This post consists of two parts. The first is a follow up to my previous blog post on the Guardian. And the second deals with an idea as to how news sites can monetize traffic that comes for free through social / search sites.

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Last week Ken Auletta of the New Yorker and David Carr of the NYT got together on PBS News Hour to discuss the Guardian. This was in the context of Auletta’s piece on Alan Rusbridger and the Guardian in New Yorker.

During the discussion, David Carr made a series of interesting points, all around the common point that the time had come for the loss-making Guardian to charge for the content that they provide.

The time has come

David Carr: “I would argue that when the eyes of the world are focused upon them, they are doing breaking story after story…wouldn’t it be a good time to step towards the consumer and say you love these stories, how about showing us a little sugar, how about we start charging?…Historically they have been big evangelists of free. But as the price for web ads has continued to go off the cliff, aggregating all these ads has become a de minimus achievement.”

Newspapers as membership or communities

David Carr: “…signing up for a subscription becomes an act of voting or membership or affiliation.”

Ken Auletta : They have an identity as a liberal anti-establishment newspaper. That is a community they have built it around the world.

NYT paywall leaky on purpose

David Carr : “The NYT has demonstrated that you can charge without losing all visbility around the web. Our UVs haven’t gone down. The things that were flaws, like you can still get in off a google search, you can still get in off a social media referral from twitter or facebook, those are actually features…we made our paywall leaky on purpose so that people can keep pulling to the curb and can get a sample of our editorial excellence. And after a while they say, you know what I am here all the time, and why not (pay for it). The trouble is it cant be cheap. It will be easy if it is like an ipad app you get for 99c and are done with. It is got to be recurring revenue to be a stable source of income to sponsor the kind of journalism the guardian has been doing.”

The video set off a series of debates in social media, including the John Gapper – Emily Bell twitter debate. The best place to capture all of that (including the Gapper – Bell debate) is in Mathew Ingram’s take on this. Mathew is a prominent advocate of free, so keep that in mind when you read the article.

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I found the debate interesting, especially in the context of my recent piece on how Guardian can navigate its way into profitability. As actions I had stated that the Guardian should do the following

1)    Shut down its Sunday edition, The Observer and invest in getting its Saturday edition to #2 after the Telegraph

2)    Increase prices of the print edition on weekdays, at the cost of dropping circulation, to enable the print edition to pay for itself

3)    Charge for online access through a metered model.

Let me first tom-tom that I was here first! Now having gotten that out of the way, I would like to reiterate the key points that have emerged, both by Carr

–       Signing up for a paywall as an act of membership or affiliation: Membership models or velvet rope strategies for newspapers aren’t new. Google “membership models newspapers” to see a long list of articles on the same. To get a sense of what such a membership would entail and how the business model works, see here for an article (written from the pov of LA Times though but nonetheless many common points made).

–       Paywalls designed to be leaky: This is an interesting point that David Carr made, and there has been some amount of debate on this in the past especially in the context of the NYT paywall which was rather easy to game (googlesearch the headline and read the story for free, or arrive at the story via a link in social media). The reason why NYT made paywalls intentionally leaky is best seen as a kind of versioning strategy to enable price discrimination, explained astutely by Nicholas Carr in his blog.

I will write more about paywalls and price discrimination at some point. For now those wishing to explore more on this should check out the following articles by Felix Salmon and Albert Sun.

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Exploring an idea.

Recently Megan McArdle’s article “We are Googling the NYTimes to Death” set off a minor kerfuffle in the media blogging / navel-gazing world.

McArdle stresses a key point. Newspapers made money as long as they were pipes – the mechanism by which we access information – because readers needed to go through those pipes to get their news, and newspapers could sell those eyeballs for advertising. In today’s world newspapers and magazines are no longer pipes; that role has been taken over by facebook, twitter, google and other aggregators who now direct traffic to the stories that news media publishes, and in some senses have become a layer between the news publishers and readers.

I searched for data on the extent of traffic driven to mainstream media sites through social media. The following is what I found neatly captured in a chart by a stats portal called statista (data as on 26 July’13)

 

Source of traffic to leading news sites

Source of traffic to leading news sites

 

Add traffic coming via search, which is actually much bigger, 25% approximately for the NYT and growing, and you can begin to see McArdle’s concerns. An interesting article on the Nieman Journalism Lab website details how traffic coming via its home page has dropped from around 60% in early-2011 to 48% (in Aug’12), primarily as a result of increase in search traffic.

Given the growing importance of these pipes, I wonder if makes sense for the quality news sites to come together and propose a tiny fee ($0.01 / incoming link accessed) which is to be paid by the site who directs traffic to these news sites. Such a fee or a link tax would not impact a blogger or even a small news site which links to NYT given their infinitesimal volumes, but would impact a google or facebook given their large volume of links into NYT.

What would be the payout from a facebook to NYT? Let us calculate. Similarweb puts the site visits for NYT (Sep13) at approx 67m. Given that FB brings about 4% of this traffic = 2.68mn visits, which @ $0.01 per visit translates to a monthly payout by FB to NYT of $26,800. Not too much, and even when aggregated across all media properties, it should amount to less than $1m. Of course, this is only for the month.

What about Google then? Would Google pay? Google’s payouts would also be much larger at 5-6x. While it can certainly afford to pay, the challenge would be in getting it to shell out, especially to news sites with whom it is engaged in adsense partnerships. One could argue that news sites could work out a consolidated adsense + link tax.

What does a link tax achieve?

  1. This is a kind of micropayment. One argument against micropayments are the friction it induces, prohibiting the customer from paying. This is frictionless. As you saw from Albert Sun’s article on price discrimination, advertising is about the only way of monetizing the long tail of readers (see point D on the demand curve diagram from his blog). The link tax is another route to monetizing this long tail.
  2. While the link tax brings in some revenues, it is not sizeable. Even for NYT, @ $0.01 per link, the link tax will only bring $350K / month = $4.2m a year (assuming 52% through other search engine / social / other sites). One route is to charge higher amounts for the first 100K links or so and then reduce it as per a slab. This benefits smaller websites, especially those that have installed metered models.
  3. It does create headaches for google, twitter, facebook and similar outlinking sites. They will have to keep records of the links served, and also pay these sites, though given automation of the process, there isn’t too much extra effort. I don’t think these sites will give in easily, and a certain amount of coercion (a la Government intervention in France and Belgium over Google) may be required.

Anyway, let me know what you think of it!