Monday, February 22, 2010

Metering Paid Content So It Protects -- Even Grows -- Online Ad Revenue

It used to be simpler: If you want to maximize online ad revenue, don't even think about charging for your content.

But several speakers at Friday's paidContent conference said that the relationship is becoming less black and white. And some, notably Managing Director Rob Grimshaw, argued that paid content can actually increase online ad revenue.

"There's no tradeoff between having a subscription business and an ad business," Grimshaw said. "The more registered and paid subscribers, the more successful the advertising that results.", the online edition of the Financial Times newspaper, has become the standard-bearer for the so-called metered approach to charging for online content that The New York Times and others plan to adopt. users can read a few articles each month before they're asked to register, and 10 articles before they're asked to buy a subscription.

Grimshaw said has 1.9 million registered users and 121,000 paying users, categories of users that advertisers find significantly more valuable than visitors who have not invested the time and/or cash in the site. He said such users are especially valuable in a time of declining ad revenue: "In a real tough market, it gives you a competitive edge."

The New York Times abandoned its earlier paid content venture, Times Select, not because it wasn't making money (220,000 users were spending $10 million a year), but because the paper concluded it would make more money from advertising on freely-available pages.

Now the paper hopes its metered subscription model will drive overall revenue.

Martin Nisenholtz, senior vice president for digital operations at the Times, said:
"Our goal is to maximize overall revenue. The goal isn't to say we've created largest circulation revenue base or the biggest advertising revenue base. It is to maintain the largest overall base of revenue. The meter has to do with subscriber and advertising management. If you move the meter out and in, the model you create around that can be maximized for overall total revenue."

Nisenholtz declined to provide specific numbers, but Steven Brill, co-founder of the Journalism Online system to enable content charging, said he estimates that the Times will put less than 10 percent of its online ad revenue at risk with the metered online subscription approach it is developing.

It's unclear to what extent paid users can boost the online ad revenue of smaller publications. Jim Shine, publisher of the 32,000-circulation Lima News in Lima, Ohio, told me last year that such a boost to ad revenue had not yet materialized from the pay wall the paper installed last August.

Times Company CEO Arthur Sulzberger cautioned against drawing industry-wide lessons from New York Times experiments: "Answers that we are coming up with are not necessarily the right answer for other news organizations locally. There are other opportunities that might work for them."

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