Counting On the Web

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By: Jennifer Saba

Arthur Sulzberger Jr., chairman of The New York Times Co., was attacked by media hounds last year when he casually remarked that he didn’t much care if his flagship paper appeared only on the Web in five years. While Sulzberger knows that pulp isn’t going to the scrap heap any time soon (and he has long avowed that he is “platform agnostic”), his comment still managed to stir debate over pushing more resources to the digital side in hopes that it can serve as a lifeboat for a slowly sinking industry.

As print-ad revenue stalls (flat is the new up!), online revenue is growing by leaps and bounds. Much has been written, including in these pages, about the need for online revenue to represent more of the top line. But how can this happen? There is still no universally accepted norm for measuring Web audience, targeting techniques are still not widely adopted, and experiments in paid content are so few and far from resounding successes.

Web audience, at the moment, is counted in myriad ways with mixed results. There are some in the advertising community who maintain that audience data, just like circulation, should be audited. Ultimately, advertisers pay based on the cost per impression, but overall Web traffic still provides a good measuring stick.

Meanwhile, more publishers are recognizing the beauty of online by targeting ads to those readers who might be more inclined to buy a product or service. Behavioral targeting — or as one executive who spoke to E&P called it, “BT” — is a way to add effectiveness, and advertisers are willing to pay more for the direct hit.

The New York Times and The Wall Street Journal are the two major players currently charging for content on the Web in a serious way, with a degree of success. But as publishers keep announcing plans to establish newspapers as the hyper-local authority, there might be more room for Web sites to charge for specific content.


Running the numbers

Audience numbers, often slippery, can get even more so when applied to the Internet — that great measurable medium boasting reader data that was once expected to be as cleanly sliced and diced as a tomato under a Westhof knife.

But last year, several sites saw their audience data reduced to a pulpy mess when third-party online audience measurement outfits slashed the number of unique users. For example, Nielsen//NetRatings (owned by E&P’s parent, The Nielsen Co.) initially counted pop-up windows that had snuck into Entrepreneur.com’s traffic. ComScore Media Metrix then re-evaluated how it counted global traffic, which affected such as Forbes.com, among others.

This, of course, raised nowhere nearly the same stench that settled on newspapers when a handful of metros fraudulently pumped up their circ. But there were reverberations. Advertisers and publishers alike are taking note of how online audiences are measured, and that can have future implications for newspapers badly in need of explosive growth in online revenue.

A quick primer: Web audience data can be tracked internally either with custom-made tools or with software from companies like Omniture, which ticks how many people come to a particular site by analyzing server logs. The software “tags” each Web page to show who’s visiting.

There are third-party research firms — the two major ones being Nielsen// NetRatings and comScore Media Metrix — that also track audience data. Both research firms measure Web audience by surveying a randomly selected panel of Internet users. Members who participate download software that follows Web use either at work or at home. Audience numbers are then extrapolated.

Since readers can be counted in a variety of ways to varying results, advertisers are starting to call for more transparency about the data-gathering process.

The Interactive Advertising Bureau (IAB), an organization that represents more than 200 members responsible for selling over 85% of the online advertising in the U.S., said that big-name advertisers — among them Ford, BMW, HP, Pepsi, and Visa — will demand audited numbers from Internet publishers this year.

“There is an inconsistency in the numbers,” says Sheryl Draizen, the IAB’s senior vice president and general manager. “That’s why it’s an issue. We will never understand where the difference comes from unless there is transparency in the methodology.”

Besides, she points out, “Every other medium that deals with audience metrics gets audited.”

The Audit Bureau of Circulations is following suit — surely sensing the decline in paid print circulation and newspapers’ mad dash for the Web — and is making a push for newspaper Web sites, along with others, to join the auditing process through its interactive division, ABCi.

“In general we have seen a modest uptick from our membership in Web site verification,” says Neal Lulofs, vice president of corporate communications at ABC. He says that roughly 60 newspapers of all manner and size use ABCi to audit traffic.

In a nutshell, ABCi verifies a Web site based on the results of its internal logs, reviewing its server-content files and removing spiders, bots, and other types of software applications that run automated tasks that could skew the numbers.

To help bolster this division, ABCi released a study — conducted by NSON Opinion Research — with the heading, “Online Accountability: Gauging the Growing Demand for Audited Web Metrics.” The research found that 68% of advertisers and agencies would prefer to advertise on Web sites that are audited, versus those that aren’t. When asked to project their preference over the next three years, that number increases to 76%.

The disparity in data-gathering methods and results among Web-measuring outfits is astounding. The September 2006 audience data for the San Francisco Chronicle’s Web site, sfgate.com, fluctuates wildly depending on which firm is doing the counting. An ABCi audit shows the site had 7.6 million monthly unique users, while comScore said it was 2.4 million. Meanwhile, Nieslen// NetRatings tallied 3.7 million uniques.

That’s not an isolated example. At the Houston Chronicle, ABCi reported the paper’s monthly unique user count in September 2006 as 6.5 million. ComScore said 2 million; Nielsen//Net Ratings reported 3.5 million.

For now there is little urgency among newspaper publishers because, in a classic chicken-and-egg scenario, many local advertisers haven’t raised much concern. Of audited Web metrics, Howard Owens, director of digital publishing at GateHouse Media, succinctly puts it this way: “It’s a solution in search of a problem.”

Owens explains that variations in tracking audience haven’t hamstrung the pitch during sales calls, since advertisers and publishers can triangulate how many people are coming to a site. Advertisers pay for a certain number of “impressions,” and get them, no matter the site’s overall traffic.

“I have talked to advertisers, especially local advertisers, and they are not demanding [Web audits],” Owens adds.

Caroline Little, CEO and Publisher of Washingtonpost.Newsweek Interactive, says while she doesn’t hear of any pushback from advertisers about audits, there is some confusion in the industry. “We have a lot of .gov users that don’t get counted” in the Washington Post’s traffic numbers, she says about third-party measurement firms. In general, she says, it’s a problem when Washingtonpost.com compares itself with another site that might be using a different method to track audience.

But as long as publishers are up front about how audience metrics are obtained, they shouldn’t run into trouble. “I think that is the value in going with a leader in Web measuring,” says Michelle Strong, audience development and national sales director at Belo Interactive.

She says that there are benefits to audited metrics: “I applaud the efforts of IAB and other organizations really pushing for standards. It allows us to speak from the same script.”

If national advertisers and agencies start making noise about such matters, more newspapers will revisit an auditing procedure, says Randy Bennett, vice president of audience and new business development at the Newspaper Association of America.

“In this environment there are so many different media conversing on this platform that it’s not a newspaper decision, but [organizations] like the IAB and some others who are driving the standards forward,” Bennett says. “The newspaper industry will comply with those standards as they emerge. If it will give us a leg up, the newspaper industry would take the lead on it.”

Even ad agencies concede that audited Web sites are not top-of-mind. “It should be a big deal, but it’s not right now,” says Shawn Riegsecker, CEO and founder of interactive agency Centro.

Though taking action to audit numbers is barely at a simmer now, it could reach the boiling point in the near future — something that publishers, advertisers, and ABC acknowledge.

David Verklin, CEO of advertising agency Carat Americas, explains it’s currently not a pressing issue, but it will be when more money floods to the Web. U.S. online advertising is projected to grow to $32 billion in four years from $17 billion in 2006, according to Merrill Lynch. And it’s something that national advertisers — an area of weakness for many newspapers — want.

“There is so much data available, and [for] the clients, there is an assumption it’s accurate and unbiased,” says Verklin. “That may not be an issue with spending at 4%, but it is when it reaches 20%.”

So as advertisers shift more and more dollars to the Internet, the importance of standardizing data will become decidedly more apparent.

Verklin concedes that advertisers and publishers are still in the early stages of pushing for Web audits, but that he doesn’t know of a single client that is not planning on increasing its online budget: “With that as a frame, one begins to see why audited metrics become a little more important. We are talking about real money.”


Targeting audience

Newspaper executives, meanwhile, are crossing their fingers that they will be able to seriously increase their online revenue share during the next few years. Most companies report that Internet revenue represents anywhere from 5% to 10% of the top line — which isn’t bad, considering it was a pittance not so long ago.

Or as Gary Pruitt, CEO of the McClatchy Co., responded in late March when asked about online revenue by the New Yorker’s Ken Auletta during a panel sponsored by Syracuse University’s Newhouse School in New York on the future of newspapers, “It used to be online audiences were worthless to newspapers; now we are making money.”

Now, the rush is to make more of it, and fast. One way in which some newspapers have added to their online revenue is by using the Internet for arguably its strongest application: targeting. Web sites can aim ads at highly specific audiences, and in the process charge more.

For example: A car dealership wants to place an online ad in the auto section of the site, but the section is sold out. It can then choose to place the ad so that readers of the auto section who also visit the business section will see the ad — but only those who first visited the auto section, not every business-section reader.

This is referred to as “behavioral targeting.” As Verklin of Carat Americas describes it, “It’s one of the greatest opportunities newspapers have. It’s the future of where marketing is going.” And he’s willing to pay a higher cost-per-thousand (CPM) to get it, and effectively weed out waste.

Michael Mathieu, president of the Internet division at Freedom Communications, is employing online behavioral targeting. He came to the Irvine, Calif.-based company last summer from the consumer site United Online (parent company of Classmates.com and NetZero). “When I got here, most of these papers still had the mentality that online was like print,” he says.

Mathieu cites one example of the effectiveness of behavioral targeting, describing a mortgage company that wanted to advertise in the financial section of one Web site. The site positioned the ad in general news, but targeted only those readers who also visit the financial section.

It’s not dissimilar to Amazon.com’s approach, in which the book purveyor tracks purchases and then “recommends” future books based on the titles that were bought.

“For key verticals, it works well,” says Mathieu. “We would hope to have the goal to be in the position to [target] every piece of our inventory.” He recalls that one advertiser claimed a 22% increase in his return-on-investment by using behavioral targeting.

When using BT, the cost of pinpointing ads increases as well. For each level of targeting, Freedom Interactive can up the CPM by $5. For example, it might cost $12 to place an ad on the site. The paper could bump that up to $17 to include behavioral targeting, or $22 if the advertiser requests a profile with more details of who is visiting.

“I don’t think it’s a silver bullet. It’s another tool that we use,” says the Washington Post’s Little. Her paper does target ads by behavior, and she says that it helps with inventory management and in reaching its target demographics.

Belo Interactive’s Strong says the company has seen some success with behavioral targeting, but not all the company’s sites could take advantage of it. (Belo uses the popular third-party behavioral advertising network Tacoda.)

Because Belo penetrates so many markets of varying sizes, sometimes BT worked and sometimes it didn’t. Strong says that for behavioral targeting to be successful, the audience needs to be large. “The larger your site, the more audience you have to carve into segments,” she explains. “Our larger markets are having success, but our smaller markets don’t share the same success. That why you see the trend of audience networks.”

Strong explains that for Belo’s bigger metros, it’s worth it, especially in certain categories. Auto and travel advertisers in particular take a shine to it. And, better for Belo, the company can command 20% to 50% higher rates for the effort.


Pay-for-play

It’s been more than a year since the New York Times launched its online daredevil experiment Times-Select, introducing new content but in the process walling off the paper’s marquee opinion writers.

In March, the company reported that 442,060 home-delivery subscribers signed up for free for the service, while 213,900 are online-only subscribers (or 30% of the Times’ total subscribers). For 2006, the company reported that it snagged $9.9 million from TimesSelect purely from subscriptions.

Vivian Schiller, senior vice president and general manager at NYTimes.com, calls the switchover a “big success. We are pleased with the results.”

The New York Times has no intention of charging more for ads — or even selling ads around the content, according to Schiller. While there is advertising on TimesSelect (a banner for Netflix, for example), that is not the company’s primary focus. For now, TimesSelect makes money from its subscriber base.

She says the company has “no regrets” making some of its content paid. Others, including industry players and observers, aren’t so sure it should feel that way.

“I think at this point, it’s a middling success,” says Ken Doctor, an affiliate analyst with Outsell Research. But he hails the Gray Lady for proving it can stand in the marketplace with its hybrid model of partly paid online content.

For the most part, the New York Times is testing the waters while other newspaper publishers are unwilling to get their feet wet. “It’s another instance where the Times is showing a kind of leadership in the industry and is willing to do something in a full-fledged way without fear or indecision,” says Bruce Murray, co-founder and CEO of research firm Corzen. “But I think the jury is still out on whether it will work or not.”

The other newspaper making the paid-content model work is the Wall Street Journal. But over time, the paper has been pushing more of its content from behind the pay wall. The paper is generating free blogs and videos while being more “courageous” with search engines like Google, says Brian Quinn, VP of advertising sales and marketing for Dow Jones Online. But he adds that the site remains bullish on paid.

It’s not surprising that WSJ.com is unshackling some of its content, since the site is trying to grow advertising. At the moment, WSJ.com gets more revenue from subscriptions (about 48%) than from advertising (about 42%).

The Washington Post considered a hybrid model as well, but put the idea on ice. Says Washingtonpost.Newsweek Interactive publisher Little, “I think the New York Times and we around the same time recognized that opinion really defines our publication. We found that users are really interested in that on the Web.”

The Post took the opposite approach, however, keeping that opinion free — producing more blogs and video content, as well as interactive chats that have proven very popular with readers.

She says that since 90% of Washingtonpost.com’s readers come from outside the D.C. market, it would cut out an enormous chunk of online readership to suddenly start charging: “We want to grow the audience, and the advertisers will follow.”

And advertisers are not necessarily willing to pay more for an ad behind a pay wall. It’s easy to believe the print standard would apply to the Internet — that advertisers value paid print products over free ones — but that is not the case. Says Carat Americas’ Verklin, “Publishers will have a hard time convincing us that we should be prepared to pay double the CPM in that space” — meaning ads running in the paid-content areas. “Will the user in the walled garden pay more attention to the advertising? Probably not.”

Even when publishers “own” a specific coverage area, that valuable content might not turn out to be quite as valuable once a price tag is attached. That’s what The Dallas Morning News found when executives decided three years ago to put the paper’s coverage of the Cowboys — the patron saints of the Big D — behind a paid wall. The paper made some stories about the football team free, but charged for columnists and multimedia coverage. Readers could access that material by paying $40 a year or $10 per month.

The results, says John Granatino, assistant general manager at Belo Interactive, “were not extraordinary,” and in December 2006 the paper punted on the idea. The audience was too small to justify a subscription fee, and there was very little advertising revenue gained on paid content. Although the Morning News is benching the concept for now, Granatino admits paid content could make a comeback.

“We will always look for opportunities,” he adds, upon further reflection. “Publishers are in challenging times. We’re always looking for ways to get money.”

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