doesn’t go down!?

In a paywall experiment everyone is watching, this summer Murdoch owned papers The Times and The Sunday Times of London started charging for web access. In a press release yesterday New Corp. said they had gained 105,000 paying customers because of this. According to the NYTimes (here) website visitation was expected to drop 90% once the walls went up but according to Nielsen that number only fell by 42% (1.78 million).

Tech blog GigaOm further parses the numbers to reveal that out of 105,000 paying customers only 50% are subscribers which the writer paints as a failure: “after four months of selling its new paywall system, News Corp. has only managed to convince a little over one-and-a-half percent of its readers to pay something for the newspapers’ content — and has only been able to convert half of that already tiny figure into actual monthly subscribers.”

TechCrunch picks up the failure story and does some quick back-of-the-napkin math to show why it’s not actually true:

Basically, those 50,000 monthly subscribers are paying $12.80 a month, or $640,000 a month total. Let’s say the other 55,000 pay-as-you-read crowd is generating another $160,000 a month in subscription revenues (I am being generous here and assuming two days a month per person at $1.60 per day). That comes to $800,000 a month, or $9.6 million a year in online subscription revenues.

What did they give up in online advertising revenues? At 41 million estimated pageviews a month, assuming a $5 CPM (cost-per-thousand-impressions), that was only $200,000 a month in online advertising revenues.

[…]Depending on the actual CPM, financially they are doing at least two to four times better than they were before. And that is with only about 1.5 percent of their former readers becoming paying subscribers.

In the end this strategy will work for many publications, because the CPM’s will go up under a paywall. Advertisers want to reach engaged readers and there’s no better test of engagement than making someone pay for access. The problem all along has been the cost of making the leap both in increased infrastructure and temporary loss of advertising and subscribers. Media companies and their nearly retired owners aren’t about to take any chances.

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9 Comments

  1. So, with the expected revenue, does this mean the demand for more editorial photographers will increase? And the pay scale for photographers will increase as well? Is it reasonable to expect some kind of trickle-down effect that will be beneficial to staff, contractual and freelance editorial photographers?

    • @Dominique James,

      One would hope that to increase paying subscriber rates, an increase in quality of content would be in order. Quality and uniqueness has always cost more.

      If you’re a mediocre photographer, this is probably of no benefit to you. But for the talented-but-struggling, I would be guardedly optimistic.

  2. The longer term issue for the advertisers is effectiveness. They still have the metrics of view and click-throughs, and those aspects will justify the increased rates. If that does not happen, then the rates the publications can charge behind pay-walls will decrease. It remains to be seen if this idea will be sustainable. Investors don’t currently agree with the optimistic views of the publications.

  3. If every major news source did the same thing and the reader was put into a position of having to choose who to pay – the Times would get back more of it’s readership and would do even better. I know that amounts to a web conspiracy. I’m just sayin’ – that’s all.

    Not to mention that they can now boast to advertisers that their readers are the type of people willing to pay for quality.

    OT – I don’t get the whole click through measurement of ad effectiveness. Seems like a better method of measurement (if you have to do it) would use study groups and eye tracking etc. Do you have to click to get the message or is seeing it enough? I don’t click on anything. Does that make me immune to adverts? I seriously doubt it.

    • @Craig,

      (I’m lower case craig)

      I think all of those methods are rather quaint.

      Better is to track purchases, network with advertising partners and show ads that are relevant to the consumer’s purchase interest. If the consumer has opted out of such tracking, you could still assemble an aggregate of others and show them an ad for something that others who subscribe like.

      I’m sure there’s a defined metric there somewhere… something like ‘relevance’. There’s enough trackable data generated by a person as they live their lives online that it would be easier, cheaper and more accurate to use datamine methods.

  4. I think it will take at least a year or more before there is accurate trending and metrics. Click through to me is only accurate for drawing the target buyer to the advertisers site and a possible purchase on-line. I would question how you would determine an on-line add motivates a purchase in a store. I don’t think outlets are trying to capture data on purchases by polling customers on how and why they purchased a specific item.

  5. What about the issue with substitutes. The pay wall theory works when there are little or no comparable substitutes. In my market there are two large online news providers, one that just instituted pay wall. Once that happened, the impressions delivered on the competing site skyrocketed.

    I get that CPM will go up when you are pooling more affluent/engaged readers, but what happens when the pay wall site simply cannot deliver the # of impressions you need. If your product is targeted towards a broad group of demo’s you arent necessarily concerned with how engaged your readers are, but rather simply your frequency and reach.

    Free sites can still deliver to those small demo’s through ZAG targeting. I think people will pay for quality info they can’t get anywhere else and info that will earn them a return (wall street journal online for example), but there are too many substitutes for news.

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