Business Models

by Mike Masnick


Filed Under:
journalism, paywall, success, surprises

Companies:
ny times



NYT Paywall Working Better Than People Expected, But That Doesn't Mean It's Working

from the treading-water dept

Over the past few days, there's been a lot of talk about the NY Times "paywall" and whether or not it's "working." It was kicked off by a Bloomberg piece arguing that things were going amazingly well with the paywall, proving the doubters wrong. I've actually had a surprising number of people contact me about that article, asking for my take on it -- so let's make a couple of upfront statements and then explore it:
  1. First off, I agree that the performance of the NY Times paywall greatly exceeded my own expectations for it. I was quite harsh in predicting it would be a complete flop. I was wrong. It wasn't a flop. I explore why below.
  2. That said, I don't think that it's been nearly as big a "success" as some are making it out to be, and I still think that it wasn't the best play that the NYT could have or should have made -- and it's doubtful that anyone else following in the NYT's footsteps would find similar results. And that's a pretty big problem, because even if you think the NYT's paywall should be judged a "success" it doesn't change the fact that its revenue continues to drop (and not just its print revenue -- digital revenue is struggling too). Perhaps the paywall may have limited the revenue collapse, but it has done little to create a new and sustainable business model.
Separately, it should be noted that the success "numbers" are based on an outside estimate from an analyst, and could be wildly off-base (in either direction). So, some grain of salt should be taken with the claims that the paywall made as much as it did. Now, let's do a bit of exploration.

Why has the paywall done better than expected:
  • It's not really a paywall! This was a point we realized soon after the details were released, when it became clear that the paywall was so porous that no one would ever have to pay. Ever. As we noted, it's really the Emperor's New Paywall, in that it's completely invisible. If you don't want to pay, you just don't use javascript, or you remove the text after the ? at the end of the URL, or you open another browser, or you delete your cookies, or one of the half dozen or so other tricks that means you'll never ever face the paywall. In effect, the NYT's paywall is a donation system made to look like a paywall -- sort of like some museums with their "recommended donations" at the entrance. You never actually have to pay, but many people do out of convenience.
  • They don't count links/earned media: This one is big. Since so much traffic comes via links these days, one of the major problems with paywalls is that they hurt this kind of traffic. For example, we try not to link to paywalled sites whenever possible -- but we will link to the NY Times, knowing that they let in any linked traffic, and it doesn't count against your "paywall meter." That at least meant that they weren't killing off important new sources of traffic, unlike many (if not most) other paywalls out there.
  • The NY Times smartly figured out a way to get a ton of people signed up for free, to boost their early numbers. They did an ad deal with Lincoln, such that right as the paywall launched, anyone could get a free subscription by test driving a Lincoln. Who knows how many people actually took this up, but it bootstrapped the early numbers, and now everyone completely forgets about this (seriously, it's difficult to find any article that mentions this point any more).
  • In the end, it appears that the NY Times is a paper that many people think is indispensable, and because they haven't bothered to look around and find out that you never actually have to pay, a lot of people have just paid up for the hell of it.
And... for why this still wasn't a particularly smart solution or the best possible move for the NY Times to make:
  • As mentioned, overall results still suck. That's a pretty big deal. While the article claims that new subscriptions have finally started to outpace ad revenue declines, it seems unlikely that this will continue.
  • Despite not blocking linked traffic, overall traffic hasn't been good. It's certainly not increasing.
  • Proponents of paywalls insist that one key reason for a paywall is that it allows newspapers to charge advertisers more, since they better know their audience and can charge advertisers higher rates. It turns out that this is hogwash, and the NY Times has admitted that the paywall has had no impact on the rates they can charge for advertisements.
  • And part of that may be because advertisers often tend to value scale and "mindshare" over targeting. Sure, they all claim to want premium audiences backed by data, but having dealt with way too many advertisers in my life, they always always always eventually go back to the scale question. And a paywall -- even a fake one like the NYT's -- tends to limit your ability to scale.
  • And then there's my biggest issue in all of this. It's been entirely based on fooling users into thinking they need to pay, but not about adding more value for the users. As we've argued for years, there are plenty of opportunities to get users to pay, but it has to be about adding additional value beyond the content. It's why we've done things like providing additional scarce value for folks who choose to pay us. We don't block our content with a paywall, but we give people reasons to buy that provide them extra value (and feel free to do so, if you'd like).
Here's the crux of it: A solution based on giving people the same thing for a new, higher price only opens you up to disruption. A solution based on providing more value for your users that keeps them loyal to you is going to last a lot longer. The NY Times is, at the very least, in a unique position, in that many believe it provides coverage that can't be matched elsewhere. So they pay. But that's hard to say about almost any other newspaper (and for many, it's not even true of the NYT). We've been hearing more and more reports about other newspapers rushing into the paywall fold, only to find that almost no one signs up, and then they're left dealing with the aftermath of locked up content that only a few dozen people read. That's a disaster.

There are ways forward, but newspapers have to get beyond thinking there are only two choices: advertising and paywalls. The NY Times paywall has been more successful than many of us expected, but that hardly means it qualifies as a true "success story."

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  1. icon
    jameshogg (profile), 26 Dec 2012 @ 5:48pm

    Re:

    Considering the amount of success Kickstarter has had since its beginning, chances are that the success will continue once crowdfunding goes mainstream. If I were Radiohead, my next experiment would be to make an album, gather the profits I think I deserve from Kickstarter and release it into the public domain while walking away with the appropriate profit.

    If Kickstarter was going to eat itself it would have done so by now. "Eating itself" is not a new criticism - they said the same thing about Ebay with the horror stories in regards to scams there. Now they have consumer feedback, and an overall sense that people can trust the service and the legal protection if they fall victim of fraud. Crowdfunding will go the same way.

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