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How Google Killed Web Subscriptions

by: Felix Salmon September 18, 2007 | about stocks: DJ / NWS / NYT    
Felix Salmon

Felix Salmon

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Everybody knows that Google has won the search-engine war. But what's much more important is that Google has won the search war – and the latest casualty is TimesSelect. The subscriber firewalls at the WSJ and the FT will be the next to go.

Until Google came along, most content-based websites had a similar business model: users would come to the site's home page, search for what they were looking for, and then find it. So if you wanted a NYT story, you'd first go to nytimes.com, and then search. If you wanted a Wikipedia article, you'd first go to wikipedia.org, and then search.

No longer.

When I want to find one of my old blog entries on portfolio.com, I just type the search terms into the Google window in my browser. When I want to find a Wikipedia entry, I do the same thing, in the knowledge that Wikipedia's PageRank will guarantee that entry a top-two spot. Google's even very good at finding books on Amazon.

But Google is very bad at pointing people to anything behind a subscriber firewall – and rightfully so.

What changed, The Times said, was that many more readers started coming to the site from search engines and links on other sites instead of coming directly to NYTimes.com...
“What wasn’t anticipated was the explosion in how much of our traffic would be generated by Google, by Yahoo and some others,” Ms. Schiller said.

When was the last time you saw a WSJ or FT article on a web search? As people increasingly get their information from Google and not from home pages, the WSJ and FT websites have a choice: go free, or become irrelevant. The WSJ certainly can't be happy that Nick Denton, with his shoestring operation, gets more traffic, and more visitors, than they do.

As Jeff Jarvis says today, the really valuable thing that the WSJ and the FT provide is not their news, but their relationship with their readers.

Having worked in the magazine business, I saw this even at the dawn of the internet: a magazine has to pay up to $30-40 in marketing costs to acquire subscribers; it can pay up to $5-7 to print and distribute a copy of a glossy magazine; it has high editorial costs. Add that up, and a magazine can find itself in the hole $60 or more per subscriber in the first year of a subscription. And they get as little as $1 per issue in subscription revenue. Yet clearly, a magazine can make money because that subscriber’s value to advertisers is much greater.
It’s the relationship that is valuable. It’s the relationship that is profitable, not the control of the content or the distribution. That is the essential media moral of the internet story. It has taken 13 years of internet history for media companies to learn that.

Well, most media companies, anyway. We'll see how long it takes for the WSJ and the FT to see the light. All that traffic from Google doesn't weaken the strength of the relationship between media companies and readers, it just changes the way that readers find their trusted content. If a WSJ story comes up top of a Google search, people will click on it because they trust the WSJ. And because people trust the WSJ, WSJ stories will come up top of a Google search. It's win-win for all concerned, and, yes, Rupert Murdoch knows it.

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This article has 2 comments:

  •  
    Sep 18 02:16 PM
    The thesis of this article - that Google search is the main problem for NY Times Select and other attepts to monetize the NYT's online presence - is in the right neighborhood, but at the wrong address. The problem for Times Select is that, in the context of all the information sources on the internet, that product isn't competitive at the price they want to charge for it. The Internet offers a very different competitive landscape than what the print edition faces. The costs to publish something internationally on the web are incidental, and on the web it is easy for readers and secondary sites to aggregate content from many different sources, picking the most interesting sources in each area of interest. Participating in 'searched for' news is definitely one part of that market, but it's a small part. In order to charge fees on the Internet, the NYT should consider offering less costly al a carte choices in just a few areas where they have a lot of expertise, being more realistic about the competitive value of those offerings. It would make more sense for them to produce greater quantity of content on the Internet - where publishing cost is much cheaper - and pick only the best of those items to use in their print edition.
    Reply
  •  
    Sep 20 02:43 PM
    I disagree with your thesis, Google is not responsible. The newspaper industry is somewhat to blame, as they sell contect directly and indirectly through Associated Press (which is owned by newspaper publishers) to aggregators like Yahoo and Google. A subscription model cannot work for a minority of the newspapers with people having free access to most of the newspapers. I also believe that people will also be willing to pay for premium specialized online content (I have no problem paying for the online access to WSJ, Barron's, Economist). The WSJ has been the most successful paid subscription web site ever; with almost 1 million subscribers paying ~$100 per year, it will be difficult to replace those revenues with online ads.
    Reply
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