Web Ad Revenue up Against ‘The Wall’

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By: Jennifer Saba

Shackling content behind a pay wall may be off the drawing board ? or at least a thing of the past for most big metros. But in smaller markets, it’s not a rarity for the daily paper to charge for Web content. Greg Harmon of Belden Associates estimates that at least 50 dailies are still using the paid online model. “We have clients asking about it, which is remarkable to me,” he says.

The Watertown (N.Y.) Daily Times had resided in the “paid” camp until it turned on its heel in the other direction, partly to get more eyeballs but also to go after its competitors. The paper serves as a warning to others: Throw up a pay wall and you’ll severely limit traffic and, in turn, advertisers. No matter what the size of the market, competing sites will rush in to fill the “easy access” void.

Located some 90 miles north of Syracuse, Watertown has a population of about 27,000. Owned and operated by the Johnson family, the Daily Times’ average daily circulation is 28,483, according to the figures ending September 2007 from the Audit Bureau of Circulations. In the past four years, daily circulation has fallen 11%.

Around 2000, Daily Times executives decided to charge for online content, believing that revenue would offset print circulation losses. Executive Editor Bert Gault, who has been with the paper 35 years, says, “We took the position the work we do has value.”

For about seven years, the Daily Times Web site stuck with the paid model. But at its peak, the site netted only about 1,000 subscribers. The paper charged $79 a year for online access (or about $12 a month). Those with home delivery, at $178.88/year, could get the site for an additional $39.

In fall 2006, the Daily Times decided to redesign its online home and started playing with the idea of busting down the wall. “We decided to open it up in anticipation of attracting more advertising,” says Gault, who mentions the site made some money from advertising, but not a substantial amount. On Feb. 7 this year it dropped its subscription price and added breaking news stories throughout the day, along with online videos from the Associated Press and searchable databases.

The Daily Times’ com- petitor? Newzjunky.com, a locally based site. The man behind it is Steve Smith, whom the paper hired in May 2000 after admiring his work for a local restaurant’s Web site. Smith helped build out the Daily Times site, says Gault, and left in the fall of 2004 to devote all of his resources to his own project.

Which is not to say Newzjunky produces original reporting. It’s done in the style of The Drudge Report, linking to AP stories, local TV station Web sites, or any other local (and national) content it can get its hands on. There are links to birth records, building permits, the city council with its agenda and minutes, court information, divorces, property transactions, obituaries, road work projects, school board agendas, you name it.

Newzjunky consistently beats the Daily Times in traffic. In January, the news- paper’s site had about 30,000 people visiting, while Newzjunky clocked in with 80,000, according to Web analytic site Compete. By the end of February, Web counter Quantcast reported the Daily Times Web site had about 30,000 unique visitors, while Newzjunky had about 53,000 uniques.

Newzjunky’s homepage is crammed with ads. Who knows what the site is charging, if anything, but appearance goes a long way. (E-mail requests to Newzjunky for comment were never returned.)

Howard Owens, the director of digital publishing at GateHouse, has been covering this on his blog, HowardOwens.com. He wrote: “Never before have I seen a newspaper.com get trounced in its own market by any competitor ? not even a TV station. Newzjunky.com has twice the traffic, and is growing faster than the local daily’s news site. … That’s no small feat. I don’t know of any comparable event in online media.”

Gault says that Newzjunky played a partial role in setting the Daily Times free, though he feels his competition doesn’t have the local breadth of the paper’s site.

Since knocking down the pay wall, Gault says that the Daily Times’ traffic is climbing even without major marketing. According to Omniture stats, the site had about 55,200 uniques in March with seven days left to go. The average time spent per unique user for the same period was about 42 minutes.

“The Web is not a strategy for conserving print circulation,” Belden’s Harmon says. “We have seen paid access, and it makes your online audience look exactly like your print audience. It doesn’t extend your reach, and it locks you into the 50-plus age group.”

It’s too early to tell what other effects the move has had on the site. Gault says there is still some hesitation from advertisers, who are taking a wait-and-see approach. That partly has to do with the Daily Times’ ad rotation, he says, since advertisers in that market are more used to static positioning.

Watertown isn’t alone. The East Ore-gonian Publishing Co. is in the process of taking down the pay walls to its sites, including two dailies: The East Oregonian in Pendleton, which went free in December, and The Daily Astorian, which made the move in March. “We were successful and profitable, but it was not generating the revenue we wanted,” says Laura Sellers, East Oregonian Publishing’s director of marketing and innovation.

Walter Hussman Jr., owner and publisher of the Arkansas Democrat-Gazette, staunchly believes that raising some kind of a pay wall will stem circulation losses. “By making our Web site a complement ? and not a news substitute ? to our print edition, it is possible to grow both your paid print circulation and your online audience,” he tells E&P. To make his point, he says total visits in February are up 13% year-over-year, according to Omniture data. Daily print circulation also rose about 1% to 178,186 copies, according to the Audit Bureau of Circulations.

Whether or not Hussman pulled a rabbit out of his hat by locking down content, perhaps it points to something else: No matter if the content is free, if a newspaper treats the Internet like another piece of paper, it’s going to fail.

Sree Sreenivasan, who runs the new media program at Columbia University’s Graduate School of Journalism, is even against mandatory site registration, since it’s just one more password to remember. “It’s not just dropping the pay wall,” he says, adding that “you can be dull” and free. “You have to adapt and learn from watching these nimble guys. They are taking your playbook and improving on that, and you need to take their playbook and improve on it.”

Steve Yelvington, principal of strategies at Morris Digital Works, points out that none of the sites at Morris require subscriptions, but “it’s not a question of if you put a newspaper behind a pay wall or not. The real question is, what are you using the Internet for? What about the possibilities for conversation and interaction, and bringing together lots of different things that people are doing in the market?”

Whether they reside in rural or urban centers, these days anyone can get their mitts on the technology to set up a Web site. “The barrier to entry is low, and the opportunities for a start-up is so great,” Yelvington adds. “If a newspaper sits on its hands and pretends that somehow the 21st century didn’t happen, it’s going to fail. It’s just a matter of time.”

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