About one-fourth of all newspapers now have paywalls on their websites, with more to come. But 95% of all "local news" sites probably won't go that route. (Think TV sites, Patch, Examiner.com.) Is it a good idea, or will newspapers get eaten alive on the web? This presentation points to a bigger issue: Newspapers are getting beaten in the race to deliver content that holds the greatest value of all online: Advertising content.

1. Will Paywalls Kill
Newspaper Web Advertising?
March 1, 2013 Special Presentation for Press Forward Conference

2. About this presentation
The following presentation was made by Gordon
Borrell during Press Forward, the Wisconsin
Newspaper Association/Associated Press
Convention & Trade Show, at the Madison Marriott
West in Middletown on March 1, 2013.
© 2012 Borrell Associates Inc.

3. The Paywall Phenomenon

4. It’s Definitely a Trend
© 2013 Borrell Associates Inc.
Sources: Borrell Associates Inc.; Pew Research

5. A Few Facts to Consider
© 2013 Borrell Associates Inc.
 Visitors, visits/visitor & reach stagnant for newspapers
 … But not for TV & hyperlocal „pureplay‟ sites
 95% of local news websites don‟t have paywalls
These companies don’t:

6. A Few Facts to Consider
 72% of daily newspapers do not have a paywall
© 2013 Borrell Associates Inc.
 When paywalls go up, web traffic declines 20-40%
 . . . but typically returns in 12-14 months
 Story limits range from 5-25 per month; avg. is 11
 Pricing: $2.87/mo. subscribers; $9.96/mo. non-subs.
 Jackpot! Newspaper stocks up!
 McClatchy +40%, NYT +45%, Gannett +33%

7. © 2013 Borrell Associates Inc.
Source: CommonWealth Magazine

8. Newspaper Online Ad Sales

9. Newspapers’ Share of Local Online Adv.
Local Online Advertising, 2012:
© 2013 Borrell Associates Inc.
$18.5 Billion
Source: Borrell Associates Inc., Adspending.com

10. But Newsp. Share of Online Steadily Declining
© 2013 Borrell Associates Inc.
24%
Share
57%
Share
Source: Borrell Associates Inc.

11. Advertisers Don’t Seek News Readers
When it comes to the lean-forward medium of online, the
mass-media news model doesn’t work very well.
Numbers tell the story. Companies with only advertising content
(not local news) dominate the local online marketplace.
That’s because local advertisers seek buyers in the online
arena, not readers.

12. Top 25
© 2013 Borrell Associates Inc.
Primarily Ad Content
Primarily News & Info Content

13. Illustration: Banners Aren’t Seen
Traditional media websites rely heavily on banner advertising.
But the ―display‖ model only works with lean-back media like
newspapers, TV or radio, where people are more receptive to ads.
An eye-tracking chart tells the story. Leaning forward, website
news readers see everything BUT the ads.

14. Eye tracking: Everything but Ads
© 2013 Borrell Associates Inc.

15. The Best Online Content? Advertising!
Online mimics yellow pages directories – the other lean-forward
medium. And the directories’ content is . . . you guessed it, nothing
but advertising.
Illustrated in the following charts, while TV and radio attract a lot
of consumer attention, the minuscule amount of time spent with
a yellow pages book attracts nearly 300 times more revenue
per consumer minute.

16. Average Daily Time Spent
© 2013 Borrell Associates Inc.
Yellow Pages 0.04
(hours per day)
Newspapers 0.18
Radio 2.23
Television 4.00
© 2013 Borrell Associates Inc. Sources: A.C. Nielsen, RAB, New York Times, Columbia Journalism Review

17. A Minute of Your Time is Worth…
© 2013 Borrell Associates Inc.
Yellow Pages $11.3
Newspapers $7.9
Radio $0.3
Ad revenue per minute spent
with each medium—all adults
Television $0.4
$0 $2 $4 $6 $8 $10 $12
In Millions
© 2013 Borrell Associates Inc. Sources: Borrell A.C. Nielsen, RAB, New York Times, Columbia Journalism Review

18. Local News: How Big a Draw?

19. Local news has a steady following
© 2013 Borrell Associates Inc.
Enthusiasts
Source: Pew Research Center’s Internet & American Life Project Local News Survey, January 2011. N = 2,251

20. Getting real about expectations
© 2013 Borrell Associates Inc.
 Three-fourths won’t pay for local news online
 23% would pay $5 to $10 per month
Note: These are just those ―local news enthusiasts.‖
Source: Pew Research Center’s Internet & American Life Project Local News Survey, January 2011. N = 2,251

21. Getting real about expectations
If 72% are “news enthusiasts”. . .
© 2013 Borrell Associates Inc.
and 23% of them would pay online fees . . .
16.5% of adults are the target.

22. Another Question
So…. Is that “non-local-news enthusiast” a good
target?
Probably not: Only 8% say they’d pay for news.

23. Conclusions
 The audience for local news is big and enthusiastic
www.borrellassociates.com
 But they’re most comfortable with traditional channels
Web-based marketing seeks a buyer, not a reader
 Advertising-based “news” is more important on Web
 Therefore….
Erecting paywalls on news articles is a pretty good idea.

24. Why?
1. The vast majority of adults (87%) aren’t interested in local news online.
Therefore: There’s no competitive pressure to make it ―free.‖
2. Advertisers don’t want to be around local news readers online.
Therefore: Expecting riches from banner ads is a pipedream.
3. Revenue per print subscriber is typically10 times that of a unique visitor.
Therefore: Eroding print readership by putting news online is a bad idea.

25. Wrapping Up: A History Lesson
Newspaper publishers three generations ago would have
thought this discussion ridiculous. Here‟s what a publisher
might have said:
―Why are we spending so much time debating this? Of course
we should charge! I’m more interested in the bigger opportunity
of this newfangled medium called the Internet. Let’s invest heavily
in it. Let’s own the local Internet space.‖

26. Publishers Used to “Get It”
These TV call letters
They started:
© 2013 Borrell Associates Inc.
all relate to a local
newspaper’s name:
 Radio stations: 1920s
WTMJ-TV
 Television Stations: 1950s KCRG-TV
WSBT-TV
 Cable Systems: 1960s
WBEN-TV
KRON-TV
WGN-TV

27. But the Computer Age Confused Them
 Videotext: 1980s
© 2013 Borrell Associates Inc.
 Audiotex/Fax-back services: 1990s
 Computer bulletin boards – AOL/Prodigy: 1990s
 Internet/free Websites, no ads: late 1990s
 Rush to “Monetize” Websites: 2000-2004
 Rush to charge for access: 2012
Unlike radio, TV and cable, publishers failed to see the interactive world as separate ventures.

28. The Lesson Most Haven’t Learned
When a disruptor
arrives, the “disrupted” Newspapers Interactive Media
© 2013 Borrell Associates Inc.
often concentrates on
the overlapping
area, missing the bigger Area of Opportunity
opportunities to create
“new” business. Where many newspaper
publishers fail to see the
same opportunity their
predecessors saw: An
altogether NEW entity.
Where newspaper paywalls fit in.

29. Ask This Question
Is the Internet a sustaining technology to
www.borrellassociates.com
your newspaper, or a disruptive technology?
(It’s both, of course. But erecting paywalls
fits squarely in the “sustaining” camp.)
Do you want a significant share of the online
advertising spent in your market?
(Of course you do. But a “significant share”
in one medium has NEVER, not ever, been attained without a
singular staff focused exclusively on selling that medium.)

30. Recommendations
www.borrellassociates.com
 Charge for access to local news content!
 Pursue ‘green’ area business with a separate staff
 That staff can’t report to print managers. Period.
 Beware of applying “mass media” model to online

31. Thank You!
Resources:
@goborrell
@borrellassoc
Local Ad -Spending Data: www.adspending.com