Special Presentation for Press Forward ConferenceMarch 1, 2013

WILL PAYWALLS KILLNEWSPAPER WEB ADVERTISING?

About this presentation

The following presentation was made by Gordon Borrell during Press Forward, the Wisconsin Newspaper Association/Associated Press Convention & Trade Show, at the Madison Marriott West in Middletown on March 1, 2013.

© 2012 Borrell Associates Inc.

The Paywall Phenomenon

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It’s Definitely a Trend

Sources: Borrell Associates Inc.; Pew Research

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A Few Facts to Consider

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:

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A Few Facts to Consider

72% of daily newspapers do not have a paywall

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%

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Source: CommonWealth Magazine

Newspaper Online Ad Sales

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Newspapers’ Share of Local Online Adv.

Source: Borrell Associates Inc., Adspending.com

Local Online Advertising, 2012:$18.5 Billion

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But Newsp. Share of Online Steadily Declining

Source: Borrell Associates Inc.

57%Share

24%Share

Advertisers Don’t Seek News Readers

When it comes to the lean-forward medium of online, the mass-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.

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Primarily Ad Content

Primarily News & Info Content

Top 25

Illustration: Banners Aren’t Seen

Traditional media websites rely heavily on banner advertising. But the “display” model only works with lean-back media like newspapers, 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.

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Eye tracking: Everything but Ads

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 revenue per consumer minute.

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Average Daily Time Spent

© 2013 Borrell Associates Inc.

Television

Radio

Newspapers

Yellow Pages

4.00

2.23

0.18

0.04

Sources: A.C. Nielsen, RAB, New York Times, Columbia Journalism Review

(hours per day)

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© 2013 Borrell Associates Inc. Sources: Borrell A.C. Nielsen, RAB, New York Times, Columbia Journalism Review

Ad revenue per minute spentwith each medium—all adults

Television

Radio

Newspapers

Yellow Pages

$0 $2 $4 $6 $8 $10 $12

$0.4

$0.3

$7.9

$11.3

In Millions

A Minute of Your Time is Worth…

Local News: How Big a Draw?

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Local news has a steady following

Source: Pew Research Center’s Internet & American Life Project Local News Survey, January 2011. N = 2,251

Enthusiasts

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Getting real about expectations

Source: Pew Research Center’s Internet & American Life Project Local News Survey, January 2011. N = 2,251

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.”

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Getting real about expectations

If 72% are “news enthusiasts”. . .

and 23% of them would pay online fees . . .

16.5% of adults are the target.

Another Question

So…. Is that “non-local-news enthusiast” a good target?

Probably not: Only 8% say they’d pay for news.

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Conclusions

The audience for local news is big and enthusiastic But they’re most comfortable with traditional channelsWeb-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.

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.

Wrapping Up: A History Lesson

Newspaper 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 heavily in it. Let’s own the local Internet space.”

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Publishers Used to “Get It”

Radio stations: 1920s

Television Stations: 1950s

Cable Systems: 1960s

WTMJ-TV

KCRG-TV

WSBT-TV

WBEN-TV

KRON-TV

WGN-TV

These TV call lettersall relate to a local newspaper’s name:

They started:

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But the Computer Age Confused Them

Videotext: 1980s

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: 2012Unlike radio, TV and cable, publishers failed to see the interactive world as separate ventures.

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The Lesson Most Haven’t Learned

Area of Opportunity

Newspapers Interactive Media

Where many newspaper publishers fail to see the same opportunity their predecessors saw: An altogether NEW entity.

Where newspaper paywalls fit in.

When a disruptor arrives, the “disrupted” often concentrates on the overlapping area, missing the bigger opportunities to create “new” business.

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Ask This Question

Is the Internet a sustaining technology toyour newspaper, or a disruptive technology?

(It’s both, of course. But erecting paywallsfits squarely in the “sustaining” camp.)

Do you want a significant share of the onlineadvertising 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.)

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Recommendations

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

Thank You!

Resources:

@goborrell @borrellassoc

Local Ad -Spending Data: www.adspending.com