Subscription-Based Web Content - A Dying Practice

Posted by steve on September 25, 2007 at 11:15 AM

Last week, The New York Times announced that it will no longer be charging visitors to access parts of its media site, NYTimes.com.

This previously-blocked content, published specifically for TimesSelect subscribers, is now open to all readers. This announcement comes exactly two years after the decision was made to create the TimesSelect program and make portions of the site's content subscription-based only.

Why the change? After all, the goals of TimesSelect were met. The program drew 227,000 subscribers and generated $10 million in revenue a year over the past two years. The problem, though, is that these goals were low and The Times significantly underestimated traffic levels from major search engines.

So they're getting more traffic than originally projected, how is that bad?

The issue faced by The Times by underestimating the amount traffic to the site from search engines like Google and Yahoo is that conversion rates were extremely low; in this case, conversions being paid subscriptions. Why would these visitors want to subscribe? The majority of traffic from the search engines was likely made up of first-time visitors unfamiliar with the quality of content on NYTimes.com; so why pay for it?

Essentially, The Times discovered that the lack of trust and brand loyalty from search engine traffic resulted in a lack of paying subscribers.

So now, after two years, The Times has concluded that the $10 million forfeited each year from the abandonment of the TimesSelect program will be far exceeded in the long run with an advertising-based model, which I have to agree with. According to Nielsen/Net Ratings, the site receives 13 million unique visits every month, and by opening up the entire site, it is safe to assume that this number's only going to go up in the future. While $10 million a year is no small change, with the amount of traffic NYTimes.com generates, an advertising-based revenue-generating model has the potential to far surpass their old subscription-based model.

With this announcement, The Wall Street Journal is now the only media site which charges subscription fees to readers, a fee that Robert Murdoch may be dropping sometime soon.

The subscription-based model of generating revenue is a dying practice. Not only have expectations not been met by The New York Times, but other sites in various industries are also generating less than ideal revenue from this practice, and the competition's taking notice.

Take SpiralFrog for example. SpiralFrog, a new ad-based music download service, is set to challenge the likes of subscription-based iTunes. Downloading music on SpiralFrog will be free of charge to users, and its revenue will be generated through banners and other online advertising.

We'll have to wait and see how users take to some of the requirements of utilizing SpiralFrog, such as monthly questionnaires, but by forgoing subscription fees, I foresee the development of a large user base in the coming months.

As The New York Times discovered, restricting parts of your site to search engines and non-subscribers limits your revenue-generating opportunities by inhibiting your overall user base. As we've seen from Google over the past several years, the real money is in an ad-based model, and to fully take advantage of this model, you need significant traffic.

Complete site access helps you to get this traffic. The more accessible content on the site, the stronger the appeal. The stronger the appeal, the wider the audience. The wider the audience, the more referrals and back links. The more back links, the better the search engine placement. The better the search engine placement, the more traffic. And the more traffic, the more revenue from site advertisements.

It's a nice little circle.

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