Before Twitter, free newspapers seemed a brilliant way for the internet generation to keep up. Abandoning cover price for advertising revenue alone looked like an economic model tailor-made for the digital era.

Free titles were launched around the world amid predictions that they would teach the net generation about newspapers. As proprietors ponder the value of Transport for London's (TfL) new contract to distribute free daily titles on the tube their future looks less certain. "Most of the local weeklies that have closed in recent months have been frees," says Dominic Ponsford, editor of Press Gazette, "Given that they are entirely dependent on advertising you would think that free daily newspapers might be susceptible to recession, too." The evidence is that they are.

Last week the pioneering free newspaper group Metro International (no relation to Britain's own Metro) announced plans to sell newspapers in Italy and Portugal. Metro International's 2008 annual report reveals that only nine of the company's 20 publishing operations were profitable. Analysis of the first quarter of 2009, published by the website Newspaperinnovation.com, reveals that eight of its 13 majority-owned titles recorded losses.

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In Austria Oberösterreichische Neue, a free title for the Linz area, has announced that it will close. Portugal recently lost the sporting freesheet Diario Desportivo and the San Francisco free daily City Star closed on 15 May. Italian title, 24Minuti, closed in April. Swiss freesheets, Le Matin Bleu and 20 Minutes, are to merge.

"In 2004/2005 free newspapers became very popular," says Dr Piet Bakker of Newspaperinnovation.com. "Everyone jumped on the bandwagon. Now we find ourselves with four or five free newspapers in a single market. Even a booming market could not support that many."

Steve Auckland, managing director of Associated Newspapers' free newspaper division, agrees that the field is too crowded. "Where there are number two or number three titles in a market they will close."

National circulation of Associated's British Metro dipped 2 per cent between April 2008 and April 2009, a performance many paid-for titles would kill for. The London market looks even livelier. Associated's London Lite (+ 0.31 per cent) and News International's thelondonpaper (+ 0.98 per cent) posted annual circulation increases in April. "Free newspapers work well in densely populated areas," says Lawson Muncaster, chief executive of the London financial freesheet City AM, "Being national is much harder. Free newspapers can't be national in a recession." But Muncaster agrees that the London market is unsustainable: "By global standards London Lite and thelondonpaper are not models of how free newspapers can work. They will take decades to pay for themselves."

He believes free newspapers must adapt to survive. "A lot of the executives running free newspapers have come from the old, paid-for model. It is instilled in their minds that circulation is important. That is nonsense. A loyal core audience is more valuable."

He says advertisers will be increasingly be attracted to papers with niche readerships. "Free daily newspapers will succeed by doing the things paid for titles used to do; building relationships, original journalism and concentrating on editorial quality."

Piet Bakker says big city markets in northern Europe may only be able to sustain a single profitable title. "Titles such as thelondonpaper and London Lite have exactly the same demographic. They are in head-to-head competition for the same readers."

Such direct competition will produce casualties says Bakker, but profitable free newspapers may emerge as one of the few surviving mass media outlets. The most successful titles attract bigger readerships than many websites. Advertisers like them.

Associated's Auckland admits that time are challenging but he remains optimistic: "Our readers are young. Because of falling interest rates most of them have more disposable income than 12 months ago."

But Bakker says many free daily newspapers are struggling in the recession. "At the moment they are offering 90 per cent discounts to advertisers and discounts are like heroin, very easy to get on and very hard to get off."

Tim Luckhurst is Professor of Journalism and Director of the Centre for Journalism at the University of Kent ( www.centreforjournalism.co.uk)