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NYT and WSJ to Dump Firewalls? August 10, 2007

Posted by Joanne KY Teoh in Advertising, Journalism, News.
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The original promise of the Web is “free.” Old distribution monopolies based on scarcity no longer holds. When you look at the fundamental economics of digital media content, it makes sense to dump paid walls. Who wants to pay when the Web is awash with content?

Talk is News Corp will end access by subscription for the Wall Street Journal online to lure visits and page views to attract more ad money. Soon-to-be owner Rupert Murdoch seems willing to sacrifice subs dollars in return for possibly earning millions more from online advertising.

Talk too is The New York Times will end TimesSelect, its experiment with paid content on the Web. Not surprising. For two years NYT online visitors could only access blogs of well-known Op-Ed columnists and other premium material. But these days many insightful commentators are publishing their thoughts on the Web for free.

NYT site figured there’s money to be made in blogs. About 200,000 signed up for TimesSelect at US$50 per year. But with ad money going into the biggest media brands NYT must weight the cost of a few million subscription bucks versus a potential few zillion online advertising bucks.

In 2006, Times Select generated $10 million. In the second quarter alone, NYT’s total Internet revenues grew 23%, to $80.9 million, a tally that includes ad sales from The Boston Globe’s online edition, About.com, and other sites.

According to BusinessWeek, if WSJ Online went free, it could see even greater online ad revenue than NYT. Already, the Journal makes some $75 million from ads. WSJ currently charges four times more than NYT for each ad shown on its Web pages.

WSJ commands this higher price despite a smaller online audience because its readers are seen as business-minded, college-educated professionals with significantly higher wealth—the sort of audience advertisers like makers of luxury goods, want to reach. If WSJ were to significantly expand its audience by moving to a free model, it won’t command the same premium because audiences would be more diverse.

For the WSJ and NYT, there’s also the opportunity to exploit information gathered from a larger stream of visitors. This information on surfing behavior can be shared with other Web sites those readers visit so they can be shown more relevant ads. Advertisers typically pay more for these targeted placements, and so the Web site is more than happy to share some of the revenue with the newspaper site that provided the information.

This behavioral targeted advertising, is growing in importance online. Over the next four years, US$9.6 billion is expected to be spent on ads targeted by a user’s past online surfing activity, according to research firm eMarketer.

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