I love Bear Stearns analyst Spencer Wang, but he can do better than this. According to PaidContent, Wang calculates that if the Wall Street Journal online goes free, as its new owner Rupert Murdoch has said it will, it would have to increase its traffic 12x to make up for the lost subscription revenues.
WSJ.com revenue is currently pegged at $78 million annually, based on an estimated 989,000 subscribers paying $79/year. Including non-subscriber traffic, the company claims 122.4 million monthly page views. Based on an estimated CPM of $6 and a few other assumptions about sell-through rate and ad impressions per page, Wang arrives at the 12x conclusion.
The problem, Wang concludes, is that going free would only increase its traffic 6x. Thus a downgrade of 1 cent a share, which Bear Stearns made today.
Now putting aside the fact that a $6 CPM is absurdly low for a site like wsj.com (and the more important fact that I haven't read the whole report, which may be more subtle than it appears in these reports), there is one thing clearly missing in this analysis: the indirect benefits of the Wall Street Journal reappearing in the online business conversation that it has largely ceded to others due to its subscription wall.
- What about the new newspaper subscriptions that a 6x increase in web traffic will generate? (Print subscribers are typically worth five times what online viewers are worth, due to the higher effective CPMs of print media.)
- What about the increased buzz and respect that the ability for bloggers everywhere to link to wsj.com stories will engender, bringing the paper back to the front of mind of media buyers and thus bringing in more ads?
- What about the fact that, in a fierce competitive battles with its cross-town rival, the the New York Times, once nytimes.com went free, wsj.com had no choice but to do the same to maintain mindshare with an audience who are increasingly shifting online?
I don't know how to quantify any of those factors, but I know they're all non-zero, and in the case of second, at least, could be large.
And then there's the small matter of simply migrating a powerful twentieth century brand into the twenty-first century, by understanding the forces at work in the new media landscape. It's ironic that it took a septuagenarian oligarch to understand that free will be the only viable price for mass media online in a world of information abundance and attention scarcity. But as a fan of the WSJ who doesn't read it often enough because it doesn't show up in my RSS feeds, I'm glad he did.