Has The Times Online Been a Success or Failure?
In the ongoing saga that is The Times online and its red headed stepchild that is the paywall, some concrete numbers are starting to emerge pertaining to the overall success of the experiment.
First, the good news. According to TechCrunch, The Times online signed up 105,000 paying subscribers plus another 100,000 who were already long time print subscribers during the recent switch. Those are decent numbers for a venture everyone said would fail, but there is a downside to the initial subscription reports.
Now that we know how much The Times were able to gain from June, how many readers fled once the paywall was implemented? According to comSource, The Times lost 4 million unique viewers, or a decline of 62%. Individual page views also saw a steep decline from May, 2010 through September, 2010 dropping an estimated 90% over the summer (that’s 41 million down to 4 million).
For those just skimming the numbers, one wouldn’t be remiss in thinking that the paywall was an epic disaster after reading the site lost 4 million readers. The error in that line of thinking is that those 4 million readers weren’t paying to read articles on the site. So sure, there are less eyes looking at the site, but the ace up the sleeve for The Times online is that even though they lost a large portion of their audience, a fate they surely knew they’d encounter, the readers that remain are now paying a subscription fee to fund the site.
One only needs to crunch the numbers to see whether or not the subscription fees outweigh those of online ads that were viewed by some 4 million more readers before the paywall. In simple terms, what generates more money, online ads to a large number of readers or subscription fees paid by a much smaller audience?
May I warn those against the idea of the paywall that it’s highly likely, at least initially, that The Times online will make more money WITH the paywall than before when articles were free, even with far less people visiting the site. Whether or not you believe the amount of revenue generated to be the only determining factor in The Times‘ success may be left up to you. As I reported in early September, there are other factors to consider.
For the geeks, here’s how the numbers and $$$ break down:
- First off, let’s say that the 105,000 new subscribers The Times gained in the summer are splt up between full subscribers and ‘pay as you go’ subscribers which pay $1.60 for a days access to the site (full subscribers pay $3.20 per week or $12.80 per month). With those numbers, we can assume The Times generates approximately $7,680,000 per year from its elite group of readers, the full subscribers.
- 50,000 (readers) x $12.80 = $640,000 x 12 months = 7,680,000
We must also add to that number the casual readers who only ‘pay as you go’, or randomly purchase a days worth of reading on the weekend. This is where it gets tricky, so we’ll take a guess. For the sake of our example, I’ll use Erick Schonfeld’s (TechCrunch) example where he assumes two days a month per person would generate another $160,000 in monthly revenue for a total of $9.6 million per year (there, we added the $7,680,000 to the revenue generated from the ‘pay as you go’ customers).
That $9.6 million is a pretty impressive figure as long as it outweighs what The Times were receiving from online ads when they were free (and remember, the 100,000 we talked about earlier were already print subscribers and thus get free access to the online site simply by activating their online account – so for the sake of the example, we don’t need to include them).
Before we finish, we must first define a CPM, or cost per thousand impression. CPM is a term used to measure the cost or worth of an online ad appearing at a website. For example, businesses who wish to advertise on a site purchase ad space at a predetermined rate or CPM which is driven by the amount of traffic to the site. An average CPM could run around $5. If we continue the example with that rate, it proves that The Times online paywall should be generating more revenue than when it was free.
41 million estimated page views (/1000 because of the cost per thousand impression) x $5 CPM = $205,000 in monthly revenue. Multiply that by 12 months ($2,460,000) and The Times should be doing two to four times better than they were before the pay wall. Another point to consider is that with a subscription needed to view the site, The Times doesn’t necessarily have to have that many readers to turn a major profit. In their case, a major decline in eyes wouldn’t have bothered them, at least initially.
I briefly touched on the definition of a success or failure earlier, but it’s also important to consider. Is a financial gain the sole variable we should look at when considering if the paywall is succeeding or not? Or, should we factor in the amount of people leaving the site and say the paywall was only slightly successful or a borderline failure? Will writers and journalists soon start to leave knowing their work can only be read by a limited number of people each month?
Ultimately, those questions are for you to decide for yourself. For now at least, it seems as if The Times online paywall has done its job in making money through subscriptions. They’ll only hope they have a plan in mind for when their customer subscription peaks, or when subscribers tire of the fees and leave for the free news elsewhere.