies to attract advertisers, do not earn sufficient revenue from selling newspapers alone. They are losing money due to the increasing number of pages required to lure readers. But this doesn't guarantee sufficient advertising dollars,' said an industry watcher.