The Greatest Trick The NYTimes Ever Pulled Was Convincing The World Its Paywall Exists

from the paywallonomics dept

It's no surprise that we've been pretty big critics of the NYTimes' paywall strategy -- not because we don't want the NYT to make money, but because we don't think it's a particularly good strategy. However, people are now claiming that it's undeniable that the NYT's paywall has been a huge money-making success. And looking at the numbers, I'll admit that they're way more impressive than I expected -- by a lot:

The Times introduced digital subscription packages on NYTimes.com and across other digital platforms in Canada in mid-March and globally at the beginning of the second quarter. Paid digital subscribers to the digital subscription packages totaled approximately 224,000 as of the end of the second quarter. In addition, paid digital subscribers to e-readers and replica editions totaled approximately 57,000, for a total paid digital subscribers of 281,000 as of the end of the second quarter.

In addition to these paid digital subscribers, as of the end of the second quarter of 2011, The Times had approximately 100,000 highly engaged users sponsored by Ford Motor Company's luxury brand, Lincoln, who have free access to NYTimes.com and smartphone apps until the end of the year, and approximately 756,000 home-delivery subscribers with linked digital accounts, who receive free digital access.

This is definitely more than I expected, and it does show a much faster trajectory to get to those results than its last paywall. The Forbes account of this notes that, as a conservative estimate, this could mean an additional $40 million per year for the NYT's topline. Separately, it also points that the loss of traffic from the paywall might not even be noticeable, claiming that it received 33 million unique visitors per month which was "in line with its average for the preceding 11 months."

That's all impressive. And once again, I'll say that it's much better than expected and, perhaps, I misjudged the potential for the paywall. That said... digging into the numbers, I'm still skeptical for a variety of reasons. First up, this is a drop in the bucket. Even if the company earns an extra $10 million per quarter from this, the paper also lost $114 million. But, that's a little misleading on its own, as it includes a giant writedown.

But, the real question is what could the NYT be doing instead. It made $84.6 million in the quarter from digital advertising alone, way more than it made from subscription fees. But the growth there was tiny -- only 2.6% at a time when I know companies are looking to do really interesting digital promotions and will pay for them. And while the company says that its unique visitors were "inline" with previous 11 months, what you want to hear is that the traffic is growing. The use of unique visitors is interesting, since most ad campaigns work on a CPM basis, where views are what counts -- and other estimates suggest that pageviews have dropped noticeably. This would make sense, actually. Since the "paywall" still lets people view up to 20 pages before it sorta stops you from seeing any more, you could see how the same number of people would go there, but actual pageviews would decrease.

But what if, instead of focusing on the paywall, the NYT had focused its efforts on adding more direct value to the site itself, to (a) get more visitors to the site and (b) to keep them there longer, viewing more pages and doing more? At the same time, if they started looking at more creative, premium sponsorship/ad campaigns, I could see how they could have spent the same resources in a much more scalable growing arena, rather than having it go into a more limited paywall. That is, if they'd focused on continuing to grow traffic and creative ad campaigns, that's something that will continue to grow. How many more subscribes will they get with the paywall? If people haven't subscribed yet, how much more will it take to get them to subscribe, when it's pretty clear that anyone can get around it. I have to admit I've never even noticed the paywall at all in all my surfing.

Early on, I called the NYT paywall the Emperor's New Paywall, but perhaps a more interesting point is that, as with the Emperor, the NYT's has done an amazing job convincing lots of people that the paywall is really there and that they have to pay to view articles on the site. It's a great trick. But can it last? People, who aren't paying now, don't have much reason to start paying, so I'd expect that the subscribers will plateau at some point relatively soon. I'd imagine that the younger generation is barely paying at all. The strategy brings in some money now, but it seems like a pretty small amount for selling out future growth opportunities.

Filed Under: economics, journalism, paywalls
Companies: ny times

New York Post Tries Hamfisted Safari Browser Block To Try To Sell More iPad Apps

from the good-luck-with-that dept

DannyB points us to the news that apparently the folks at the NY Post are still figuring out how this web thing works. As there's been a lot more attention paid to things like apps, they put together a fee-based NY Post app. I have no idea if it's any good, but somewhere along the line, it appears that someone at the Post realized that people could bypass the app by simply visiting the NYPost website via the browser on the iPad. Rather than think that perhaps they should focus on making the app more valuable and worth paying for, the geniuses went a different direction and decided to block access to anyone arriving at the NYPost.com domain via a Safari browser on an iOS device. Will this make people buy the app? Probably not. It might encourage them to go to competing sites, however. Even more ridiculous is that apparently no one at the Post realized that there are other browsers: you can still get to the site via alternatives like Opera and Skyfire.

Filed Under: apps, ipad, ny post, paywalls, safari
Companies: news corp.

Washington Post Managing Editor Explains Why Focusing On Direct Revenue From Consumers Is Short-Sighted

from the free-is-expensive,-but-it-can-pay-off dept

From the title of this article in Forbes, by Raju Narisetti, the managing editor of the Washington Post, you might think it was going to be another rant against "free" online and talk up the wonders of paywalls. After all, the article is called "Why Free is Very Expensive." But, the article actually is much more nuanced, and effectively explains why folks at The Washington Post think that a paywall doesn't really make much sense:

Here is why revenue from readers is unlikely to be our salvation.

-- A metered model makes your business susceptible to the will of a few readers--those who consume the most articles/pages. Often, less than 5% of these kinds of visitors account for nearly 50% of your page views. And they have very little barriers to exit.

-- Aggregators, like Huffington Post, will still find ways to deliver your content for free and often with more engaging technologies since they don't have to invest much in content creation.

-- The infrastructure for payment systems, data security, customer service, reader acquisition and retention for digital subscriptions costs a bundle to build and run, yet your consumer price points need to be low, making the return on investment a clear challenge.

-- Our Web sites were to be trusted safe havens protecting, informing and entertaining you amid a deluge of digital content. And when you came to us, we would make money off you. But that was before your friends became your trusted sources. There are 600 million of you on Facebook and we know we need to be there too with our content. We haven't even begun to fathom that monetization challenge. So, we could up end an expensive drawbridge around Web sites that are already losing their value?

-- Scrolling on Web sites has always been a poor experience for consuming news. Now, just as new devices and digital experiences--none invented by major news brands--create richer engagement outside our sites, we are talking about charging readers for sub-optimal Web site consumption.

He does point out, as everyone agrees, that it is costly to run a major modern news operation, and that the digital business models for large publications like the one he works for haven't kept pace. But, thankfully, unlike some of his competitors, he wants to look forward and not backwards. He's looking at the ways large successful internet companies are making more and more money by increasing convenience and building more value for users:

I, for one, think that the golden age of targeted digital advertising is yet to come. Do we really want to trade that larger opportunity for the much smaller and unreliable pursuit of consumer dollars? I also wonder if we aren't better off redeploying our newsroom resources to create new revenue streams and more engaging digital platforms than trying to make the traditional Web experience better and charge for it....

Free is indeed very expensive. But, what the prolonged and knee-jerk debate about free vs. paid inside our news organizations shows is that we still have what led us here in the first place: An imagination deficit. Rather than apply an ‘all or nothing' approach focused, perhaps wrongly, on just our Web sites, we should be willing to make creative bets on our business model. We continue to make what is being consumed--in large quantities. It is time we figured out how to make it easier, more engaging and useful. Despite their soaring valuations, Facebook, LinkedIn and Twitter don't create much, if anything at all, by way of original content. And, for that matter, neither do Google or YouTube. They simply make it easy, useful and engaging to their audiences. These are incredibly disruptive times and one thing is clear to me: There isn't time or room for incrementalism at major news organizations.

It's nice to finally see someone at a major publication recognize this point that many of us have been making for a while. For all the talk of paywalls, there's been very little done to actually increase the value of the online experience for users at these newspaper sites. There's been very little effort to build and support community. It's nice to see that at least one major paper is hopefully moving in that direction.

Filed Under: business models, journalism, paywalls, raju narisetti
Companies: washington post

NYT's Gets 100,000 Subscribers To The Paywall... But It's Too Early To Tell If That Means Anything

from the let's-wait-and-see dept

With the NYT's latest earnings is the news that it's been able to sign up 100,000 people for its new not-really-a-paywall. However, even the NYT seems to admit it has no idea what this number really means, since many of those include discounted offerings, and there's no clear indication whether or not those people will stick around later. In fact, as reader Ragaboo suggests, the NYT was using Groupon to push super cheap subscriptions over the past few weeks, leading to speculation that it was looking for a last minute "push" to boost its numbers. Separately, we'd already seen that automaker Lincoln was offering people free subscriptions as well. So, while this is an interesting bit of data, it'll be more interesting to see what happens next. The other interesting tidbit is that digital ad revenue grew 4.5%, which seems slower than some other online properties lately, and which certainly raises questions about whether the paywall is harming online ad growth -- especially considering the rather substantial drop in traffic. Given that online ad revenue continues to rise, and subscriptions to the paper continue to drop, it still appears like the NYT is betting on the wrong horse in this race.

Filed Under: newspapers, paywalls
Companies: ny times

If You're Going To Ask People To Pay For Your App, NYT, You Should Make Sure It Doesn't Suck

from the just-a-suggestion dept

We've been quite critical of the NYTime's "Emperor's New Paywall," but there's another aspect to the discussion that goes beyond just the "paywall" itself, but the fact that part of that "paywall" is really granting access to either a smartphone or iPad app. Of course, they're charging an awful lot for the privilege of having access to the app, and you'd think if they were doing that, the app had better be damn good. Unfortunately, that appears to not be the case. Lots of people are giving the apps pretty bad reviews. Yes, some of them are just complaining about the price, but even if you ignore those, the people who are actually paying seem to be complaining quite a bit as well. In particular, many are angry that it removed functionality from the old app, and people who had used the old app to archive favorite stories had them all deleted. Others are complaining that the app seems to crash all the time, and does not appear to be well implemented at all.

This raises another danger of "charging" for things that might otherwise be free. When you put up a price on things, you also increase expectations. If you fail to meet those expectations, you could face some serious backlash (not to mention customer service costs). It's really quite amazing that in those 14 months and with that $40 million, it appears that the NY Times didn't really spend all that much money on actually making their smartphone and tablet apps work well.

Filed Under: apps, business models, journalism, paywalls
Companies: ny times

How Else Could The NY Times Have Spent $40 Million?

from the let's-come-up-with-some-ideas dept

While we've already been suitably stumped over the question of how the NY Times spent $40 million dollars to create the Emperor's New Paywall, perhaps we should take a more proactive view and discuss what else they could have done with that $40 million to put it to use more productively. That link has a few suggestions, from creating better products to investing in startups. I'm still wondering why it didn't use that money to simply create more value for users -- more features, more tools to keep them coming back, greater access to journalists and each other, more community features, etc. So how else do people think they could have spent that $40 million more productively?

Filed Under: business models, journalism, paywalls
Companies: ny times

Saying That The NY Times Paywall Is Dumb Does Not Mean That We Don't Want The NY Times To Make Money

from the this-is-real? dept

Someone passed along Simon Dumenco's AdAge report in which he purports to debunk the bloggers who are criticizing the NY Times' paywall. Frankly, it may be the dumbest argument I've seen in a long time, in that it makes absolutely no sense. First Dumenco mocks BoingBoing (where Cory Doctorow is not a fan of the NYT paywall) because it didn't have employees kidnapped in Libya like the NY Times did. And... somehow, this is proof that a paywall makes sense. I'm not kidding.

Dumenco's demented argument appears to be "the NY Times does real journalism, the people complaining do not, and thus mocking a paywall is bad." But that completely and totally ignores the very point that people are making about the paywall. We're not mocking the paywall because we don't like news organizations doing real journalism, or we think they don't deserve to make money. We're mocking the paywall because it won't help the NY Times actually make that much money. It's a bad idea not because it'll help the NY Times continue to do serious reporting, but because it won't actually help them do that. That's the point that many of us -- including Doctorow -- were making. But instead of responding to that, Dumenco made up a complete straw man that somehow people against the paywall are against the NY Times doing reporting at all.

Even worse, he compounds the ridiculousness of the argument by then mocking Doctorow's support of business models that include "free" as a part of the business model by noting that Doctorow sells physical books, even as he gives away digital copies of all of his books. It's as if Dumenco's brain can't comprehend rather simple concepts. When people talk about the use of free as a part of a business model, it doesn't mean that everything must be free. For example, I read Dumenco's ridiculously stupid article online for free. Does this mean that Dumenco also doesn't believe that the NY Times should make money? That seems to be the logical conclusion of his illogical argument.

We see this kind of brain-dead logic all too frequently in discussions of business models in the digital age. I tend to think of it as the mental divide-by-zero error, wherein otherwise intelligent people simply stop thinking, the second someone mentions "free" as a part of a business model. Suddenly, they think that this means "absolutely everything must be free and no one should make any money at all." And yet, no one argues that. They're arguing about what things should be free, and what it doesn't make sense to charge for if you actually want to make money. For example, charging for a paywall online is probably not a very good business strategy to make money. Saying that doesn't mean I don't want the NY Times to make money. It means that I think they could make more money by putting in place an alternative business model -- such as by getting people to pay for added scarce value, rather than abundant content.

Filed Under: business models, cory doctorow, free, paywalls, simon demenco
Companies: ny times

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.

Filed Under: business models, economics, paywalls
Companies: citigroup, ny times

Why The NY Times Paywall Business Model Is Doomed to Fail (Numbers)

from the dude-where's-my-math dept

Not considering technical details (every wall can be brought down), even by its own business model the New York Times' paywall is doomed to fail.

Last Friday's Financial Times had some interesting numbers.

• Fact 1: According to analysts, the New York Times only needs to convert 1 to 10 per cent of the online visitors in order for the model to pay off.
• Fact 2: NY Times chief executive Janet Robinson has stated that they only expect about 15 per cent of visitors to encounter the paywall, since visitors can read 20 articles per month for free.
• Fact 3: Full website access and the mobile app are bundled for $15 per month. For the iPad app + web you pay $20 per month. $35 for all three.
• Fact 4: One analyst argues that the NY Times could earn $66m per year if it converted just 1 per cent of the visitors. This would mean they go from paying nothing, to paying (at least) $195 a year.

There is no way these numbers add up. Consider fact 1 and fact 2. First of all only 1 per cent might actually not be all that easy, let alone 10 per cent. Secondly, the 1 per cent is misleading, as they'll actually have to convert 1 to 10 out of every 15 visitors to encounter the paywall. So they actually have to convert 6 to 66 (!) per cent.

Next, the pricing might be too high. $15 per month is a lot for consumers who are not used to pay for news online, especially since there's no additional value as Mike commented last week. I'm not saying nobody will pay, but dragging in the 6 to 66 per cent of the visitors will be challenging, to say the least.

I cannot imagine this paywall to be successful. They can probably kiss the $40m investment in the development goodbye.

Filed Under: math, paywalls, predictions, subscriptions
Companies: ny times

It Took The NY Times 14 Months And $40 Million Dollars To Build The World's Stupidest Paywall?

from the maybe-we-can-confuse-people-into-giving-us-money dept

We've been waiting patiently for almost 14 months since the NY Times announced that it was going to take another crack at a paywall -- something that it had massively failed at last time around. You would figure that given that amount of time, maybe they'd actually get something right. Instead, it looks like they may have gotten almost everything wrong. I'd point you to the NY Times' own explanation of the amazingly complex paywall, but I don't want to use up your limited number of "free page" views, so instead, I'll point you to everyone else's, often much more intelligent, analysis of the paywall, starting with Felix Salmon, who works through the details and can't make any sense of it.

For starters, the plan is confusing. You get 20 page views for free. You can also get around the paywall five times per day if you come via a search engine. Or are reading one of their blogs. Or come via a link from another site, which might mean I can link to NYT stories, but why risk it? Top news is sorta free and certain stories might be free. Maybe. Then, if you're a paper subscriber you get the website for free. Okay, so what's the paywall. For $15 for every four weeks (not every month), you get access to everything on a laptop/desktop or a smartphone. But not an iPad (um, unless you use a browser, I guess). For $5 more you lose the smartphone access, but gain iPad/tablet access. Huh? Exactly. For $35 every four weeks you can get the NY Times on both a smartphone and the iPad. Oh, and if you pay, you still see all the ads. And, finally, this is the introductory pricing. Who the hell knows what the final pricing is. So sign up and expect to have to pay more later. Isn't that appealing?

They spent 14 months and over $40 million on this?!?

It feels like something that was completely developed by committee group-think. It's one of those things where they're sitting around and someone timidly suggests a dumb idea ("I know, for $5 more we take away their smartphone access") and, because they have to come up with something, someone else says "sure" and then they think there's validation of a good idea. But there's no one brave enough in the room to say: "Guys, the newspaper is digital. Charging different amounts based on the hardware is like charging people different prices for listening to the same music on headphones vs. speakers." But no one did that. And because they had a committee, who kept making bad suggestions like this, and 14-months to keep upping the stupid, they spent over $40 million on it.

And here it is. Well, if you're in Canada, that is. Why? Who knows? The NY Times apparently decided to see if they could set off the mocking bomb in a remote area by launching in Canada first, where perhaps they hoped people would be too polite to say "this is dumber than putting gravy on french fries." If you're in the US, you have a few more weeks to get your life in order and to stop reading the NY Times.

Digging into the economics, I'm having trouble seeing how this helps at all. Obviously, some people will pay. But it's not going to be nearly enough to overcome the costs of this program and the likely massive cost in customer service to deal with putting forth the most confusing paywall possible. On top of that, it will decrease people going to the actual website, meaning fewer ad impressions, meaning that they're killing off ad revenue at a time when ad revenue has been going up significantly. Last time the NY Times did a paywall (for just its columnists), many of the columnists got annoyed that their work was hidden away, which made them significantly less relevant. In the last few months I've spoken to a bunch of journalists at newspapers who are considering paywalls, and all those journalists seem to be considering finding a non-clueless publication to work for.

Oh, and missing from all of this? Any attempt to add value. There's nothing new of value to pay for. Just a paywall. Which takes away value.

Perhaps I'll be proven wrong, but I can't see how something like this succeeds. It's like a giant experiment in wrongness. It gets the user motivation wrong. It gets the economic model wrong. It gets the pricing wrong. It gets the value proposition wrong. It's the perfect combination of wrongness, which they now want you to pay for. I think I'll pass.

Filed Under: business models, journalism, paywalls
Companies: ny times