Trends - Trends - The Year Of The Fees

Trends - The Year Of The Fees

by Jay Weintraub

Almost a week ago, Experian made an announcement that should have sent the online ad interest more abuzz than it appears to. Last week, they announced their intent to purchase LowerMyBills for $330 million dollars with an additional $50 million available based on performance. LowerMyBills was the largest advertiser online in terms of impressions last month and consistently ranks in the top five. That the merger of one of the net’s largest advertisers and sophisticated lead generation machine with one of the largest owner of personal data did not produce more interest seems like fodder for the conspiracy theorists.

Instead of stories pertaining to the merger, one of the more widely covered topics this week deals with the New York Times’ decision to start charging for some of its web content. The parent company represents a powerhouse in media and publishing, owning the International Herald Tribune, The Boston Globe, 16 other newspapers, quite a few network-affiliated television stations, two New York City radio stations, and a slew of web properties including recently acquired About.com. The premium online service, named TimesSelect, costs $49.95 yearly for non-print subscribers and should begin this September. In its press release, The New York Times Company describes TimesSelect as a “New Online Offering.” The company calls the yearly subscription a “modest fee” that will allow users access to its Op-Ed and news columnists as well as “in-depth access to The Times's online archives, early access to select articles on the site, as well as other exciting features.”

Reading the press releases provides an interesting insight into how the company positions what, in many readers’ minds, represents the exact opposite of what their senior vice president of digital operations calls a “great offering.” For the Times, charging for content represents revenue diversification and capitalization off of their increasing popularity. To users, the shift could very well seem antithetical to the nature of the web. Users expect more, not less, content and features to become available for free as technology progresses.

The New York Times stands in the enviable position that it can consider charging for content. Aside from the adult industry, very few mainstream companies have built a successful online model around pay for content, the most notable being the Wall Street Journal with their WSJ Online. Unlike the Wall Street Journal, the Times approach leaves a healthy portion of their site free of charge. They have good reason to do this. The company makes great money from advertising sales. In April of 2005, their total advertising revenues rose only 1.9 percent but their Internet advertising revenues by more than 30%. Being able to charge for some content could conceivably give the Times the best of both worlds.

Even though The New York Times has some of the most known, revered, and at times disliked, columnists of any paper, it remains to be seen whether they can entice users to whip out their credit cards. By many accounts the power of the op-ed columnist has declined as media becomes more decentralized. Putting their best minds behind a pay-only curtain could endanger not just these op-ed columnists but also the Times as a whole. The price, while seemingly high, pales in comparison to the $600 per year cost of being a paper subscriber. Were there limited content online, charging for some of the most known, best works sounds reasonable, but the problem with the internet is too much content, not a lack of it. The Times has chosen that users should pay for quality as opposed to using the quality to lure in paid subscribers.

Paid versus free content is not a new debate, and the recent announcement from the Times impacts little our day to day operations, certainly with respect to the next 24 months. Why it does matter though strikes at the core of our business – inventory. Much of our efforts go towards the indirect funding of mass media. Those in our space dominate the bulk of impressions on many of the major ad networks and content sites. A decrease in inventory would certainly impact what we do. A decrease in ad supported inventory has occurred in all types of media – with cable TV training people to pay for both premium and ad free content offerings; radio too has invested heavily in the pay for content model with satellite radio. Only the internet continues to offer an abundance of its content for free. Some places have shown a shift with online music subscriptions attempting to break the free mold. The benefit of instant access to information will not go away. Certain means for showing ads will. Smart aggregators and arbitragers will always have an opportunity even if 2006 becomes the year of the fees

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Jay Weintraub
Director of Market Strategy
Revenue.net
http://www.revenue.net
e: jweintraub@revenue.net
http://www.repvine.com/members/jayweintraub/

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