Paywalls: Just Plain Dumb

I don’t know how anyone could look at the traffic data coming out of Murdoch’s paywall initiative and not conclude that they are ill-advised and monumentally stupid.

According to data from Experian Hitwise, which charts Internet traffic, visits to The Times of London and The Sunday Times’ Websites have dropped by 66% since parent company News International put those sites behind paywalls on July 2.

[From London 'Times' Sees 66% Traffic Drop, Post-Paywall]

Just 12% of The Times pre-paywall audience created a registered account and of that new number of 10% actually agreed to pay for the content. Couple that with 12k iPad apps that have been sold and you are looking at less than $20 million a year in revenue, which come nowhere near close to supporting the cost structure of a newspaper as large as The Times.

As Steve Forbes said in an interview on Bloomberg radio just last week (I don’t have the link and am repeating the segment from memory), paywalls don’t change the economics of journalism and while these companies are driven by an absolute requirement to find new revenue sources paywalls alone are not enough. Forbes went on to describe how a fundamentally different way of delivering advertising, as integrated programs across many sites and tailored for specific advertiser audience targets (not demographics alone) are how they are changing the dynamic.

Paywalls are dumb, most certainly, not because they are an attempt to monetize content or because they attempt, as Murdoch has declared, to focus on a smaller but higher quality audience. Paywalls are dumb because they, as The Times numbers indicate, prematurely drive down the audience denominator number and limit the ability do the kind of integrated advertising strategy that Forbes outlines. The cost to serve the pre-paywall audience is not significant but the cost to create the content is, and now we know, at least so far, that the revenue generated by a paywall on a major media site is insufficient to fund either.

[Editor’s Note: Jeff cross-posted this at his personal blog. –mrh]

About Jeff Nolan

My name is Jeff Nolan and I write Venture Chronicles. What started, in 2002, as a simple initiative to understand this thing called “blogs” that I kept hearing about has evolved into something much more significant. Home About Venture Chronicles About Venture Chronicles My name is Jeff Nolan and I write Venture Chronicles. What started, in 2002, as a simple initiative to understand this thing called “blogs” that I kept hearing about has evolved into something much more significant. Along the way to becoming a bona fide blogger I started to understand the implications of user generated content. At the time I was a venture capitalist for SAP, the enterprise software company, and in my travels in the enterprise software market it became evident that blogging would be a powerful communication channel for enterprises to use, what we now call social media, and a powerful information collection mechanism for bottom up corporate intelligence. Combined with search technology, social networking software, and wikis, I was witnessing the inception of an entirely new generation of knowledge management software. I am currently the VP Product Marketing for Get Satisfaction, the simple and effective way to build online communities that enable productive conversations between companies and their customers. Over 50,000 companies use Get Satisfaction to create a social support experience, build better products, realize SEO benefits, and take advantage of brand loyalty behaviors that results in strong word of mouth marketing experiences in the market. I can be reached at jnolan-at-gmail-dot-com.