In Defense of “Free”

The recent comScore numbers are in and the answer is pretty clear: The NYTimes.com won and won big, showing a 64% rise in readers and a 52% rise in page views over the last quarter. Why? The mid-September tear-down of the subscription edifice Times Select. TechCrunch carried the story yesterday and Marketing Pilgrim added onto it today. Here is Marketing Pilgrim’s interpretation of the NYT’s decision to go free:

The main reason behind they changed models is that search engines were bringing a new demographic to the site. In the past more people
went directly to the site, and they were often regular readers who are loyal to
the paper. People coming to the site via search engines were turned off by
having to subscribe. Most likely they are looking at a specific article and want
to pick and choose rather than read the entire paper. Sort of like how we want
to buy our songs one at a time rather than buying the whole CD.

Right now subscribers generate about $10 million a year in revenue. After
running the numbers the Times saw more growth potential in online advertising
revenue than in collection for subscriptions.

I like the iTunes analogy. I think they are right on. I believe most online consumers of media, be they consuming text, audio or video, want it a la carte. They don’t want to be forced to buy the entire paper, the entire CD, the entire movie. A snippet here, a song there, a micro-chunked video now and again, and I get what I want, when I want it and how I want it. This is also consistent with Digg, StumbleUpon and other community-based recommendation engines, where people read and listen to what is popular and/or what their friends are into. And this is cool. And as ad targeting gets increasingly better, the value of these recommendations only gets more valuable to advertisers seeking to reach a particular demographic with empirical, measurable results.

And there is no doubt the Mr. Murdoch has already internalized this phenomenon by announcing the freeing of the Wall Street Journal Online. He knows that edifice Rex - the realm of Old Media - is rapidly dying. And he is going to get out in front of it. MySpace was only the beginning…

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COMMENT:

AUTHOR: Rob

EMAIL: rob@businesspundit.com

URL: http://www.businesspundit.com

DATE: 12/13/2007 11:05:21 AM

Roger,

I know I’m in the extreme minority here, but I disagree with the movement to free.  I think it’s good in the short term, but will be bad in the long term.  The economics just don’t make sense to me.  Here is why:

1.  The barrier to entry for content creation is low

2.  Advertising dollars will not expand forever, and they aren’t expanding as fast as content creation.

So as a result, you have ever more content chasing a limited number of dollars.  

3.  Consumers will move away from search engines, which benefit high PR sites like NYT and WSJ, towards more social search

4.  If #3 is true, NYT will not have the user growth needed to sell more ads to make up for lost revenue

5.  If #3 is false, media organizations will pursue more niche strategies to be found for specific search engine searches, which means each given piece of content attracts a smaller piece of the ad pie, which means that funding content creation becomes a losing game.

I’m on the entire flip side of this.  I think over the next 3 years, consumers will start to pay for quality content because it will be worth it to filter through the massive amount of crap on the web.  I must be in the minority of searchers here, but I think Google overall gives lousy results, and I rarely find what I am looking for, although admittedly I have esoteric interests.

The only way I see a free web sustaining itself is if personalization technology improves to the extent that I don’t need to sift through aggregators and RSS readers and everything else I use to find content now.  In that case, the technology will actually recommend the best content for me, and will automatically scour millions of sources.  But we are a long way from this, and because it will be computationally intensive, it’s not the kind of thing people like to do on the web.

I can point to my own blog as a micro-study.  As my search traffic has exploded because I have over 3000 posts, I haven’t made very much more money.  Average time on the site has dropped from 2 minutes to 20 seconds, as search engine visitors just hit and leave.  I’ve had days where I’ve received 15K visitors from Reddit or 50K visitors from Digg in a single day, and the impact on advertising has been negligible, because people that come in from those sources don’t click ads.  I get over 1500 visitors a month from search engines to my critical post on Jim Collins’ “Good to Great,” (I’m on the front page of results) and most of those people read it and click away.  They don’t click ads or click around the site.

My experience has been that search driven ads are a lousy way to make money IF you are a content creator.  For aggregators, they are great.  But for content creators, you should focus on building a tight community and then selling ads directly instead of using contextual search.  

In other words, I think the economics of web content are becoming worse.

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2 years ago | view comments |  Internet