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The pros and cons of newspaper paywalls: a Twitter debate

Mathew Ingram

Debates over newspaper paywalls break out all the time, but not all of them involve a former Dow Jones chief executive, a former Wall Street Journal publisher, the current head of the Wall Street Journal‘s digital arm, the president of BuzzFeed and media writers for Bloomberg and All Things Digital. Just such a debate broke out on Sunday, however, and you can check out an edited version of it below (or there’s also a Storify version.)

I started things off with a critical tweet about a Bloomberg story by Edmund Lee on how the New York Times paywall was working “better than anyone had guessed,” which I contrasted with a post of mine about the decline in traffic to the NYT site (as measured by comScore) and what appeared to be a corresponding decline in advertising revenue — including digital revenue. Edmund responded that his story said circulation revenue has made up for the shortfall in ad revenue.

Edmund is right, of course — he did mention this in his story, using numbers from an analyst (which of course are estimates). And so I acknowledged that saying he “ignored” the shortfall was too strong — but still, his piece made it sound as though all you have to do is put up a paywall and your problems are solved, which I think is a Pollyanna-ish viewpoint. At which point, Josh Sternberg of Digiday noted that ad rates haven’t gone up at the NYT, as detailed in his recent post, even though that was the assumption on the part of many paywall advocates — i.e., that a paying audience would be worth more to advertisers:

@joshsternberg @mathewi fact is CPMs are going down for everyone -- paid sites at least have stemmed those webwide declines in ad rates

Edmund Lee (@edmundlee) December 23, 2012

At this point, I made the same point I’ve tried to make before about paywalls — that they aren’t a solution for everyone, and that even for those where such a strategy is working, they can’t be the entire strategy:

@joshsternberg @edmundlee: the reason I harp on this is the impression that a paywall is *the* answer -- where is the rest of the strategy?

Mathew Ingram (@mathewi) December 23, 2012

Peter Kafka of All Things Digital also jumped in to confirm that the NYT says the paywall has had virtually zero effect on ad rates:

.@mathewi @edmundlee @joshsternberg NYT people tell me pay wall has zero effect on cpm.

Peter Kafka (@pkafka) December 23, 2012

@pkafka @edmundlee @joshsternberg: the assumption was that paying customers would be seen as more valuable -- what happened to that idea?

Mathew Ingram (@mathewi) December 23, 2012

Raju Narisetti, head of the Wall Street Journal’s digital unit, responded that one rationale for paywalls is that it allows newspapers to learn more about their readers, and thus hopefully target ads better — which is part of why I am in favor of membership-style approaches rather than blanket paywalls:

@rajunarisetti @davisshaver @edmundlee @joshsternberg: exactly why I think a more membership/tiered approach is better than a plain wall

Mathew Ingram (@mathewi) December 23, 2012

I noted that the latest estimates are that the online advertising market grew by 18% in the third quarter to $9.3 billion, and yet few newspapers — including the NYT — have seen anything like that kind of increase. Why?

@edmundlee @joshsternberg: relevant stat -- digital ad sales up 18 percent. how much of that growth are papers getting?…

Mathew Ingram (@mathewi) December 23, 2012

Former Wall Street Journal managing editor and co-founder of paywall provider Press+ Gordon Crovitz then chimed in with a stat about how most paywalled sites see as much as a 30% premium for their ads — raising the obvious question of why the NYT hasn’t seen that:

@crovitz @rajunarisetti @pkafka @edmundlee @joshsternberg: so then what does it mean that the NYT has seen none of that?

Mathew Ingram (@mathewi) December 23, 2012

Bill Grueskin — former WSJ deputy managing editor and now academic dean of Columbia’s journalism school — also jumped in to add that paywalls can harm a content business because they reduce the number of readers, and that affects the scale of the business:

@rajunarisetti @mathewi @davisshaver @edmundlee @joshsternberg But scale is so diminished by most paywalls. And advertisers demand scale

  (@BGrueskin) December 23, 2012

At which point, former Dow Jones CEO Les Hinton said that quality is more important than scale:

@BGrueskin @rajunarisetti @mathewi @davisshaver @edmundlee @joshsternberg More advertisers are looking for quality not simply scale

Les Hinton (@leshinton) December 23, 2012

And Crovitz came up with what for me was the quote of the day regarding ad rates and the newspaper business:

... Of course with plummeting CPMs, flat may be the new premium for paid pages @rajunarisetti @pkafka @mathewi @edmundlee @joshsternberg

Gordon Crovitz (@crovitz) December 23, 2012

I suggested that it would be nice to see the industry spend as much time and resources on trying to get creative about advertising instead of just writing off the whole business as a lost cause, and Jon Steinberg — president of BuzzFeed — agreed:

.@joshsternberg @edmundlee: I'd like to see as much innovation around monetization as there is around display or design like Snow Fall

Mathew Ingram (@mathewi) December 23, 2012

.@mathewi @joshsternberg it's amazing pay walls and not better ad products were the solution. Agree that creates a much smaller business.

Jon Steinberg (@jonsteinberg) December 23, 2012

And Grueskin said that the biggest issue for newspapers and advertising is that they no longer have the kind of pricing power they used to when they controlled the platform:

@BGrueskin @leshinton @rajunarisetti @davisshaver @edmundlee @joshsternberg: that is the entire newspaper industry problem in a nutshell

Mathew Ingram (@mathewi) December 23, 2012

@mathewi @bgrueskin @rajunarisetti @davisshaver @edmundlee @joshsternberg True. Trite, but: quality & ingenuity score - no shortage of them

Les Hinton (@leshinton) December 23, 2012

Post and thumbnail photo courtesy of Flickr user Giuseppe Bognanni

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