Will Newspaper Paywalls Kill Web Advertising?

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1 Will Newspaper Paywalls Kill Web Advertising? Gordon Borrell, CEO Borrell Associates Upcoming Webinars Go to localmedia.org 1

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3 Have a question? Use the Question box. Question Type your questions here. 3

4 Survey Will Newspaper Paywalls Kill Web Advertising? Gordon Borrell, CEO Borrell Associates 4

5 Will Newspaper Paywalls Kill WbAd Web Advertising? i April 23, 2013 Local Media Association Webinar Digital Gurus Weigh In Our Foundation: Research 1

6 Let s Review the Trends Advertising Trends Paywall Trends Online Content Trends Sustaining Models vs. Disruptive Models The Answer Shrinking Advertising 2

7 Advertising Is Declining $ in Billions In 2012, businesses spent 6% less on advertising than they had a decade earlier. Source: Borrell Associates, Inc Promotions Are Increasing $ in Billions In 2012, they spent 88% more on promotions than they had a decade earlier. Source: Borrell Associates, Inc

8 What are Promotions? Coupons Discounts Rebates Contests Events Sponsorships Signage Printing And a whole lotta digital stuff Uh oh. The deer have the guns. Source: Borrell Associates, Inc More Evidence: Ads Down, Payments Up Sources: Veronis Suhler, Borrell Associates, April

9 The PaywallPhenomenonPhenomenon It s Definitely a Trend Sources: Borrell Associates Inc.; Pew Research 5

10 A Few Facts to Consider 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: A Few Facts to Consider 72% of daily newspapers p do not have a paywall When paywalls go up, web traffic declines 20-40%... but typically returns in 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! 6

11 Source: CommonWealth Magazine Newspaper Online Ad Sales 7

12 Newspapers Digital Revenue Growth Not Enough To Maintain Share Source: Borrell Associates Inc. Newspaper Share of Online Declining 57% Share 24% Share Source: Borrell Associates Inc. 8

13 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. That s because local l advertisers seek buyers in the online arena, not readers. Illustration: BannersAren 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. 9

14 Eye tracking: Everything but Ads What s the Best Online Content? 10

15 Average Daily Time Spent Yellow Pages Newspapers Radio Television (hours per day) Borrell Associates Inc. Sources: A.C. Nielsen, RAB, New York Times, Columbia Journalism Review A Minute of Your Time is Worth Yellow Pages Newspapers Radio Television $0.3 $0.4 $11.3 $7.9 Ad revenue per minute spent with each medium all adults $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 11

16 The Biggest Borrell Associates Inc. 60% NOT from TV or Newspaper Sites... And What They Have in Common Advertising is main content 2013 Borrell Associates Inc. 12

17 And the Fastest Morphers Are Percent of Total Gross Revenues from Digital Sales Yellow Media (Canada) 33% Scripps (newspapers) 11% Washington Post Co. (newspapers only) 33% GateHouse Media (newspapers) 8% 8% YP (yellow pages) 31% Univision * 7% 7% Hibu (yellow pages) 26% Nexstar Broadcasting (TV) 7% 7% DexOne (yellow pages) 25% Gray Television 6% 6% New York Times Co. 24% LIN Media (TV)* 6% 6% McClatchy (newspapers) 20% Entercom (radio) 5% 5% Gannett (newspapers) 19% Radio One 5% 5% Salem Communications (radio)* 15% Gannett (TV) 4% 4% Supermedia (yellow pages) 14% Clear Channel (radio only) 4% 4% A.H. Belo (newspapers) 13% Journal Communications (Radio) 3% 3% Lee Enterprises (newspapers) 13% Scripps (TV) 3% 3% Journal Communications (newspapers) 12% Media General (TV) 3% 3% Torstar (Canadian newspapers) 11% * Salem Comm.: Includes revenues for some national Christian sites * Univision: Includes revenues for national hispanic digital ventures * LIN Media: Includes revenues for non local digital ventures Local News: How Big a Draw? 13

18 Local news has a steady following Enthusiasts Source: Pew Research Center s Internet & American Life Project Local News Survey, January N = 2,251 Getting real about expectations 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 N = 2,251 14

19 Getting real about expectations If 72% are news enthusiasts... and 23% of them would pay online fees % of adults are the target. Another Question So. Is that non local news enthusiast a good target? Probably not: Only 8% say they d pay for news. 15

20 Conclusions The audience for local news is big and enthusiastic 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. 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. 16

21 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. Publishers Used to Get It They started: Radio stations: 1920s Television Stations: 1950s Cable Systems: 1960s What do these Call letters have In common? WTMJ TV KCRG TV WSBT TV TV WBEN TV KRON TV WGN TV 17

22 But the Computer Age Confused Them Videotext: 1980s Audiotex/Fax-back services: 1990s Computer bulletin boards AOL/Prodigy: 1990s Internet/free Websites, no ads: late 1990s Rush to Monetize Websites: Rush to charge for access: 2012 Unlike radio, TV and cable, publishers failed to see the interactive world as separate ventures. The Lesson Most Haven t Learned When a disruptor arrives, the disrupted often concentrates on the overlapping area, missing the bigger opportunities to create new business. Newspapers Interactive Media Area of Opportunity Where many newspaper publishers fail to see the same opportunity their predecessors saw: An altogether NEW entity. Where newspaper paywalls fit in. 18

23 Ask This Question Is the Internet a sustaining technology to your newspaper, or a disruptive one? It s both, of course. But erectingpaywalls fits squarely in the sustaining camp. Ask This Question 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. 19

24 Recommendations 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 End of the Third Trimester What will your digital baby look like? 20

25 Questions Gordon Borrell, CEO Phone: Follow me on 21