On NYT Paywall, Citigroup says 'Good Buy'; Techdirt says 'Hello!?!'
from the say-what-now? dept
We've been having some fun mocking the NY Times paywall, which makes no sense to us at all. While we're sure some people will subscribe, the overall math is hard to make work, especially considering anyone who wants to can easily get around the paywall. In fact, the way the NY Times set up the paywall, it actually takes away significant value from the NY Times itself. Instead, it drives that traffic to other sites that link in to NYT stories, because readers don't use up "free clicks" if they come in via other sites.In the meantime, we've got plenty of stories of other paywalls out there that suggest that people aren't particularly eager to sign up for paywalls. Some will. Perhaps a fair number will. The NY Times has the kind of brand that will certainly lead a bunch of people to just subscribe, perhaps without realizing they really don't need to do so.
However, consider ourselves confused and scratching our heads to hear that an analyst at Citigroup, Leo Kulp, is making the rather shocking prediction that "Revenue generated by an annual digital subscription will likely dwarf the advertising revenues generated by even heavy users." Say what? The only way I can see this happening is if the NY Times has the world's worst online ad sales force, which I doubt. And, of course, we already have some data on a NY Times subscription plan, back from the last time they tried a paywall. It generated some money -- about $10 million per year. Not chump change, but hardly a huge number for a publication like the NY Times, which was why they did away with it. They knew that expanding ad revenue was a much better plan.
So can anyone explain the math by which the NY Times' digital subscription revenue will "dwarf" ad revenue? I've been plugging numbers into spreadsheets, and unless the online ad market totally collapses, I just can't see the math making any sense.
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Filed Under: business models, economics, paywalls
Companies: citigroup, ny times
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No, it makes a lot of sense...
Fortunately, there will always be people willing to pay to get past the paywall in a normal way, even if they have to do this so they can set up the links on their sites to forward their own visitors to the NYT site. Thus, there will be some income from subscriptions.
Thus: advertisements = near-zero income, subscriptions is some income. As a result, advertisements are indeed dwarved by subscriptions... :-)
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A accounting is being interviewed for a job.
First candidate goes in.
First question: How much is 2 + 2?
Candidate answers 4.
Second candidate goes in.
First question: How much is 2 + 2?
Candidate gets up closes the door.
Then whispers in the interviewer's ear: How much do you want it to be?
For main street first candidate gets the job.
For governments, liberals, and Wall Street second candidate gets the job.
And that is the problem and why no one on main street can understand governments, liberals, or Wall Street.
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WARNING!
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CNN is also chiming in via a somewhat pro-nyt biased article, in no uncertain terms labelling anyone who gets around the paywall as "People who don't want to pay for the Times' content -- or who believe the internet is and forever should be an endless vat of free stuff".
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"So can anyone explain the math by which the NY Times' digital subscription revenue will "dwarf" ad revenue?"
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And I'm the one who's insane.
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I think you have to give up your categories and stereotypes or you have to give up hope. It's one of the two.
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The first taste to hit your mouth is the bitter aroma of "governments". Note that while the taste of this ingredient is bitter, it is also relatively nuetral. At no time is "governments" overwhelmingly on one side of the aisle or another.
Next, we have the earthy dulcet tones of "Wall Street". Note the complexity of the taste? That's because the players on "Wall Street" are generally (you guessed it) conservative! "Wall Street" adds body to the flavor as well as oxidization, which you can test for yourself by swirling your glass and noting how long it takes for the argument to drip down the sides.
Finally, we have the simple and sweet textures of "liberals". This particular flavor tastes like a six week old semen stain on a dress, which is strange because it's generally no better or worse flavored than the "Wall Street" component.
So, this argument, like a good wine, is full flavored and complex, because it basically indicts EVERYONE, from conservative cock sandwiches to nonsensical nuetrals all the way to lamp-licking liberals (I like alliteration). The fact that, like most red wines, it will only result in a headache if consumed too much, is also of note.
My suggestion? Feed this argument to your dog.
CHALLENGE....
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$15/month * 12 months = $180 a year. I don't know squat about online advertising rates, but at 5 cents per page view (I'm sure its WAY lower than this) It would take 3600 pages views to earn that same $180 a year. Not many people would rack up that many views in a year.
I think this is what hes basing his math on. The revenue earned per paying subscriber is orders of magnitude above what they earned off that single user through ad revenue.
I think this is a valid point, but ignores all the negatives of the paywall, such as driving readers away and lower ad revenue from reduced page views etc. They just assume they will get enough subscribers to offset the ad revenue losses.
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Time to down grade Citigroup.
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http://theunderstatement.com/post/4019228737/digital-subscription-prices-visualized-aka -the-new
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In the pay / subscription model, money is made at all times. That is to say, you get paid regardless of what the user does. If they visit your site daily / hourly or not, they are still paying. A 1% conversion rate on traffic @ $180 a year means about 50 cents per day. So then you have to look at your revenue per non-paying user, if your site is open. If that is half a cent average per visitor, you are now breaking even.
More importantly, even with a subscription model, you have free pages that you give away, and those have advertising on them. So you don't lose anywhere near as much ad dollars (and you can in fact concentrate on them, as each of the exposed pages would be more significant), and you end up netting more money overall.
The variable is the signup rate. That is the one that is never known in a new system.
But yes, the subscription model can be much more profitable. This is especially true for something like the NYT that already has a subscription base to work from, will still have plenty of viewers to the newspaper online, and so on.
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Shit, td must make a ton of cash then.
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The conversion factor (how many people sign up) and the retention factors (how many people remain signed up and keep paying) are key in knowing the bottom line.
There are a lot of things at play that none of us (not even Mike) will have access to (like average page views on the free edition, ad income per page, cost per page to provide,e tc), nor do we know how the subscription model will change that. Example, the "20 free pages" may represent what the average casual user does in a given time period, which may mean that the NYT retains all of the existing ad revenue, plus they gain on subscription, example. We don't know, because we don't have access to the details of how their site runs.
The economics are just very different from a straight ad revenue based model. I doubt that Mike would want to put the results from his CwF thing on the table to show the amount of income that was generated while retaining full ad views. I don't expect the NYT will want to do it either.
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A counter idea...
One: They have left so many holes in their paywall that a casual user like myself would never even see it. (I get my news by reading blogs like Techdirt, or aggragators like Slashdot, ect.)
Two: This is a big assumption, consider that they have been looking at their traffic and realize that most of it comes from direct links from blogs, twitter, facebook, and others. Their heaviest users might be just the kind of people that would pay for the news from the NYTs. Be they from wall street, or blog writers who make their living writing about the news.
Three: The last assumption would be thinking that they are not dumb. 98% of the people that come to their site wouldn't pay for a subscription. But 2% would. So how would you setup a paywall that lets in most of that 98%, while charging the people that find your site the most useful? Something like they have done.
So the big question is how would this work for them and I think I have an idea. A blog writer is looking for stories to write about when they go to the NYT. Adds are wasted on them. How would they view the content if they were paying for it? It would have more value to them. And they would still be able to link it in their blog without worry for their readers.
So it might actually work them them.
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Now if you wanted to lump government, wall street, conservatives it would be more valid but not the tea party as they would not belong in even that group as correct answer to 2+2 for them would be '54'
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What if ad blocking became a default feature in Internet Explorer, like popup blocking is now? Imagine a world where even the non-tech savvy block ads. Perhaps Mr. Kulp has inside info on this, Microsoft's latest desperate attempt to topple the Google giant?
Or he could be biased, bribed, or just flat-out wrong. One of the four, I suppose...
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The Tea Party are Urlacher fans?
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The funny part is that it might end up back where RtT+CbF (Reason to take, copied by fans) ends up: Looking for the one sucker with the ad blocker turned off, and then trying to get him to see a million pages to pay for everyone else.
It's amusing to see how many of Mike's business model ideas end up at this dead end.
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Setting up for lawsuits
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Why can't you get past this notion that we live in some kind of static world? Advertising, like any other kind of business, adapts and changes. What gets blocked by an ad blocker isn't the only kind of advertising available. More importantly, ads can be made in such a way as to actually be desirable. Advertising agencies are FILLED w/creative people. I have full faith in them to figure out how to inform us of their products.
"The funny part is that it might end up back where RtT+CbF (Reason to take, copied by fans) ends up: Looking for the one sucker with the ad blocker turned off, and then trying to get him to see a million pages to pay for everyone else."
No, actually, the funny part of all this is that rather than have faith in good people to do good work, you'd rather come up with meaningless strawmen that have little to no basis in reality, and then whip out your gummy-worm sized man-tube and whack away at your punching dummy. Nobody is going to rely on your one "sucker". They're far too busy evolving and competing, and if they aren't, they're competition is.
"It's amusing to see how many of Mike's business model ideas end up at this dead end."
Name one. Seriously, name a modern business model that Mike or anyone else writing for Techdirt has championed that is now dead. Go ahead, I'll wait....
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(retain ad revenue since the website is free for the tech saavy)
+ (guilt some supporters into paying a subscription fee)
= (increased profits)
I'm a marketing genius too!
/sarcasm
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Name one. Seriously, name a modern business model that Mike or anyone else writing for Techdirt has championed that is now dead. Go ahead, I'll wait...
I would go into a detailed explaination of the difference between "dead" and "dead end", but I might be speaking past your understanding level. Clearly you are only reading every other word at this point.
Alas, a dead end doesn't mean dead, it just means that it is trapped, stuck with no way to move forward. The whole "sell the scarce" model dead ends where you end up with a single person overpaying dramatically for some artificially scarce item, while what they are really going is paying the freight for all the freeloaders who got the true product for free (music, movie, etc).
The discussion the other day about Zenith is a perfect example. A few people are paying $25 or $50 "donation" to the cause. But they are the few compared to the mass of people who come in, watch the free clip, and leave. They will be back (maybe) to watch the second part when it is released. They sure aren't going to pay for it. The model dead ends because it hopes that a few suckers will overpay in order to support the masses getting it for free.
it dead ends because it can't progress further. You teach most people not to pay, and you hope there are enough people who ignore this lesson and pay (way more than they should).
They aren't "dead" models, they are just "dead ends".
the funny part of all this is that rather than have faith in good people to do good work, you'd rather come up with meaningless strawmen that have little to no basis in reality, and then whip out your gummy-worm sized man-tube and whack away at your punching dummy.
Aside from your snide personal insults (and it is bigger than a gummy worm... sorry to disappoint), you obviously don't pay attention around here. People who pirate are not "good people doing good work", they are people looking and taking a free ride. If they are willing to work hard to get a music file, imagine how much effort they will put into blocking annoying ads and sticking it to the man.
Advertising only works when people see it. There are laws that limit how far advertisers can go into being part of the "conversation" before they have to announce that they are in fact an ad. People learn to filter those things out, and over time, ad blockers (with a shared dynamic blog tagging system for spam) will filter those out too. The same sort of creative people who write the ads also write ad blocking software. Plus the ad blocking software people are doing it for fun most of the time, so they really have much more time and effort to put into it.
Perhaps Mike would like to let us know how many people are using ad blocking of some sort or another. I am guessing that about 25% of the people coming here block some or all of the ads.
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The new "new math"
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I think there is much more here than Mike would like to admit.
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How come you think they will be savvy enough to block ads but not savvy enough to disable javascript and get past the paywall?
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Earthquake not required to bring down this wall.
AdBlock Plus and No Script, and Twitter feeds of the stories, and bookmarklets, and more can be used to get around, under, over and through it.
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What really gets me about your comments is your poor view of human nature and morals. I'm one of your "suckers". I paid up a lot of money (via kickstarter) for musopen to record music for public domain release - and guess what? I'm really happy that all the so called "freloaders" will be able to get the music for free and use it however they want. I get a real kick out of having made this possible.
You really need to change your thought patterns and assumptions.
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Where. Is. That. Happening?
"A few people are paying $25 or $50 "donation" to the cause. But they are the few compared to the mass of people who come in, watch the free clip, and leave. They will be back (maybe) to watch the second part when it is released. They sure aren't going to pay for it. The model dead ends because it hopes that a few suckers will overpay in order to support the masses getting it for free."
How is that "paying the freight"? What IS the freight? Zenith offers something for free, lots of people come in, the real fans donate, the non-fans don't, and we move on. Where's this dead end?
"it dead ends because it can't progress further. You teach most people not to pay, and you hope there are enough people who ignore this lesson and pay (way more than they should)."
Uh....what? You teach people WHERE YOU ARE, give them something for free, allow them to pay you for that if they want, and then use the attention to sell something else. This has been going on FOREVER. Honestly, where's the confusion?
"They aren't "dead" models, they are just "dead ends"."
I fail to see where you've yet demonstrated a single dead end. All I see you doing is postulating that people will trend towards not paying in a "give it away and pay" scenario, a model specifically NOT endorsed by techdirt. Care to try again?
"Aside from your snide personal insults (and it is bigger than a gummy worm... sorry to disappoint), you obviously don't pay attention around here."
Right. Priceless. Dark Helmet doesn't pay attention to what's going on at Techdirt....
"People who pirate are not "good people doing good work", they are people looking and taking a free ride. If they are willing to work hard to get a music file, imagine how much effort they will put into blocking annoying ads and sticking it to the man."
Imagine how much effort it would have taken YOU to realize that I wasn't talking about infringers with regard to "good people doing good work", but to the creative folks I mentioned that are in advertising figuring out how to get our attention, regardless of ad blockers and all that jazz. But you understood perfectly, you're just pretending to not have....
"The same sort of creative people who write the ads also write ad blocking software. Plus the ad blocking software people are doing it for fun most of the time, so they really have much more time and effort to put into it."
Uh, okay? It's an arms race, so what? You're acting like one side is just going to give up. Why would either side do that?
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What in your example would be a dead end would be kickstarter to offer your music for free, give you the tools for free, waiting for one sucker to come along to buy your autographed mousepad for $500 to pay for it all.
That is the dead end.
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It's paying the freight because the real costs are $x per use. Like it or not, it costs them to make the movie, and it costs them to distribute it in this manner. The few people who pay (way over what it is worth) to "support" the project are paying for everyone else to get it free. The free doesn't work without someone paying for it (because there is no free lunch).
Imagine how much effort it would have taken YOU to realize that I wasn't talking about infringers with regard to "good people doing good work", but to the creative folks I mentioned that are in advertising figuring out how to get our attention, regardless of ad blockers and all that jazz. But you understood perfectly, you're just pretending to not have....
I realize that fully. What you aren't getting is that it is just like an arms race. The "creative" folks who make ads try to find ways to get our attention, and once spotted as adverting, the "creative" folks who make ad blockers will find a way to make it go away. Advertisers do not work in a vacuum, people aren't going to say "ahh, let these ads in, because they are so creative". People will just block them any way they can. These are "good people doing good things" by writing ad blocking software. It cuts both ways, and you don't seem to want to accept it.
Uh, okay? It's an arms race, so what? You're acting like one side is just going to give up. Why would either side do that?
Did I suggest they are going to give up? Nope. What I am suggesting is that it will become increasingly difficult to support websites with an "ad based" model, and the costs to create and implement effective advertising strategies online may reach a point where they are no longer cost effective. The point of advertising is to reach people. When the people are actively tuning your message out, you are no longer reaching them. Efforts made to "reach them anyway" are more likely to be seen as annoying, rather than informative.
At that point, advertising becomes a dead end model.
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Don't like Mike's simple minded approach blind you on this one.
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Richard donated money to someone else so they could record their music.
Actually, I think just generally reading closer and trying to understand the people you're arguing against would make a great deal of difference in the quality of your arguments.
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times site:"Are you blocked?"
javascript blocker: "no"
Their best defence against such a thing becoming widespread would be to constantly change and use a wide variety of ways to detect blockers.
But then you get some horrible page loadtimes, and there are still a lot of ways to get past the wall that have nothing to do with javascript blocking.
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Paywall sponsorship
And then I got an Email message from Lincoln (the car company). It seems that, courtesy of them, I can get full, free access to the NYT for the rest of 2011. So I signed up for that. Didn't have to buy a car, though I suppose I'll get some ad messages from them, which I can filter if it becomes a hassle.
I don't know if everyone got this offer, or if something about my online profile led Lincoln to think that I'm a good target for their direct advertising. I am signed up with an NYT account for commenting on some of their blogs and things -- maybe that's the source of my good fortune.
And suddenly the NYT model makes sense: Put up a paywall that is easy to get around, but a bit of a hassle. Spread some FUD about whether the various loopholes will be there forever. And then sell to a big advertiser (or several) the right to offer free total access for some fixed price to a selected slice of your readers.
So now they don't lose me as a reader, they get a new revenue stream from Lincoln and any other companies who might be part of this program, and I'm supposed to feel grateful to Lincoln for this special service -- which I do, but just a tiny bit. It's not a bad way for NYT to make a bit of extra cash, and they will also get some subscription income from the wealthy and/or clueless.
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Re: Paywall sponsorship
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ii) The recordings will be put in the public domain - so they will be offered free to everyone (even you!)
iii) I get nothing from this other than the rights (shared with the whole world) to use the recordings completely unrestrained by copyright - and the warm glow of having done lots of other people (who can't affford it) a favour.
What is happening is that content in future will be funded only by those who are prepared to give it away (there are more of us than you think). We will pay the artists and they will create wonderful stuff for us.
Those who wish to consume without paying can do it - but they have no power to determine what is created.
Those who want to use art as a means to make money (but are not artists ) will be cut completely out of the loop.
This is not a dead end. This is the fulfillment of the prophecy
"The meek shall inherit the Earth"
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the chinchillas gave it one sniff and would not go near it after that and the cat pretty much reacted in the exact opposite manner as they do with tuna. as soon as they heard the first line opening up, they ran and hid.
now if you will excuse me, i have argumentbarf all over the carpet that i need to clean up now thanks to you.
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although, I also do not believe that the internet is an endless vat of free stuff. In fact, case in point... i spend money on the internet every month.
you see, it does provide value to me unlike the NYT.
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times gives you 20 pages for free. Run a php session for each user. As each pages is loaded, us javascrpt to write a cookie. Then on the next page, read the cookie. If the cookie isn't there, then javascript is not enabled. Track the user with php for the 20 pages, and then blow them off - this can be done simply by redirecting the next page request from that user.
That is a very simple way to do thing. Depending on the type of CMS they are using to control the sites, the CMS may also have internal tracking for each user session.
It isn't as clear and obvious as you might think.
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Ads?
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and given the usual US citizen's definition of liberal (anyone who's not strongly right wing economically, and thus is clearly a communist :S) this is actually a sanner definition than usual.
after all, the common man is hardly in wall street or government...
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Re: Time to down grade Citigroup.
and the stock/share market is not an indicater of anything except how many people have been conned into the latest 'bubble' (which are more like sand piles, actually, but whatever)
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Sales Will Try To Spin It
The NYT salespeople will change tactics, and claim to advertisers that the enw traffic coming in via the paywall will be more 'targeted' and 'qualified' compared to random internet strangers.
This will only work for a month or two. The great thing about online marketing is that everything is trackable. Advertisers will know if their revenue from NYT ads is going up or down, and react accordingly.
At the same time, the NYT will 'secretly' encourage or permit loophole access because they know that their advertising revenue will depend heavily on loophole visitors.
The whole thing will fail in the end, because the paywall will cut out a lot of page views and their ad revenue will drop. Shareholders will get angry.
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The truth is that people would much rather pay by viewing ads only on the articles they actually read than by subscribing and paying at all times regardless of the value they are getting for their money.
Why would any reader of the NYT want to pay for/subsidize all of the hundreds of articles that they don't have the time or inclination to read?
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If My Memory Serves Me
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Could somebody please run these through an AutoTuner?
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