insideview Paywall Q&A A fresh look at industry issues through the expert eyes at Novus. Feb 2010 ISSUE 3
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1 Feb 2010 ISSUE 3 insideview fresh look at industry issues through the expert eyes at Novus. Paywall & It s no secret that digital publishers are always seeking new ways to monetize their content. But with online ad revenues at U.S. newspapers dropping 17% from a year ago* and The Economist declaring 2010 The Year of the Paywall, the idea of charging for online content is gaining steam like never before. Paywalls themselves remain controversial, sparking much debate about when and how (and in some cases, whether) they should be implemented. Not surprisingly, points of view on the issue depend on which side of the wall debaters see themselves standing on. If you re inside the paywall, they can provide security, protection and profitability. If you re outside it, they can shut you out suddenly and unexpectedly. dvertisers are understandably curious to see what happens in the coming months, and eager to know whether paywalls will have a positive or negative impact on their audience reach. s always, our purpose with this InsideView is to take a clear-eyed look at the issue, correct what can often be confusing or misleading information, and provide the clarity that leads to informed decisions. * , Newspaper ssociation of merica
2 2 What is a paywall? In its simplest terms, a paywall is a digital mechanism that separates free content from paid content on a website. In other words, if you re cruising through WSJ.com reading articles for free, and then a window pops up telling you that the next article requires you to buy a subscription, you ve just encountered a paywall. In fact, paywalls are nothing new. Salon.com famously built one around its news content after 9/11 eroded its ad revenues. The site required readers to buy a subscription, then later offered the option to earn a free Day Pass by watching a sponsored ad. Results were mixed, as the paywall delivered much-needed revenue, but also stunted growth and alienated some readers. Conflicting paywall outcomes persist to this day, because, as former Salon.com Managing Editor Scott Rosenberg recently noted to guardian.co.uk, Paywalls are psychological as much as navigational. content-based paid content security pop-up digital mechanism paywall revenue online content frequency-based paid content internet premium day pass
3 3 What types of paywalls exist? Paywall is really a catch-all term for any border that restricts content and requires payment. Within that realm, several paywall types exist: Content-based paywalls are increasingly common on newspaper sites. Certain information (such as breaking news and reporter blogs) is provided free; while premium content (such as investigative journalism and popular columnists) sits behind the paywall. To view premium articles, users must purchase a site subscription usually monthly or yearly with print subscribers generally receiving free online access. Frequency-based paywalls treat content equally, but allow visitors a certain number of free articles (of any kind) per day, week or month before requiring payment. Micropayment paywalls can be either contentor frequency-based, but require a small payment (rather than a subscription) just for the article the visitor wants to see. These payments have traditionally been solicited through pop-up windows. But as the New York Observer reported in November 2009, popular magazines such as Time, People, Sports Illustrated, The New Yorker, Vogue and O are exploring an itunes store -like micropayment model for their premium online content. (pple s recent release of the ipad could also influence this trend.) pp-based paywalls keep online content free of charge, but require smartphone users to pay for the app that provides mobile access. This approach is most notably being employed by the U.K. s The Guardian. Paywall Usage Paywalls rise, fall and change frequently. The following provides a cross-section of recent activity. Content Providers with Partial Paywalls WSJ.com FT.com Newsday.com TheEconomist.com Variety.com SouthCoastToday.com ConsumerReports.com Some xel Springer properties (Germany) TheGuardian.com (paid iphone app) Paywalls Coming Soon ll News Corp. Properties (next 2 years) NYTimes.com (2011) Chicoer.com (Chico, C Enterprise-Record) (2010) YDR.com (York (P) Daily Record) (2010) DenverPost.com (next 2 years) MercuryNews.com (next 2 years)
4 4 Which publishers have implemented paywalls? Proliferation is fluid, but perhaps the two most well-known existing paywall sites are WSJ.com (The Wall Street Journal) and FT.com (the Financial Times). dditional paywalls can be found on such sites as Consumer Reports, Newsday, The Economist and Variety. On the impending paywall front, Rupert Murdoch caused a stir by announcing that News Corporation would convert all of its online properties to paywall systems in But thus far only WSJ.com and SouthCoastToday.com (the website of the Standard- Times of New Bedford, M) have made the leap. The New York Times recently made a point of announcing, a year early, its plans to implement a paywall system in Similarly, MediaNews Group announced impending paywalls on websites for the Enterprise- Record (Chico, C) and the York (P) Daily Record, probably in 1, nd if those pilot programs go well, the publisher says it will likely expand the move to sites for the Denver Post and San Jose Mercury News. Significant on the entertainment side, Hulu.com is now considering charging viewers to watch some of the TV shows it now streams for free. What role do search engines play in the paywall debate? Search engines play an increasingly large role in how publishers think about and implement paywalls. Google and Google News currently crawl newspaper.com sites, provide brief summaries and links to articles, and generate their own advertising revenues by selling sponsored links based on those results. Depending on the publisher s wishes, Google offers multiple methods for indexing and displaying this content from performing comprehensive indexing and linking to full content, to indexing only previews and driving users to paywalls. In the middle ground, Google offers a controversial listing method called First Click Free that gives users access to content behind the paywall by allowing someone to click on a search result and read the full article once but not click from the article to any other premium site content without encountering a paywall. lthough Google maintains that its indexing capabilities are entirely at the mercy of publishers and that it does those publishers a service by driving 100,000 clicks to news sites every minute others see it differently. Most notably, Rupert Murdoch declared in November 2009 that he would remove all News Corp. stories from Google s search index files in order to close the First Click Free back door, end the perceived free ride of online news, and halt the ability for Google to unfairly monetize its news content. Google News Indexing & Click Options Listing type Free Content First Click Free Subscription Preview What is indexed? Full story Full story Full story Preview/summary What does the user see? The full story (free). The full story (free), if clicked from Google. summary.* summary.* * User must pay or register to see full story.
5 5 Do paywalls work? When it comes to paywalls, success can be defined differently depending on your self-interest and point of view. One can find negative case studies from Salon.com, tlanticmonthly.com and NYTimes.com all of whom enacted paywalls, only to drop them soon after. But what does one make of the fact that just three years after shuttering TimesSelect, The New York Times is now gearing up for another paywall try? To further muddy the waters, paywalls at WSJ.com and FT.com are largely considered successes for the publishers. WSJ.com has now reached an estimated 1 million subscribers (according to its rival, The New York Times), and by ugust 2009, the Financial Times web subscription revenues had risen a whopping 30% from the previous year. On the other hand, Newsday.com recently measured a decline in year-over-year unique visitors by 47%, accompanied by a 32% decline in page views all since it began to charge visitors $5 a week for unlimited site access*. * MediaDailyNews, 1/25/10 The final question remains: What do paywalls mean for advertisers? The issue is certainly still evolving. Publishers are far quicker to state their paywall intentions than they are to actually act. nd with so many sites placing 12- to 24-month timeframes on their paywall implementation processes, the strategy seems to fall into the wait and see what the other guys do category. One thing is clear, however: Much of the fear that paywalls will weaken the punch of advertising is misguided. Indeed, anyone with a strong offline legacy can look at paywalls and feel a certain déjà vu creeping in. s stated in our first InsideView ( The State of the Newspaper Industry ), when newspaper publishers recently implemented a circulation cleansing process, advertisers received a much better and more valuable sense of true advertiser-friendly readership: fewer readers, but of a higher quality. Similarly, paywalls undoubtedly cleanse viewership to eliminate less valuable eyeballs. For example, according to Experian s Hitwise service, 25% of WSJ.com s traffic comes from Google and Google News. That may sound like an impressive quantity, but as News Corp. Chief Digital Officer Jonathan Miller recently stated, The traffic which comes in from Google brings a consumer who more often than not reads one article and then leaves the site. That is the least valuable traffic to us. By requiring user information, paywalls also greatly increase the ability to segment by gender, age, zip code and other demographics. Erecting paywalls (and/or blocking search indexing) may sound exclusionary, but in the end, it s about quality vs. quantity. We suggest that the term paywall is overly negative by nature, focusing on the concepts of price ( pay ) and exclusion ( wall ). dvertisers would benefit from considering the process more as a trust filter that, in the end, may make highly coveted Trusted Content Consumers even easier to identify and reach. nd that no matter how you look at it is good news.
6 6 By the Numbers 25% Percent of WSJ.com s traffic that comes from Google and Google News 1. 44% Number of WSJ.com visitors coming from Google who are new users meaning, have not visited the domain in the previous 30 days 1. 4% Percentage of U.S. visits to news and media websites in Oct that originated from Twitter and Facebook % Percentage by which upstream traffic from Twitter and Facebook to news and media sites has grown since Oct ,000 Number of clicks Google claims to send to news organizations every minute. 1,000,000 Estimated current number of WSJ.com subscribers ,000 Estimated current number of online Financial Times (FT.com) subscribers, up from 101,000 in % Percent by which FT.com web subscriptions rose from ug to ug Number of corporate users of LexisNexis and Factiva who purchased special licenses to read archived articles from the Financial Times % nnual growth in online ad revenue from to % nnual decline in online ad revenue from to ,831,867 Number of monthly unique visitors to newspaper websites double the figure from five years ago 3. 1 Experian s Hitwise service 2 The New York Times 3 Newspaper ssociation of merica novusmediainc.com Two Carlson Parkway Plymouth, MN Novus Media Inc.
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