Pay walls: it's about the ads

Pay walls on magazine and newspaper websites are not about replacing advertising revenue. They are about winning it back.

True or false?:

Journalism is in crisis	True . False
The publishing industry needs a new business model	True . False
Pay walls are a stupid idea	True . False

There has been a lot of talk on these three subjects and on the last there has been a pretty broad consensus:  pay walls are a really stupid idea. Except, that is, for the people who actually own newspapers. Some of those guys think pay walls are worth a go (the latest, this week, being the New York Times). So what do they know that we don't?

The New York Times announced this week
that it would charge for some web content

The argument against pay walls goes something like this: the web is full of free information. If you charge, people will simply go elsewhere. The slump in audience numbers that results makes it hard to generate revenue from (among other things) advertising.

But I am beginning to think the argument is flawed, particularly when you consider the advertising.

The crisis in journalism is really a crisis of money. Advertising has somehow disappeared making it difficult to fund good quality journalism. Where has the advertising gone?

• Well, we are in the worst recession for a gazillion* years and advertising always dips during recession. But the recession will end.
  
• There are lots of new media for advertisers to try, so they are trying it all out. They'll be back when they realise how much of it was just fooling around.
  
• A lot of advertising never worked in the first place. The advertisers only noticed this when the new forms of media allowed them to measure better. Those guys are gone for now, but when they work out how to do it better, they'll be back.

So taking these factors into account, my new business model for the publishing industry is...

selling ads

I know. It sounds stupid. But I think that is what the pay wall publishers are counting on.

Imagine you are an advertiser in ten years time. All this new stuff that kept popping up when the web was new has died down. The media is stable, if different. So where do you spend your ad budget? Do you spread it evenly over the (by that time) gazillion* web pages? Of course not. You pick the places you think will most effectively reach the audience you want to reach.

And when some Uber-blogger comes to you telling you about numbers of unique users and bounce rates, you will know that they cannot tell you the difference between a committed reader and a cat snoozing on a keyboard. In that scenario, I think the following sales pitch will go down quite well:

Our stuff is so much better than anyone else's that our readers actually pay to receive it.

So pay walls are not really about making more money out of readers. They are about winning back the hearts of advertisers. There will be a short term loss of revenue, but long term it may turn out to be sound business strategy.

* That's a British gazillion as defined by the Royal Institute of Making Stuff Up.

New model journalism

One freelance journalist has met the credit crunch head on by adopting a new business model for his journalism. Roy H Rubenstein guest blogs about the launch of gazettabyte.

I was recently promoted from freelance to publisher. There is no company car nor have long lunches replaced copy deadlines. Instead I’ve decided to publish my own online magazine -- gazettabyte, a website covering optical developments in the datacom and telecom industries.

In July 2009, the UK’s Institute of Physics closed FibreSystems Europe, a magazine I had been writing for since 2003.  But when I approached other titles looking for replacement freelance work, I was either ignored, or told there was no freelance budget.

Moving from freelance to online publisher

So I decided to launch my own publication. But to make it work I needed to be paid.

I came up with the concept for gazettabyte, put together an editorial calendar and approached several firms within the optical industry to see if they would back the venture. It certainly helped that I have covered the optical industry as an analyst and journalist for the last decade — these were companies I knew and had worked with.

The response has been hugely encouraging. I now have nine sponsors whose backing gives me a year to establish the site.

I plan to write eight in-depth (3000-word) articles on industry trends, some company-specific features and  a range of shorter pieces - gazettabits (yes, I really do have such a tag category on the site).

No more surprise phone calls telling me to stop writing as the magazine is about to fold

One concern I have is that with eight features spread over a year, will the regular copy make readers return? Another issue is how much time the site will require. I want to remain a freelancer and cover other topics too. However much time I estimate, I expect the site will require more. Even the writing bothers me – I no longer have talented editors to improve my copy.

But I do feel privileged. I now have my own title.  No more surprise phone calls telling me to stop writing as the magazine is about to fold.

Roy H Rubenstein

http://www.gazettabyte.com
http://twitter.com/gazettabyte

Micropayment: the debate

Rupert Murdoch says his papers will start charging for online content, the FT and others report. His News Corp announced a 47% drop in revenues.

But a New Media Age survey found that 77 per cent of UK regular online readers were not prepared to pay for access to news websites. Many commentators doubt if online subscriptions are viable.

Micropayment is one solution on offer. Walter Isaacson, a former managing editor of Time says: a newspaper might decide to charge a nickel for an article or a dime for that day's full edition or $2 for a month's worth of Web access. Some surfers would balk, but I suspect most would merrily click through if it were cheap and easy enough.

Newspapers struggle to find an online business model that works

In today's Guardian, Frank Fisher says:

This needs a big player . . . Google already has the infrastructure and the reputation . . . Not only that, but they're touted as news content's No 1 enemy, via GoogleNews. They "owe" the press one.

Slate's founding editor, in a piece for the New York Times headed You can't sell news by the slice points out:

Newspaper readers have never paid for the content (words and photos). What they have paid for is the paper that content is printed on. A week of The Washington Post weighs about eight pounds and costs $1.81 for new subscribers, home-delivered. With newsprint (that’s the paper, not the ink) costing around $750 a metric ton, or 34 cents a pound, Post subscribers are getting almost a dollar’s worth of paper free every week — not to mention the ink, the delivery, etc. The Times is more svelte and more expensive. It might even have a viable business model if it could sell the paper with nothing written on it. A more promising idea is the opposite: give away the content without the paper. In theory, a reader who stops paying for the physical paper but continues to read the content online is doing the publisher a favour.

Talk of micropayments goes back 10 years, Stephen Dubner points out in a different article for the New York Times. He quotes Marshall W. Van Alstyne, an associate professor in the Information Systems department at Boston University:

Putting micropayments on news is like putting tollbooths on an open ocean. Internet users, awash in a sea of information, will avoid new barriers by navigating around them. And frankly, the interests of a free society are rarely served by building barriers between the people and their news.

See also Micropayments won't save journalism in TechCrunch.

Online news only 3.5%

Less than 4% of newspaper reading in the US happens online according the the Nieman Journalism Lab.

The Lab's Martin Langeveld has had to make some assumptions about reading habits to arrive at his conclusions but the result will surprise many who believe that internet has made bigger inroads.

A similar calculation for the The Guardian in the UK would suggest that online represents 20% of reading.

My Sums
Monthly impressions for guardian.co.uk: 228,136,292 (228m)
Daily print readership (3.61 multiplier on circulation): 1,264,000 = 910,080,000 (910m) monthly page impressions (if you assume each reader looks at the equivalent of 24 pages [1.264m x 24pages x 30 days]).
Total web and print = 910m + 228m = 1138m
Web % = 228m/1138m x 100% = 20.04%

See also Inksniffer's take on web metrics

Advertising: a warning from 1974

Advertising during recession works, although the beleaguered publishing industry is having a tough job convincing its clients.

This from Direct Marketing magazine 1991:
[The American Business Press (ABP) analysed] the severe 1974 to 1975 recession. Relying on questionnaires submitted by advertisers, the study tracked the sales and profits growth of 173 industrial companies between 1972 and 1977. The companies were divided into two groups: those that reduced advertising during the recession; and those that did not reduce advertising,

The study found that the companies that reduced advertising achieved minimal sales growth in 1974, suffered a sales decline in 1975 and increased sales by 70 percent during the five-year period. For companies that maintained their ad budgets, sales suffered no slowdown during the recession and grew 150 percent for the entire period. Profits showed a similar pattern. Most notably, the momentum gained by the steady advertisers during the recession helped them to grow at a faster rate in 1976 and 1977.

The original article can be found at Allbusiness.com.