27 July 2007

The Value of Free Content

One of the constant themes of this blog is that there's plenty of money to be made by giving away things for free. Here's an interesting study by Neil Thurman of the UK newspapers sector that confirms precisely that:

Advertising is relevant to the issue of content charging because, to a certain extent, there is a trade-off between them. Content charging, by limiting access, reduces the number of users to whom a page is exposed. When FT.com introduced a subscription barrier to parts of its content in May 2002, user numbers fell dramatically, as did its advertising revenue (Ó hAnluain, 2004). Conversely, when Times Online removed the subscription barrier it had imposed on overseas users, it experienced a “huge” increase in traffic (Bale, 2006).

Users are put off by having to pay, but traffic is also affected for technological reasons. Content charging can alienate sites from search engines and aggregators like Google (Outing, 2005). Similarly, imposing a subscription barrier also isolates newspaper websites like the Wall Street Journal’s WSJ.com from blogs, a growing source of traffic (Penenberg, 2005). In the current market, many newspapers feel that the revenue they could gain from content charging would be less than what they would lose in advertising. Even the UK newspapers who are currently charging for significant amounts of content — FT.com, Independent.co.uk, and Scotsman.com—can see the potential benefits of dropping these barriers

A companion study indicates that opening up can bring with it some unexpected benefits:

Some British news websites are attracting larger audiences than their American competitors in US regional and national markets. At the British news websites studied, Americans made up an average of 36 per cent of the total audience with up to another 39 per cent of readers from countries other than the US. Visibility on portals like the Drudge Report and on indexes such as Google News brings considerable international traffic but is partly dependent on particular genres of story and fast publication times.

Opening up means that users get to decide whether to read you, and that quality often wins out. Newspapers with closed content are unlikely to attract this kind of passing trade, and will therefore lose global influence as well as advertising revenue. (Via Antony Mayfield.)

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