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Will Newspaper Paywalls Kill Web Advertising?


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About one-fourth of all newspapers now have paywalls on their websites, with more to come. But 95% of all "local news" sites probably won't go that route. (Think TV sites, Patch, Is it a good idea, or will newspapers get eaten alive on the web? This presentation points to a bigger issue: Newspapers are getting beaten in the race to deliver content that holds the greatest value of all online: Advertising content.

Will Newspaper Paywalls Kill Web Advertising?

  1. 1. Will Paywalls Kill Newspaper Web Advertising?March 1, 2013 Special Presentation for Press Forward Conference
  2. 2. About this presentationThe following presentation was made by GordonBorrell during Press Forward, the WisconsinNewspaper Association/Associated PressConvention & Trade Show, at the Madison MarriottWest in Middletown on March 1, 2013. © 2012 Borrell Associates Inc.
  3. 3. The Paywall Phenomenon
  4. 4. It’s Definitely a Trend© 2013 Borrell Associates Inc. Sources: Borrell Associates Inc.; Pew Research
  5. 5. A Few Facts to Consider© 2013 Borrell Associates Inc.  Visitors, visits/visitor & reach stagnant for newspapers  … But not for TV & hyperlocal „pureplay‟ sites  95% of local news websites don‟t have paywalls These companies don’t:
  6. 6. A Few Facts to Consider  72% of daily newspapers do not have a paywall© 2013 Borrell Associates Inc.  When paywalls go up, web traffic declines 20-40%  . . . but typically returns in 12-14 months  Story limits range from 5-25 per month; avg. is 11  Pricing: $2.87/mo. subscribers; $9.96/mo. non-subs.  Jackpot! Newspaper stocks up!  McClatchy +40%, NYT +45%, Gannett +33%
  7. 7. © 2013 Borrell Associates Inc.Source: CommonWealth Magazine
  8. 8. Newspaper Online Ad Sales
  9. 9. Newspapers’ Share of Local Online Adv. Local Online Advertising, 2012:© 2013 Borrell Associates Inc. $18.5 Billion Source: Borrell Associates Inc.,
  10. 10. But Newsp. Share of Online Steadily Declining© 2013 Borrell Associates Inc. 24% Share 57% Share Source: Borrell Associates Inc.
  11. 11. Advertisers Don’t Seek News ReadersWhen it comes to the lean-forward medium of online, themass-media news model doesn’t work very well.Numbers tell the story. Companies with only advertising content(not local news) dominate the local online marketplace.That’s because local advertisers seek buyers in the onlinearena, not readers.
  12. 12. Top 25© 2013 Borrell Associates Inc. Primarily Ad Content Primarily News & Info Content
  13. 13. Illustration: Banners Aren’t SeenTraditional media websites rely heavily on banner advertising.But the ―display‖ model only works with lean-back media likenewspapers, TV or radio, where people are more receptive to ads.An eye-tracking chart tells the story. Leaning forward, websitenews readers see everything BUT the ads.
  14. 14. Eye tracking: Everything but Ads© 2013 Borrell Associates Inc.
  15. 15. The Best Online Content? Advertising!Online mimics yellow pages directories – the other lean-forwardmedium. And the directories’ content is . . . you guessed it, nothingbut advertising.Illustrated in the following charts, while TV and radio attract a lotof consumer attention, the minuscule amount of time spent witha yellow pages book attracts nearly 300 times more revenueper consumer minute.
  16. 16. Average Daily Time Spent© 2013 Borrell Associates Inc. Yellow Pages 0.04 (hours per day) Newspapers 0.18 Radio 2.23 Television 4.00© 2013 Borrell Associates Inc. Sources: A.C. Nielsen, RAB, New York Times, Columbia Journalism Review
  17. 17. A Minute of Your Time is Worth…© 2013 Borrell Associates Inc. Yellow Pages $11.3 Newspapers $7.9 Radio $0.3 Ad revenue per minute spent with each medium—all adults Television $0.4 $0 $2 $4 $6 $8 $10 $12 In Millions© 2013 Borrell Associates Inc. Sources: Borrell A.C. Nielsen, RAB, New York Times, Columbia Journalism Review
  18. 18. Local News: How Big a Draw?
  19. 19. Local news has a steady following© 2013 Borrell Associates Inc. Enthusiasts Source: Pew Research Center’s Internet & American Life Project Local News Survey, January 2011. N = 2,251
  20. 20. Getting real about expectations© 2013 Borrell Associates Inc.  Three-fourths won’t pay for local news online  23% would pay $5 to $10 per month Note: These are just those ―local news enthusiasts.‖ Source: Pew Research Center’s Internet & American Life Project Local News Survey, January 2011. N = 2,251
  21. 21. Getting real about expectations If 72% are “news enthusiasts”. . .© 2013 Borrell Associates Inc. and 23% of them would pay online fees . . . 16.5% of adults are the target.
  22. 22. Another QuestionSo…. Is that “non-local-news enthusiast” a goodtarget?Probably not: Only 8% say they’d pay for news.
  23. 23. Conclusions  The audience for local news is big and  But they’re most comfortable with traditional channels Web-based marketing seeks a buyer, not a reader  Advertising-based “news” is more important on Web  Therefore…. Erecting paywalls on news articles is a pretty good idea.
  24. 24. Why?1. The vast majority of adults (87%) aren’t interested in local news online. Therefore: There’s no competitive pressure to make it ―free.‖2. Advertisers don’t want to be around local news readers online. Therefore: Expecting riches from banner ads is a pipedream.3. Revenue per print subscriber is typically10 times that of a unique visitor. Therefore: Eroding print readership by putting news online is a bad idea.
  25. 25. Wrapping Up: A History LessonNewspaper publishers three generations ago would havethought this discussion ridiculous. Here‟s what a publishermight have said:―Why are we spending so much time debating this? Of coursewe should charge! I’m more interested in the bigger opportunityof this newfangled medium called the Internet. Let’s invest heavilyin it. Let’s own the local Internet space.‖
  26. 26. Publishers Used to “Get It” These TV call letters They started:© 2013 Borrell Associates Inc. all relate to a local newspaper’s name:  Radio stations: 1920s WTMJ-TV  Television Stations: 1950s KCRG-TV WSBT-TV  Cable Systems: 1960s WBEN-TV KRON-TV WGN-TV
  27. 27. But the Computer Age Confused Them  Videotext: 1980s© 2013 Borrell Associates Inc.  Audiotex/Fax-back services: 1990s  Computer bulletin boards – AOL/Prodigy: 1990s  Internet/free Websites, no ads: late 1990s  Rush to “Monetize” Websites: 2000-2004  Rush to charge for access: 2012 Unlike radio, TV and cable, publishers failed to see the interactive world as separate ventures.
  28. 28. The Lesson Most Haven’t Learned When a disruptor arrives, the “disrupted” Newspapers Interactive Media© 2013 Borrell Associates Inc. often concentrates on the overlapping area, missing the bigger Area of Opportunity opportunities to create “new” business. Where many newspaper publishers fail to see the same opportunity their predecessors saw: An altogether NEW entity. Where newspaper paywalls fit in.
  29. 29. Ask This Question Is the Internet a sustaining technology your newspaper, or a disruptive technology? (It’s both, of course. But erecting paywalls fits squarely in the “sustaining” camp.) Do you want a significant share of the online advertising spent in your market? (Of course you do. But a “significant share” in one medium has NEVER, not ever, been attained without a singular staff focused exclusively on selling that medium.)
  30. 30.  Charge for access to local news content!  Pursue ‘green’ area business with a separate staff  That staff can’t report to print managers. Period.  Beware of applying “mass media” model to online
  31. 31. Thank You!Resources: @goborrell @borrellassoc Local Ad -Spending Data: