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Tuesday November 2, 2010 5:24 pm

Why Internet paywalls don’t work


The web model of free content supported by advertising is now well known and accepted. Yet, some old style corporations, especially in the newspaper industry, would still like to translate their subscriber based services online. That's the case of News Corp., the media giant behind some of UK's biggest newspapers, the Times and the Sunday Times. Recently, they switched from the traditional online model, to moving the entire sites behind paywalls.

There's been a lot of speculation as to how this model would do. The analyst expectations were low, since there's countless free online sites offering the same news reports, so people who don't want to pay could get most of that same content elsewhere. Still, proponents pointed to the commentaries, editorials and other unique content as a way to entice subscribers. Rumors ran wild while this experiment went on.


Today, News Corp. released numbers, and GigaOM did a bit of math analysis. Basically, the new subscriber based sites attracted 105,000 people, half of which were already subscribed to the print version, which means around 50,000 web only users were willing to cash out for the service. Prior to the paywall, the number was at around 3 million. As far as reach goes, there is no question that this is a huge failure. Of course, this was to be expected. The bigger question for management was, what about the income? While this is speculation, it also seems like this amount of subscribers can't compete with ad revenue from the incredible difference in amount of viewers.

The article ends by pointing out that these newspapers have now also been cut from the larger Internet, since they are now subscription based. However, I think this is the most important fact of all. All the numbers so far are short term, immediate results. The much, much bigger loss for the Times and Sunday Times is the fact that they cut off any linking opportunities. No longer will they be linked on Twitter, Facebook, or any other site. Kids growing up, watching their news streams, will not be exposed to any of these newspapers' content. While current subscribers know the value of the unique editorials found behind these walls, nobody else does, and no one will be able to find out.

The way the web works is more than just a model of advertisement based income, it's also based around the freedom to share links, and allow things to be discovered. The bigger loss here is the complete loss of discoverability that these walls create. While it's debatable whether financially it made sense to put up a paywall, there is no question that this is a very short term view, and that they simply cannot survive by cutting themselves from the world.

Read More | GigaOM

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