ARTS & FARCES internet

I don’t have a clue about business models for publishing original content on the web. There I said it. But neither does anyone else; if anyone did, we’d all be using it. I used to think this lack of viable business models on the web was a Bad Thing, but I’m no longer so sure. What’s happened since 1993, when the first commercial websites (including this one’s predecessor) began appearing, are attempts to commercialize online content. Only a handful of publications have been successful, and none wildly so.

The Online Journalism Review recently published an overview of Peter Krasilovsky’s speech to a group of Knight media fellows. Karsilovsky, a senior partner at Borrell Associates—a leading newspaper strategy consultancy—spoke about how the net is a disruptive technology and threatens newspaper revenues.

Krasilovsky identified three stages of a disruptive technology entering a given market:

1. Beginning innocence: “it [the disruptive technology] has no relationship what so ever with what we’re doing.”
2. Overlapping models: “you’re not necessarily seeing direct competition but you’re beginning to see a new type of business coming in and causing the existing business to sweat a little bit.”
3. Crisis: “when you realize this newfangled thing is stealing your business, and you aren’t sure how to get it back.”

According to Krasilovsky, media companies are mostly in stage two. I’m not sure that’s the case. The net has clearly decimated the technical periodical publishing market, for example. The geeks discovered that they could do a better job of covering their universe themselves. And they did. I’m not sure that the large metropolitan dailies won’t be next. Small community and neighborhood publications are, for the most part, doing a far better job of covering the local waterfront than the metro dailies.

The debate about charging for online content continues. Research from the Online Publishers Association indicates that ten percent of online users are paying for content and many experts agree that percentage is rising (currently as high as 13 - 14 percent). According to Krasilovsky, a paid content model is a non-starter: “Paid content is a great way to make more money, but the real money is in advertising and marketing….” He goes on to use the New York Times Digital as an example:

“The New York Times is very proud of having 11 million active registered users, but that is not where they make most of their money on New York Times Digital. The real money they make—because they know whom you are, and they can sell your type of person to different types of advertisers on a targeted basis—comes from the 1.5 million loyal users who come in several times a week. Those are the people that come in and will be exposed to their advertising and much higher cost per thousand rates then the daily e-mail sites and the 11 million active registered users—the people that come in about once a month or more. This is their bread and butter.”

Krasilovsky singles out the Keep Media model (unlimited access to publications’ aggregated archives for US$5.00 per month) as an analogue of the movie industry. Magazine and newspaper publishers, according to Krasilovsky, should be able to generate revenue from their archives in a manner similar to that used by the movie industry. The problem, as Krasilovsky points out, is the revenue split between the aggregator and the publisher that is usually along the lines of 60/40, respectively.

Print publishers constantly agonize over their online efforts cannibalizing their print circulation, so online is mostly treated like an ugly stepchild. Last year’s strategy was to put all of the online content behind a paywall. “We have had enough of putting our stuff on the Internet for free,” Krasilovsky mimics a typical publisher, “and although we have no real proof that we are hurting our circulation, we think that just from anecdotal evidence—that we are.”

But the facts reveal that the agonizing was misplaced. Fewer than 30 newspapers moved everything behind a paywall and they all discovered the same thing: revenues didn’t increase. “Fewer than three percent of the print circulation base pays for web access when they are not already print subscribers,” Krasilovsky notes. “So if you have this newspaper with a circulation of 300,000, we are talking about being able to attract 9,000 people at the most. And that is considered successful.”

Krasilovsky finds three exceptions that warrant placing online content behind a paywall:

• Publications that are “truly unique and highly valuable”
• Publications that serve a “small remote marketplace” and have no desire to expand beyond that geographic area
• Publications that have enormous bandwidth costs

Krasilovsky closed his remarks with some fairly startling revelations about a Borrell consumer survey a few years ago. Respondents said that online content behind a paywall did not increase their perceived value of a print subscription and nonsubscribers were even less likely to subscribe in the future.

Unfortunately, Krasilovsky missed the big negative in putting online content behind a paywall: the loss of information authority.

So, the publishing world continues to search for sustainable online business models. That none have surfaced may not be such a bad thing after all.