The money graph

A new Pew study on the economics of news does not give comfort to news sites planning pay schemes. It also does not give me comfort that we’re wasting precious time futzing over walls when we should be paying attention to the big problems we have — one of which this Pew study points out: dreadful engagement and loyalty — and should be looking at other ways to give and gain value in our relationships with the public. The Pew data:

Over all, the evidence suggests the outlook is difficult both for paywalls and for online display advertising. While most people have not been asked to pay for content, even among the most avid news consumers online, only about one in five at this point say they would be willing to pay, and this does not include less voracious news consumers. At the same time, the vast majority of those online, 8 out of 10, say they basically ignore online ads.

In short, a good deal must change, the data suggests, before the digital age will begin to sustain itself.

About 71% of internet users, or 53% of all American adults, get news online today, a number that has held relatively steady in recent years.

Most of these online news consumers graze across multiple sites without having a primary one that they rely on. Only 35% of online news consumers have a favorite site.

To put it another way, 65% of online news consumers do not have a site that is so important to them that it stands out in their minds above all other sites they visit.

The users who do have a favorite site are pretty faithful. Some 65% of them check in with that favorite site at least once a day.

Yet even among these most loyal news consumers, only a minority (19%) said they would be willing to pay for news online, including those who already do so and those who would be willing to if asked.

Instead, a large majority – 82% – of those with a favorite site said they would find somewhere else to get the news.

Because so few online news consumers even have a favorite site this translates to only 7% of all people who get news online having a favorite online news source that they say they would pay for.

This is a sign of just how much initial difficulty the movement toward pay walls could have.

In sum, there appears to be only a very small cohort of voracious news consumers who have to have their news from a particular site, even if they have to pay for it. The vast majority of online news consumers, though, seem willing to browse for news from many sites, do not have a favorite online news source, and even if they do, are not willing to pay for that site’s content.

This is not to say that resistance might breakdown over time. . . .

All these findings speak to the natural disadvantage of news content: Most news is covered by more than one organization and people do not place enough value on the difference between the various reports. In other words, if a user had to pay for a New York Times article on Haiti, evidence suggests that he or she would just look for another source that could provide the basic information. The nuances of depth or breadth in the pay story may not be valued enough to induce payment over a free alternative.

Thus, if the news industry is going to make headway with pay-walls, they are going to have to break through what for now appears to be continuing reluctance, even among its most avid consumers.

  • http://www.socialtriggers.com Derek

    You need to take surveys with a grain of salt. People consistently say what they want and do the exact opposite. It’s pretty much human nature at this point.

    Sure, only 1 in 5 say they’re willing to pay for online news because it’s currently free, but in practice, I’m sure the numbers will be a whole lot different. Just look at the Wall Street Journal.

    Now, do I think most news companies will be able to pull this off?

    Probably not. Most will not survive in a pay wall environment because most news outlets lack unique selling propositions that set them apart. Local papers can no longer compete with the New York Times on world news reporting. They’ll have to focus in on local news instead.

    Regarding online advertising, people always say they ignore ads… until they find one that interests them of course.

    • http://www.buzzmachine.com Jeff Jarvis

      I think the opposite: people will act virtuous and say they’ll pay but when faced with the choice of free or pay, I believe, they won’t.
      On advertising, I agree (as would Google): it’s about relevance, eh?

      • http://www.socialtriggers.com Derek

        I believe relevance also applies to the free vs pay debate. If a news company offers something relevant to their readers, they will get people to pay for it. But if they’re offering the same thing that free competitors offer, they won’t get people to pay for it.

        But how many people do companies really need to make a pay wall work? If 1 in 5 say they’ll pay, does that generate more revenue than a free counter part? Or even if 1 in 10 pay, would that be enough?

        So the question really isn’t whether free or pay works. The question is: How many people do newspapers need to make a pay wall work better than free?

  • http://everything-everywhere.com Gary Arndt

    A few things:

    1) Their math is wrong. They way they got 7% isn’t necessarily true. It could be (and probably is) that those with a favorite news site are the most likely to pay for access. I don’t think you can just multiply the numbers together.

    2) Is 19% paying for access plus advertising sales under a freemium model enough to stay in business? Just because 19% is a low number doesn’t mean it might not be sufficient to work. Doesn’t mean that it will work, but it doesn’t mean that it wont work. ESPN.com does a good job with their paid premium content and I’d be curious to see how that woks for them.

    3) How does the percentage of people who say they will pay for content compare to 1,3, 5, 10 years ago? I’d like to see the trend. I think the percentage is slowly increasing. More people pay for music and movies than did 10 years ago. I don’t think it will ever hit 100% (or even 50% for that matter) but it might not have to. I think the big experimentation with news organizations in the next 5 years will be figuring out the balance between free and paid, and what content people will pay for. The NYT plan seems stupid. Anyone who knows how to delete cookies can beat the system.

    • http://www.socialtriggers.com Derek

      Gary, they could also limit news consumption with user IP addresses, which means deleting cookies wouldn’t work.

      • http://everything-everywhere.com Gary Arndt

        They could, but it would be a real problem in airports, Starbucks, college campuses and office buildings.

        Also, I’ve read it is cookie based.

      • Andy Freeman

        > Gary, they could also limit news consumption with user IP addresses, which means deleting cookies wouldn’t work.

        Arndt mentioned that folks who connect from temporary locations get new IPs each time, which means that IPs can’t be used as identity from temporary locations.

        IPs don’t also work as identities from permanent locations.

        Many DSL providers changes their customer’s home IP address every day or so. (Folks on dial-up get a different IP each time.)

        Many employers use NAT, which means that external sites see the same IP for every employee. Very few of said employees are willing to pay for a “site license” for everyone at said employer. I’m pretty sure that the no one interested in charging wants to give everyone at my company access via “my” subscription. That leaves “we won’t sell to folks using their employer’s IP”, which pretty much a non-starter.

        Those are just two of the (other) reasons why using IPs as identity doesn’t work.

    • Andy Freeman

      > More people pay for music and movies than did 10 years ago.

      How about some supporting evidence?

      10 years ago, it took more effort to get free music/movies online than it does today. 10 years ago, the share of online movies/music was smaller than it is today.

      Thus, the only way we get to “more people today” is if people are more willing to pay now for online than they were 10 years ago for offline. That may be true, but ….

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  • http://www.onlineworld.tumblr.com Mitchell

    You’re missing one crucial point about the WSJ Derek. The only_ sites that have ever been able to charge people money (apart from porn and gaming) are sites that either make or save people money. I.e. Niche business publications like FT, WSJ et al, or consumer.org. In over a decade of trying, not a single general news site that I know of has successfully implemented a paywall.

    • http://everything-everywhere.com Gary Arndt

      ESPN.com

      • Tex Lovera

        Gary-

        They’re not paying for “general news” at ESPN.com. They’re basically paying for what they hope is “inside info” for Fantasy sports purposes. Which a lot of sites charge for.

    • David M

      Yup!

      Perhaps a more fundamental issue is ‘Do consumers of media really find value in media (or as Mitchell points out – specific media)? Even more so, Do people think their lives will loose value without “media”?’

      I may like the media I consume, but that doesn’t mean I value it. There is a fatal assumption that the media is worth anything more than the effort I put forth to search it.

      Seems like the Media folks have overrated themselves and begun to make assumptions based on that falsehood.

  • http://cheyannescampsite.blogspot.com k.a.m.

    Sometimes I think some dinosaur news organizations cannot get over themselves. They are sure that they are so special that nobody else on God’s Green American Earth can do what they do or collect information or report like they can. Branding and Logo’s play a major part in this loyalty phenomenon. The sad awakening comes when you buy a generic no name product off the grocery store shelf and realize it’s just as tasty, and just as delicious. Realizing the sad fact that “You Ain’t All That” anymore is a high horse to fall from, and they are not going down without a loud T-Rex earth shaking thud, that’s for sure.

    Unrelated to this article but nonetheless revelant…….I loved watching you and Leo Laporte and Scobule last night live streaming Twit tv making the SxSW party rounds in Austin. You two are the sherpas/gurus of social media and the creative class NOW, reinventing the way we communicate. Leo’s backpack is lightyears above the rest.

    Thank You JJ. ( from unofficial online student of yours)

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  • http://sputnik.pl/ Michal Tatarynowicz

    The numbers seem to leave 8.6 mln US Americans who claim to be willing to pay for their favorite news source. Assuming they’d charge $20/mo (which is very high IMO) this leaves the US pay-for-news market at about $160 mln a month split amongst all web news sources. Not a great lot.

  • http://www.cornfieldconsulting.com Chris Turner

    C’mon Jeff, you think the research is right when questioning the case for paywalls but wrong about advertising because it undermines your thesis that ads can support new forms of news media. Honestly, was there any point reading the research at all ? I point you to Simon and Garfunkel ‘ A man hears what he wants to hear and disregards the rest’.

  • Lisa

    This is what Pew says about ads btw:

    “Attitudes toward advertising online are also complicated. Fully 81% of online news users say they do not mind online advertising because it allows the content to be free. But 77% say they also ignore the ads (42% online news consumers say they “never” click on one of those ads and 35% say they do so “hardly ever”). …

    The survey data do reveal, however, that the heaviest online news consumers, as well as the most connected younger adults, are more likely to click on ads, but only marginally so. While only 21% of all online news users say they click on online ads at least sometimes, that number goes up to 28% of those who go online daily and 37% who visit at least six sites daily. And for those under 30, about 26% sometimes click on online ads as do 30% of those who get news on their cellphones. Still, even among these groups, ad consumption is low….

    Over all, the data reveal the tenuous position of news producers. Unless consumer attitudes shift with a changing reality, news operations are looking at conventional advertising that will not work online or pay wall strategies that may drive down traffic.

    For online news to become a profitable enterprise, either consumer attitudes need to change or the industry must do more. That more could be developing new better-targeted products that people are willing to pay for; new forms of advertising that work better, including local search; or new forms of revenue other than display advertising, including perhaps online retailing. “

  • http://www.familygreenberg.com/index2.php Brian Greenberg

    First, it should be noted that the same kind of brand disloyalty existed back when newspapers were the only source for (daily) news. Back in the early 90s, I bought the New York Times every morning, but if the newsstand was out of the NYTimes that day, I’d buy another paper instead. The news was the news. Still is. All that’s changed is the ease with which we can switch between sources.

    Second, it’s pretty easy to develop an “us vs. them” attitude with regard to traditional media companies, but let’s give them just a little bit of credit here. If they build paywalls, they will likely not simply put all their current free content behind the wall and expect that people will pay. Just like people will only pay for premium content, producers will only produce premium content if someone is paying. In other words, when everything’s free, the goal is to be similar to your competitors (through SEO, for instance) to try and get yourself through the user’s filters. When you’re charging for content, your goal is to differentiate yourself, so your audience comes to you. It doesnt’ surprise me that only 7% would pay for what they now get for free. But if the thing you’re paying for is better/more interesting/more relevant than what you get for free today, I’m guessing that number goes up.

    IMHO: plain, vanilla news will never make it as premium content. Analysis from trusted sources, experts in the field, or notably good writers have a better chance.

  • Tex Lovera

    A couple of observations regarding online advertising:

    1) How many of you are automatically prejudiced against clicking ANY online ad because of the fear of winding up at a malware web site?
    2) How much does that prejudice cost advertisers?
    3) How many online readers are savvy enough to tell the “OK” ads from the “bad” ones?
    4) How many people really click on the ads about the “housewife from ____ who has an amazing diet secret”?

    This isn’t the “key” to the question at hand, but it’s part of the problem.

    • http://www.familygreenberg.com/index2.php Brian Greenberg

      (raises hand)

  • http://sputnik.pl/ Michal Tatarynowicz

    Please keep in mind that TV, radio and print ads have 0.0% click trough, yet we still consider them worth buying.

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  • http://www.breakthepaywall.com BreakthePaywall

    BreakthePaywall! is a free add-on for Internet Explorer (Firefox coming soon!) that simplifies using the various methods for circumventing website paywall restrictions.

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  • http://thelynchblog.com Chris Lynch

    I agree on your thoughts about loyalty and engagement, but I still think this speaks to how paywalls will create a Reader Elite, where only those who are smart, affluent and educated will have access to quality content once we enact paywalls.

    http://thelynchblog.com/2010/03/16/the-reader-elite/

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  • Jarvis Booster

    Right you are, Jeff. Preach it.

  • David

    Arrogance is a one of the biggest problems. Too many media folks still think they are “in charge,” while at the same time they crawl over one another on their sinking ships.

    Instead of beginning the road to sharing and linking, they howl against the moon and insist what they have is more valuable than someone who has the same thing –– and now they are insisting people must pay for it. It’s akin to a car company saying, “People are gonna have to pay more for this car because it costs is more to make it.” The consumer sees through that quickly.

    But what makes people stop? Why do they spend time with us? These are the questions we must address –– where is the value? It’s certainly not in reporting more celebrity crap. We need to recognize we’ve been poor editors and stewards for a while. The change in advertising took a big reason people picked us up, tuned in, or flipped through –– and now we have to really try.

    And what do most people continue to do? Pine for the time they were in control. We can do better.

  • http://www.keenee.com Alex

    Paying for Free things does not sound wise. Will you pay for free use of air?

    The point is that News is not free to generate. But to make it popular News Sites post it free. Its similar to email model. At the maturity of the product there are only 3-4 players on the top.

    Same will happen with News Sites in future.

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  • http://www.tipyourwaiter.org Bil

    There’s something to be said about being able to hold something in my hands that makes me more willing to pay for it. Since I can’t hold the internet in my hands, it never feels as valuable. I’d never buy a Kindle or iPad or any other digital reader, but I feel very strongly that if I had one, I’d pay to subscribe to both the Chicago Tribune and the Chicago Sun-Times. While I’d never be as well-informed, I’d FEEL informed, and that’s an improvement to the quality of my life that the internet has never been able to provide (no matter how much I love the internet).

  • cm

    Jeff,

    I find it strange that you think news providers should roll over for the new world order where people don’t pay, but should put up a fight for loyalty and engagement. They are all interrelated.

    The web, twitter and other link-oriented technologies that drive prices towards free are exactly the same technologies that drive people towards skipping around the web after reading a sentence or two and thus erode loyaly and engagement.

    I’m sure many have noticed that many reports are no longer article length. Instead they’re just summaries that point to a full article. This is in response to the change in reading habits. Very few people will read more than a paragraph before flipping to the next page.

    On the www, loyalty and engagement are obsolete and quaint notions. There is no brand loyalty and people would switch from Google or Apple or whatever as soon as someone else provides a better service, or cooler products or whatever.

    Google understand this which is why they spend so little money on brand building (aka advertising). Instead they have built up a valuable brand through real product development.

  • http://www.tyndallreport.com Andrew Tyndall

    Speaking as someone who contributed notes to both the network TV and cable TV chapters, when I looked at the State of the News Media this year I had the nagging feeling that it was beginning to seem as though it was organized backwards. Thinking mostly about the coverage of national and international news, my area of expertise — rather than local — I could not help but feel that sorting the news media by industry first, with their digital convergence online as a secondary consideration, gives the report a dated feel.

    If, for example, the report focused on the dozen-or-so major national-and-international newsgathering organizations attracting a mass audience, competing against one another…

    ABC News
    Associated Press
    Bloomberg
    CBS News
    CNN
    FOX News
    NBC/MSNBC
    New York Times
    npr
    Reuters
    Wall Street Journal
    Washington Post

    …and then focused on the legacy skills of each, the foundation medium from which each derives, their specialty skills (video, audio, text, image, data, interactive etc), topic-area beats (content analysis), audience demographics, their business models, and the underlying economics and audiences of their originating medium…

    Such an organization would present a realistic way in which the audience experiences the news and would remove the confusion between the journalistic organization itself and the various media platforms across which their product can be consumed. When more and more information is being distributed through search engines and social networks, the originating industry of a given news organization is increasingly irrelevant.

    Organized this way, the crucial findings about the economics of online news that Jarvis points to here flow naturally. It is an industry with vibrant competition and scant pricing power — not one with undercapacity due to cost cutting.

    Organized thus, the report would not be painting a picture of an industry under siege but of one that still has plenty of excess capacity. It is very rare for any industry to have a dozen, viable major brands competing head-to-head.

    So much reporting on the troubles of journalism over the past decade have been about the failure of business models; so little about the improved competition deriving from digital technology.

  • http://www.visionvirtuelle.ca Adam Sofineti

    If I want breaking news, Twitter does that better than any online newspaper. If I want in-depth analysis, there are many blogs out there that do it just as good or even better than most of the newspapers.

    Am I alone, reading more blogs than online newspapers? Once the newspapers will start charging, I’m convinced, there will be many more like me.

    • http://evilpundit.mee.nu/ Evil Pundit

      You’re not alone.

      I only read newspaper articles if they’ve been linked by one of my regular blogs.

      This month I donated $40 to my favourite blogs.

  • Brian Gillespie

    The big news outlets all need to go behind a paywall and turn off Google access. There needs to be a definitive answer to end all the ridiculous speculation.

  • Douglas MacKinnon

    News is a commodity and will be available for free now and in the future. It’s hard to compete with free. The big news organizations who want to make a profit from anybody but a very small group who are willing to pay for news from a specific source should find a way to differentiate themselves in the future or make money from a parallel business that ties into their news reporting. They won’t make it from delivering the news alone. It’s the Google business model changing the world. Jeff’s book, WWGD, says it all!

    • Brian Gillespie

      You guys are confusing news with journalism. News which can be found on a Twitter feed is not the same as journalism which is product of a business or individual. The big news outlets, who output journalism need to go behind a paywall and turn off Google and the like.

      The results will then show the true business model which will no doubt fall somewhere between the old paradigm and the google paradigm.

      • http://evilpundit.mee.nu/ Evil Pundit

        You are confusing journalism with something of value.

        Journalism is simply the presentation of an opinion. Everyone has opinions.

        I agree that the big news outfits should wall themselves off from the Internet. The sooner journalists get rid of themselves, the better for society.

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  • http://iblog.at/hipriestess4u/ donna bartley

    This must go for scifi and flash fiction, I post all my stories for free and then no one buys them when I publish them, need more publicity for my new novel http://publishitorbust.blogspot.com/, but it seems 50 thousand on twitter read the book, now I’m having trouble ‘selling’ it.

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  • http://mlm-secrets.org Jim Jinright

    The Dallas Morning News is now giving away a reduced version of their newspaper 4 days a week just to support the advertising. It seems that search marketing and web 2.0 has changed the entire paradigm where the new expectation from consumers is that content should be free. I do think that some people would pay; if they thought the content was completely unbiased and objective.

    Personally, I find that traditional media is not objective and they fail to report on items that are critically import such as the banking system, global debt crises and the corruption of large governments. I hardly watch the news anymore or read the newspapers because they simply don’t report the facts. One of my favorite news channels is on YouTube with Max Keiser. I think I would pay for that type of information since they are reporting the real news.

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