Q&A: Discussing Paid Content With Dow Jones' Todd Larsen

By: Jay DeFoore The New York Times has gotten more than its share of attention following the September launch of TimesSelect, the company's first major step towards financing its journalism through an online subscription initiative. So E&P decided to look at one of the first -- and most successful -- newspaper companies to put the majority of its content behind a paid wall, the Wall Street Journal.

According to Todd Larsen, President of Consumer Electronic Publishing for parent company Dow Jones, The Online Journal has attracted 744,000 paid subscribers without scaring off advertisers. In fact, Larsen says a highly targeted and engaged audience can actually be an attractive sell.

E&P recently spoke with Larsen about the success of the Online Journal and the plans for the $520 million acquisition of Marketwatch.com. But try as we might, we couldn't get him to offer much advice to The New York Times.

What lessons have you learned from being one of the first to charge for content on the Web?

Certainly we've learned that if you have a strong product with strong content that consumers are interested in, they are willing to pay for it. Clearly there are some advantages in being quick out of the gate by establishing a pay model in the early days when consumers were getting used to what they wanted to pay for and what they didn't want to pay for. But we also believed very consistently from the beginning that it would not be sustainable to charge for content in one medium and give it away for free in another one. And that's really been a principle that we've believed in all the way through and we continue to think that that's the case. I think the success of the Online Journal, with 744,000 paying subscribers, and a very engaged audience, and a growing subscriber base that's paying $99 a year, we think that's good evidence that that's the case.

Were you surprised that so few of your colleagues and competitors out there followed suit with the online subscription model?

"When you're a paid site, you have a natural barrier that you have to get people to understand what's behind that firewall. And that's a marketing challenge."

We've been doing it long enough that I think there's been a couple of different answers to that question over the years. I think early on it was viewed as surprising that we were charging and then I think there was a time when it looked like many more competitors or publishers were likely to be more earnest about charging and I think as the ad market started picking up again then it made it a more difficult decision for publishers that hadn't started charging early to make that choice. So I think the cycles of the business have probably impacted the view on the sector over the last decade.

Doesn't the subscription model somewhat insulate you from the various cycles of the business market?

It certainly does from a revenue perspective. Having a revenue stream from paid content is very helpful for the stability of the business, and at the same time it's a growth area. We continue to have success in growing subscriptions and raising prices, yet at the same time it has not been a real limiter on the advertising side. Our adverting side has been robust for many years and despite the fact that some people view the paid content model as some sort of limiter on advertising, we've found it to be a relatively complimentary strength, whereby you have a strong, large, and highly qualified audience that's highly engaged with the site, really allows us to offer advertisers a unique audience that they're willing to pay a good price for. So we think that the paid model has use not just for circulation revenue but is a great business model on both ends of the revenue spectrum.

"Since the early days we have recognized the power of having (some) content outside the firewall."

I'll forgive you if you don't have any advice for your competitor, who just launched TimesSelect, a competing online product, but do you have a sense of what The New York Times is up against? What problems are they likely to run into?

I don't want to comment specifically and give advice to them, but I would say that any time you're doing any significant new project, and in the case for us, when we got into charging for subscriptions, there certainly is a lot of learning you go through to figure out the best practices and the best way to market to your customers and find the right offers. A lot of the principles you'd do for circulation marketing for a printed publication apply, but there's also a lot of operational things you need to do online to do that well. I think we've benefited from going through the learning curve on that over the years and I think we have a very strong online circulation operation at this point.

I see that you guys have done some innovative marketing schemes, such as the Open House you did back in November 2004, and other things like that you've done to give people an idea of what's out there, what you're offering and to drive subscriptions. Did that have much of an impact?

It did. And that's a great point, because you touched on the fact of us doing more outreach with content as well. There's really a core theme in a lot of our big business initiatives. We have learned very clearly that when a customer understands more about what is in the Online Journal, they're more interested in subscribing. When you're a paid site, you have a natural barrier that you have to get people to understand what's behind that firewall. And that's a marketing challenge.

We're interested in lots of types of initiatives that will allow us to expose potential customers to the product in a meaningful way, whether that's the open house or just an ongoing outreach where we're finding content that we think is just a sliver of what we offer in total, but is articles of interest we think the blogging community might find valuable to link to and it also give potential readers a flavor of what we offer. We're well aware of the power of traffic-driving capabilities from all different types of sites. And with a paid model you have to work a little harder to take advantage of that network.

It seems from the outside that you could easily miss out on blogs linking to your stories. At what point did you realize the power of blogging and what that could bring to your site as far as traffic and can you talk more specifically about what you've done to take advantage of that?

It's worth pointing out that since the early days we have recognized the power of having content outside the firewall. We've built up a network of sites, Opinion Journal, Real Estate Journal, Career Journal, Startup Journal, all content areas that hang off certain content areas of the Journal itself that we've put out into the free space that aren't the core business news that is the essence of what our core subscribers are paying for. We've for years been putting content outside our walls both in targeted ways that help certain audiences enjoy Journal content but also that appeal to certain advertisers or certain classified areas as well.

So we have a long history of really having a dual model, where not only do we have 744,000 paying customers, but we have millions and millions of unique visitors that are allowing us to sell advertisers a much broader audience, not just the paid subscribers. And obviously with the Marketwatch acquisition we've expanded that, so we have 9 million uniques to be able to offer to advertisers in a very packaged way, all with an audience that fits together very well.

At what point are you with the integration of Marketwatch? Can you talk about any plans you have for Marketwatch?

In terms of integration things have gone extremely well. We're planning on continuing to have a dedicated, separate Marketwatch product team, so our newsroom for Marketwatch is separate and continues to produce a great site that's all about investing and is an easy site to read and access. Editorially we're keeping it very separate. On our operations side, we have put our advertising units' sales units together and have created a group called Dow Jones Online. And Dow Jones Online is selling the network. So they're selling Marketwatch, the Online Journal, and our free sites.

How are you using behavioral targeting on your sites?

We use Revenue Science. Marketwatch is also on the Revenue Science platform so now we're able to offer targeted programs that cut across the entire network. We use behavioral targeting as a key component of a lot of major buys we do. It's been very helpful for us to allow advertisers to take certain types of behaviors that they're trying to target and allow them to have very targeted ads to an already very attractive audience. We look at our advertising group as being a very progressive group that has continually put innovative packages in front of advertisers and that's one example of how we've done that.

What are you strategies in terms of podcasting and blogging?

In general we've tried to be wherever our content is desired by our readers. More broadly than podcasting, we've been on mobile phones. We have a customized Blackberry application that has a whole menu set that's unique to the Online Journal. You can customize it to track certain stocks you're following.

We want to appeal to our readers and give information to them in any way. One of the early blogs we did has been out there for five years on Opinion Journal, our Best of the Web blog. It may be different than some of the blogs you see out there today but I think it was really an early blog in the sense that it was a daily, opinionated synopsis of all different things that were being reported on the Web and putting themes around it. We've done more and more things where we do blog-like updates.

During Hurricane Katrina we had a news tracker blog where we were basically updating a column every few minutes so readers could keep tabs on all of the different things being reported that the Journal really culled out as the key things being reported. I think that's a good example of how we're using blog-style reporting to give readers the news on key topics, even in a straight news area. We're constantly looking at ways to deliver information in ways people want them. Going forward we continue to look at opportunities to do more and more new types of columns and features. We'll continue to innovate and look for things that appeal to our readers.