PerfectMarket

Is the Boston Globe Paywall a Winning Strategy?

The Boston Globe this week implemented a paywall on their http://www.bostonglobe.com site, the exclusive outlet for content written for the Boston Globe newspaper.  The company delved into two new areas in launching a dedicated site for the Boston Globe.  First, they implemented a new design and technical approach called responsive publishing.  The concept of responsive publishing is that a website should adapt to any browser, device or window size and still look great.  Having browsed the Boston Globe site over the last few days on multiple devices, it definitely lives up to this promise.  The site looks great.  (Jay Budzik, our CTO, is going to be commenting on the technical approach to responsive publishing, so check back.)

However, it is the second change that the Boston Globe implemented that I want to discuss – their implementation of a strict paywall.  The New York Times implemented a metered paywall, which allows users to view up to 20 articles a month before they have to pay for content.  The Boston Globe took this one step further by putting all of their premium Boston Globe content behind a paywall with no free access.  If you want to view one article, you have to pay.  This content was previously available for free at http://www.boston.com.  In making this shift, they also implemented a premium user experience with much more limited advertising on the pages.  Articles on the new http://www.bostonglobe.com site have two sponsorship blocks in the left rail and one 300x250 display ad in the body of the article.  By contrast, articles on the http://www.boston.com site typically have four display ads (top, right rail 300x250, right rail skyscraper, and bottom banner) as well as an AdSense block and Outbrain, which is essentially a paid spot. 

All of this begs the question of whether or not this paywall plus premium user experience strategy is a good one.  There are three factors to consider in answering this question:

1. How much traffic will http://www.boston.com lose and how much advertising revenue will be lost as a result?  There is little doubt that moving this content behind a paywall at http://www.bostonglobe.com will have a negative impact on traffic levels.  The metered paywall that the NY Times implemented seems to have caused traffic to drop approximately 20%.  The strategy at the Boston Globe is different since it only affects a portion of the content, but there is little doubt that traffic will be impacted to some extent.

2. How much advertising will be generated by the new http://www.bostonglobe.com site?  By significantly reducing the number of advertisements available on the new Boston Globe site, the company is most likely counting on the scarcity of available inventory to drive a higher advertising rate.  This strategy works something like this.  Assume that boston.com has a 40% sellout rate on their ad spots and a $10 CPM for the ads they sell directly.  Further, assume that they make a $1 CPM on ads they do not sell directly.  This would result in a blended average CPM of $4.60 (40% * $10 + 60% * $1) and revenue per thousand page views from the display ads of $18.40 (4 ads at an average of $4.60 CPM).  Because they have reduced the number of ads on the new site by 60%, the company might end up with close to full sellout for these ads.  Further, because there are so few ads on each page, they probably expect to generate higher CPM rates for those ads.  Assuming the two sponsorship units are sold as a single ad spot and the company is able to command a 25% ad rate premium, the revenue per thousand page views at full sellout would be $25 (2 ad units * $12.50 CPM).  In this overly simplistic example, the company has managed to increase advertising revenue per page viewed, while simultaneously creating a premium user experience. 

3. What will be the subscription rate for the http://www.bostonglobe.com site?  This is really the million dollar question.  The company is basically counting on paywall subscriptions to make up for the advertising revenue lost in #1 above.  The company is currently offering introductory subscriptions of $0.99 for the first four weeks, but will begin charging $2.99 per week thereafter.  How many people will sign up?  That is the key to determining whether this new revenue stream will offset lost advertising revenues.  There is also an important additional benefit to the Boston Globe in this strategy, which is that it could potentially arrest the decline of their print subscriber base by no longer allowing readers to get the Boston Globe content for free online.

I commend the Boston Globe for a groundbreaking strategy.  The creation of a premium site for their best content is an interesting one and the use of responsive publishing in creating that premium user experience is a truly interesting experiment.  But what is the answer to the question as to whether or not the Boston Globe paywall strategy is a winning one?  Unfortunately, at this point it is too early to tell because there just is not enough data available on traffic declines at http://www.boston.com and subscription rates at http://www.bostonglobe.com.  Check back, though, because as this data becomes available, I will be sharing my thoughts on whether the economics seem to be working.

Tags: analytics, paywalls,