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Making a buck online

I was talking to someone a few weeks ago who didn’t understand why newspapers publish their stories online for free but make people pay for the print version.

Good question. As soon as they figure out how to charge for the information online — without stifling traffic — they will. It’s a pretty fine line; one the industry is struggling with.

When most newspapers and magazines went to the Web, nearly everything there was free for the taking. Advertising was expected to support the sites — the same as in print — but since the Web gave everyone the ability to become a publisher overnight, a flood of cheap ad placement opportunities diluted the revenue stream.

Many publications attempted to charge for their websites, but even when the fees were modest, the concept was a turnoff to people who only read the paper online. 

The site I work for, Dispatch.com, took its content behind a so-called “paywall” a number of years ago. That decision was reversed after pageviews declined so much that advertisers didn’t see the value in staying.

Once the paywall was removed, traffic on the site shot up and has increased steadily since. While the site does generate revenue, the idea lingers that it could be doing more for the company’s bottom line.

This is typical of most news sites. They continue to search for a payment mechanism to boost revenue without sacrificing traffic to the site, especially as surveys show that more people are turning to the Web for news.

That quest picked up steam again as the economy lagged and newspapers and magazines felt the squeeze. There are now a number of ideas floating around aimed at helping news sites increase their profitability.

Back to the future

For at least a few organizations, the basic paywall concept remains the best answer. The Wall Street Journal is one of those sites.

Part of the reason the paper is able to make this situation work is because it is a niche publication. It has the largest print circulation of any U.S. newspaper, but its focus is business and financial news and its depth of coverage is unmatched. Its only real competitor is the Financial Times of London, which also employs a paywall.

For news outlets that own a particular niche or have limited competition, a paywall can work. But general-circulation papers — who share a lot of national and international news taken from wire services — will be challenged to hold pageviews this way when that information is readily available elsewhere.

The Times of London also recently erected a paywall. But it hopes the benefits of targeting advertising to its readers will outweigh the loss of traffic.

“Obviously a huge number of casual readers will get their news elsewhere,” said Paul Richards, an analyst at Numis Securities Ltd. in London. “What you’ll have left is a core of readers that you can target more effectively with advertising and services. If you know who your readers are, it’s easier to monetize them.”

The meter is running

The all-or-nothing approach works for some sites, but most are looking for a solution that’s more palatable to the online audience.

In January, the New York Times announced a paywall hybrid where subscribers would have full access to the paper’s online edition, but other visitors to the site would have to pay for content past a set number of stories each day.

Executives of The New York Times Company said they wanted to create a system that would have little effect on the millions of occasional visitors to the site, while trying to cash in on the loyalty of more devoted readers.

The plan is scheduled to begin in January 2011. NYT editors said they were allowing themselves a full year to work out the details.

“There’s no prize for getting it quick,” said Janet L. Robinson, the company’s president and chief executive. “There’s more of a prize for getting it right.”

If this system works, it could easily end up being the model for all news websites.

A byte at a time

Another option might be micropayments, where readers would be charged for what they consume. Google made a pitch to at the Newspaper Association of America last fall to become a provider of this kind of service for various papers. In its proposal, it said:

Google believes that an open web benefits all users and publishers. However, “open” need not mean free. We believe that content on the Internet can thrive supported by multiple business models — including content available only via subscription.

This system presents a number of problems, not the least of which is deciding how to price stories. A short story or brief shouldn’t cost the same as a large feature story, should it? Would investigative pieces cost more since they took more resources to produce? What happens if the buyer doesn’t feel they’re getting enough value for what they’re being charged?

If Google can find a way to collect the fees — which they envision as being anywhere from a penny to several dollars — there will be plenty of news organizations willing to give this solution a try.

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