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.