Lehman Brothers analyst Douglas Anmuth doesn’t go quite so far as to recommend that Rupert Murdoch should take the Wall Street Journal free online — as Murdoch has mused — but he does say they should consider it (in this PDF, via PaidContent).
I’ll go that far — and farther. By going free and with Murdoch’s investment in the product — that is, in the reporting and services and with his promotion — WSJ.com can become the unquestioned leading financial information brand worldwide, winning over its many competitors: Yahoo, Reuters (now stronger with Thomson), AOL, FT.com, Forbes, MSN, CNBC. But that will happen only if it goes free.
The strategy of charging for access to WSJ.com was, I’ll argue, a result of the Bancrofts’ absentee ownership. It was a way to play safe, to get another revenue stream and not cannibalize the paper. And management executed it brilliantly. But that wasn’t big thinking. Free is big thinking. And Murdoch thinks big.
He has also toyed publicly with the idea of going all-online: killing the paper. The Journal could, I think, be the first newspaper that could make that a strategy of success and growth instead of a sign of failure. Oh, I wouldn’t kill it quite yet. But I’d plan for that day and, in the meantime, figure out what the next stages of the print Journal should look like: all analysis and features, perhaps, with a USA-Today-like digest of news. But that’s still looking at the question the wrong way: papercentric. The real question is what the free online service could be worldwide: content, service, audience, advertising, thinking past paper.
No surprise, I’d also argue that WSJ.com should become distributed, putting its news and, more important, its data out there as nuggets, widgets, modules that many other sites — blogs, social services, shows — can distribute for you.
Make WSJ.com into an API and see what people can build on top of it. Why shouldn’t I be able to build a site tracking news in media with a foundation from WSJ.com: news, stock charts, industry performance, analysts’ opinions? The more people build on top of you, the bigger you get.
Getting back just to the site, Lehman’s Anmuth says that WSJ.com would need to double or triple its pageviews to make up for the lost subscription revenue with advertising volume. He’s not sure they can do that quickly. Fred Wilson, on the other hand, points out that NYTimes.com has 10 times the traffic of WSJ.com. I’ll agree that they could triple traffic in no time. So what about the ad rate? Anmuth says that WSJ.com attracts four times the rate of NYTimes.com. Dorian Benkoil would argue, I think, that this indicates free traffic is worth less than paid traffic. But I say that a free WSJ.com would still maintain high CPMs because financial is one of the only categories where there is some measure of scarcity online (that and travel and health at most sites I know); the IAB says financial is the No. 2 ad category (behind retail).
And the other factor that is almost always forgotten in this discussion of free-v-paid is the cost of charging: mostly the cost of marketing to acquire and retain subscriptions. We’re rarely told what the churn is at these paid sites — WSJ, NYT, FT — and that is a huge part of the cost structure that has to be part of the discussion of the bottom-line profitability of the strategy.
I have little doubt that the free WSJ.com would overtake the paid WSJ.com in revenue and profitability in short order. But, again, that’s not the reason to do this. The reason to go free is to explode the brand and make it many times bigger — internationally — than it is today.
Going free — and widgetized — will get it not only explosive traffic and audience growth but also, thanks to the links it doesn’t get now (apart from the smattering of free articles they wisely mete out to bloggers now) much, much richer Googlejuice. Search for “stocks” today and the first listing — after GoogleNews headlines — is Yahoo. Also on the first page are MSN, Business Week, and SmartMoney. The Wall Street Journal is not there. That is costing them a fortune.
And once they get Googlejuice, they can also get many times more Google ad revenue — even locally targeted ad revenue — they’re not getting today.
Another way to look at this is the return on investment Murdoch will get improving the product. If he adds more reporters, as he has said he plans to do, will that pay off in additional subscriptions and ad inventory? It’s hard to argue that it will have an immediate impact. But every new journalist who writes a new story that can be found on the open web will yield immediate traffic and ROI.
If they’re worried about leaving expense-account money on the table, there are so many new ways that WSJ can charge for services: advanced analytic data and software, industry meetings (real and virtual), special reports.
In the end, though, the bulk of being No. 1 will yield so many new opportunities. I think there will be a war to create valuable “social” networks in business (instead of buying Facebook, maybe Murdoch should buy Linked-In and liven it up before Facebook becomes — as it rapidly is — the default business networking tool online). The larger you are, the less your marketing costs you and Murdoch is about to start marketing his financial news channel (where internet distribution becomes vital; the days of making a channel work only through cable are over). He can capture the valuable wisdom of wise crowds and individuals (note that I’m an investor in Covestor, which exposes the successful individual investors and their strategies).
Free means big and there should be no smaller ambition for the Wall Street Journal than being the best and the biggest brand about money.