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Why Paid News Online Will Not Work

Posted on 20. Mar, 2010 by Daniel Cawrey in Features

News Corporation’s Rupert Murdoch is not a happy man when he looks at the barren landscape of print media. In fact, he is of the idea that people who want to read news online as opposed to the newspaper or a magazine should have to pay for it. This makes him feel that the less than free model that Google promotes is a freeloading conduit to all that is wrong with the non-paying Internet. So much so, that he has on several occasions threatened to sue them.

This is problematic for several reasons. The first is that those of us who have been using the internet since the nineties have grown accustomed to free content online. Because of this I think that many of us out there are hard pressed to believe that a paid content model is really going to work. But there is also another reason: eyeballs.

Eyeballs are what the advertising business is all about. And just because the content on the internet is free doesn’t mean that those eyeballs are not looking. The reality is that the money made in any type of media is eyeballs – and how many of them are looking at ads.

Let’s face it: a subscription to the Wall Street Journal print edition with home delivery six days a week is only ten dollars a month. That’s roughly 41 cents per issue. How can Murdoch’s News Corporation, which is the Journal’s corporate parent, make money from printing words onto pages of paper and then delivering it to my house six days a week? From eyeballs. This is a graph shown recently by Google’s Chief Economist Hal Varian:

Therefore, eyeballs are subsidizing the cost of doing business in print media. It also subsidizes magazines and television. Although newspaper circulation has gone down recently, which is reflected in this graph and shows the numbers have been going down steadily over the years, revenue from ads in more popular mediums has continued to increase.

It’s the revenue numbers that send Murdoch’s blood pressure out of control because those eyeballs still exist, but they are increasingly realizing that they can get general news from the internet. Plus a lot of the time it is more convenient than print because people can quickly read what they want instead of leafing through a bunch of pages.

Take a look at another graph that was shown by Varian:

The first thing that you’ll probably notice is the sea change in spending on cable advertising. But look at the Internet advertising. While nonexistent in 1995, it has indeed grown. Yet for all the posturing about paid content on the internet, the reality based on these figures is that the true age of advertising on the internet perhaps has not yet arrived when you compare it with the other mediums and the ad spending done on those.

So let’s get back to eyeballs. In terms of the digital age, we are now dealing with a huge segmentation of the market for goods and services. Remember, at one time cable was a paid service and didn’t have many ads, if any at all. Now that the cable companies and advertisers realize this is a highly targeted segment compared to broadcast networks, the dollars spent there have skyrocketed.

I know that my site targets those who are developers and early technology adopters. That will not always be the case as Google’s technologies mature into the business market, but that’s the way it is as of right now.

Sites like ReadWriteWeb captivate folks that are into the new frontiers that the web can offer. Both sites need to pay the bills, and so we know what types of people will look at the site and advertise products that readers may be interested in. The catch? You have to look at these ads and read about our sponsors, but you get free information in exchange. I know that ReadWriteWeb also offers highly specialized content for a fee as well, and I will get to that in just a bit.

How do you segment a newspaper like USA Today? You’re basically getting the eyeballs of a huge sample of people, many who will not understand some of the products or services that are being advertised to them. At the same time, the Wall Street Journal is trying to change its reader demographic, becoming more of a general newspaper than a business one. It makes sense that they are trying to change since anyone can get stock information online these days that is more accurate, but how does their ad sales department deal with that?

It will be an interesting experiment for paid content on the internet. For very specialized and thoroughly researched information that cannot be found anywhere else, people will pay fees. But that’s with the understanding that advertisers simply cannot be a part of the equation, or that said information is of a great deal of value, more so than general news. That’s because news simply has already reached a point of no return in terms of direct monetization, and there’s probably no going back.

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Tags: advertising, Google, Hal Varian, marketing, News Corporation, paid content, Rupert Murdoch, The Wall street Journal