I'll admit it: it bugs me that Rupert Murdoch hasn't yet followed through on his plan to make the Wall Street Journal's website entirely free. It's the last big holdout in the all-web-media-must-be-free trend, and as the guy writing the book on free, people keep throwing it in my face. So I sighed when I saw in today's headlines that traffic at WSJ.com, with still just a small fraction of its content free, nevertheless grew by 45% last year, to 150m page views per month. Damn. Can pay really, well, pay?
Before we get into the data, let's revisit the argument for web media being free to consumers. It's simply that free sites get a lot more traffic than pay sites, and experience suggests that making money from advertising on a big user base is easier than making money from subscriptions on a small base. Why do free sites get more traffic, aside from the obvious reason of no barrier to entry? Because third-party sites (blogs and other news sites) will typically only link to sites that are free and Google only searches and drives traffic to sites that its crawler can get into. And on the Web, if you're not in Google and the blogosphere, you're not in the conversation; for much of the audience you simply don't exist. The trickle-down effects of such invisibility are felt in other aspects of your business, from customer acquisition to PR.
Here are the traffic figures for WSJ.com versus the New York Times, which went from the pay to free model in September of last year:
Both have grown over the past year, but in August last year, when both websites were behind pay walls, the NYT had about 5 million more users per month more than the WSJ. Now that the NYT is free, it has about 10 million more users per month. (Don't be misled by percentage figures; they always make growth from a smaller base look bigger).
If the NYT has the same 10-to-1 ratio of page views to unique visitors as the WSJ, those extra 10 million visitors account for an extra 100m page views, which at a modest $15 CPM, two ads per page and 50% paid inventory, are worth about $1.5 million a month, or $18 million a year. (Needless to say, that's just a back of the envelope calculation; the NYT may very well get a higher CPM)
Meanwhile, WSJ.com has subscriptions, which are nominally priced at $89. We don't know how many people currently pay for them, since that wasn't part of the latest press release, but last time the company reported numbers, there were about 1 million paying subscribers to WSJ.com. That's $89 million a year, right? Wrong.
Here's a screen shot from the WSJ's subscription page. As you can see, the recommended offer is the combo deal that leads to only a $10 online subscription fee.
As the footnote in Dow Jones's last 10Q notes, "WSJ.com subscription figure now also includes subscribers who selected to pay for both the print and online products as part of a bundled offer and registered to use WSJ.com."
So odds are that the online subscription revenues are now closer to $10 million a year than $89 million as people go for the combo offer. It might even be less than the $18 million more the NYT makes with ads online (using the above napkin-scratching numbers). If the WSJ dropped its pay wall, would it get as much traffic as the NYT? Maybe not. But it would at least be betting on the faster-growing part of the market.
Indeed, there's good reason to think that the subscription numbers are not growing at all. Felix Salmon from Portfolio (our Conde Nast sibling) observes:
If you look at the Mediaweek story, there's one statistic conspicuous by its absence: what has happened to the number of subscribers to wsj.com over the past year. Betcha it hasn't grown at all, and that substantially all of wsj.com's new uniques are there for the free content only. (That would help explain why pageviews are growing much more slowly than uniques are.)
Felix is betting that the WSJ pay wall will come down, sooner or later. I agree. I give it 24 months.