More Thinking on the Wall Street Journal Going Free

I've written more thoughts and clarifications of the Journal going free over at Rebuilding Media. To sum up : It's a reasonable strategic move, and one Murdoch could make successfully. But any business will have a tough time making such a move and foregoing a pretty good subscription revenue stream. There's also some more noodling about financial matters.

David Pogue Can't Help Himself

Sitting behind a desk to seem more sedate than usual, the NYTimes technology reviewer not only goes through a few gizmos, but also excerpts and mimics CNET and Mossberg of WSJ in a roundup of sorts of other V-casts of the tech world. But he's not as sedate as he claims he's going to be -- especially toward the end when he starts whacking his computer with a foam mallet to make the monkeys appear.

Here's the video.

Addendum: Behavioral Content

Thinking further on below about the possibility of using behavioral targeting for content, not just ads: Part of the power of a targeter like Tacoda, for ads, is their network, not just their technology. So, for someone to reach the levels of scale that would make targeted content more valuable, they'd have to open up and allow content from multiple services, in multiple ways, not a completely controlled inbound environment.

Startup Fever at Always On

Starup business plans in Silicon Valley are like scripts in southern California: Everyone's got one, filled with hopes and dreams. And even though most won't make, the latest hit just might arise. CNET's Webware editor Rafe Needleman was at Stanford's "Always On" summit and covers some of what he calls the most interesting among the 68 startups there. It's too early to say if any will be disruptive to media, but many of them -- predictably for a world in which info-tech and media are blending -- touch on the space.

One, Cleverset, is pitched as behavioral modeling for e-commerce, but I could also see it being used as behavioral targeting for editorial content. See that someone likes something? Give him/her more of it (and then serve targeted ads, of course). Maybe match that up with Michael Wolff and Patrick Spain's new newser.com. Use their aggregation of selected sources, selected news, a little human help mashed up with users' own usage patterns and you've got a powerful editorial and business model. Rafe, who has edited me on many occasions, separately covers chat + broadcast company PalTalk (how is it a startup?) and Retrevo, which is reviews combined with social networking.

In New York, Alan Brody on Aug. 15 will be running an Innovators Dinner as well. I bet it has a a very different feel from what you can watch on YouTube of Always On.

IBM's 'Second Life' Guidelines

IBM has issued guidelines for its employees who are on Second Life. Keep up the corporate image, don't do nasty or bad stuff -- pretty much what you'd expect to protect the "brand."

And touches in a 21st-century way on issues raised by the book Speechless: The Erosion of Free Expression in the American Workplace, by Bruce Barry. I'll be interviewing Barry on Aug. 24 in New York for Bill Sobel of NYMIEG, with whom I'm partnering on a few other things.

I'll ask Bruce about all the difficulties of managing "real" vs. worklife, for both employees and employers, and how to manage the issues in a virtual as well as real world. Believe me, you wouldn't believe some of the things people are fired or reprimanded for and how little protection of speech there is. You also wouldn't believe how difficult it'll get to manage the situation as an employer if Bruce's book and campaign manage to move the needle.

Corrections to Wall Street Journal Math

I made a few corrections to my math about whether WSJ can go completely ad supported over at Rebuilding Media, thanks to a commenter, and my own rethinkng after reading his comments. Basic logic still holds.

Will Wall Street Journal Go Free?

UPDATE/NOTE: A corrected version of the math in this post is at Rebuilding Media.

In the last paragraph of one of the many stories in today's Wall Street Journal about the purchase of parent Dow Jones, Rupert Murdoch is quoted as saying if the paper went completely free it would be a "wash" financially. It would certainly be a huge step to go free (and one I'd be perfectly happy with, paying as I now do.) Let's explore whether Murdoch's assertion is really likely to be true.

First a few assumptions:

- The soon-to-be 1 million paid subscribers referred to in another piece in WSJ are paying full price, $79.
- There are seven million unique visitors and 90 million monthly pageviews, as WSJ claims. (That's almost 13 pageviews per unique.)
- The two display ads per page (large rectangle, narrow skyscraper) run at an average CPMs of $35 and $20 (reasonably possible rates for a targeted, subscription audience in a financial/business publication). The performance based ads at the bottom are together worth an effective CPM of $12. (I know that may be high, but there are a lot of them, and it's the Journal.)
- 80% sellout on average in all ad spots (some spots will be without paid ads in some instances, there has to be some room for ad serving and so on).
- Each pageview is equally valuable.

So, we've got, yearly:

- 1 million subscribers * $79 = $79 million from subscription

- 90,000,000/1000*.8 * (35 + 20 + 12) = $4.8 million monthly in advertising * 12 = $58 million in ads

Grand total: $137 million revenue from subscription and ads.

Murdoch predicts in the piece that a free site would have 10 times as many visitors and five times as much advertising. But the number of pageviews per unique would drop significantly, because a lot of the traffic – especially new traffic – would be inbound single hits or quick dips from blogs, search engines and so on. The ad rates would also drop because advertisers could not be convinced they were buying as exclusive a subscription audience. Let's take Murdoch's assertions as true and assume:

- Pageviews per unique will drop to a more normal news industry standard of 4 per unique. (We'll also assume that by "visitors" Murdoch means "uniques".)
- Ad rates will drop to 60% of their previous levels
- A lower level of sellout on pages (as Murdoch acknowledges in saying ads won't go up as much as visitors will).

So we have:

- 70 million unique visitors at 4 pageviews per = 280 million pageviews per month.
- Five times as many ads, an ad rate we'll cut in half, and 60 percent sellout.

Which in my estimation comes out to a total of about $40.5 million.

At 80 percent sellout it's $54 million. Even at the same number of ads per page, that's still only $108 million.

Now, maybe to Murdoch the difference between $137 million and $108 million is so small as to be pocket change and therefore "a wash." Or maybe my assumptions or math are way off (if you want a spreadsheet with my calculations, just ask and I'll send it.) But that's still a lot of newsroom jobs for that extra $25 million, or more than $90 million under the poorer ad scenario

Plus, subscriptions are pre-revenue, cash collected up front that can then be spent over time. They're great for cashflow and provide a "float." Ads on the other hand are typically paid months after they're billed, and can be a real problem for cashflow. Subscriptions also tend to be more stable in down times than advertising, which can be canceled with little notice. Subscriptions are a more stable business and take less overhead to maintain.

I don't see that making a successful subscription product like the Journal free makes economic sense. Tell me what's wrong with my thinking.