Tear down this paywall

The NYTimes experiment with putting premium content behind a paywall lasted a bit longer than I expected, but eventually the cost, in terms of separation from the Internet at large, has outweighed the benefits. The NYT columnists and archives will now be available to all readers. (Hat tip, Andrew Leigh).

As Jay Rosen says, this is good news for the conversation that is the blogosphere. Paywalls are an obstacle that we can’t get around individually, since, even if I have free access to a site, there is no point in linking it for readers who have to pay.

But there’s always a downside. The Times decision has been motivated not only by the increasing costs of a closed system but by the increasing returns to advertising, of which the lion’s share is driven through Google (and to a lesser extent, other search engines), which rely on links to place their ads.

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In my experience, growing returns to advertising are being manifested in more, and more obtrusive, ads. This may signal a renewed arms race with ad blockers. I’ve just installed Adblock Plus on Firefox, and am waiting to see if that gets me blocked from ad-dependent sites.

An issue for the longer term is that, although Internet advertising revenues are growing strongly, they are bounded. Internet advertising now accounts for 7.6 per cent of total US ad expenditure. I’d be surprised to see this number go much above 20 per cent, and there’s no reason to think that advertising should grow relative to national income. If advertising is the only source of commercial finance for Internet content and services, then the resources going into creating that content are bounded by the available finance, and we may hit that bound before too long.

An apparent implication is that the “Web 2.0” model of user-created content is going to become increasingly dominant. This idea appeals to me (Dan Hunter and I have a paper coming out that makes this argument), but I’d be interested to see what others have to say.

6 thoughts on “Tear down this paywall

  1. Free websites have revenue alternatives besides obtrusive ads. One is restricted premium content for subscribers only. Another is a request to ‘please visit our sponsors’ who I gather can monitor the number of hits via that site. If newspapers are doomed as some claim then long distance bus and train commuters will need to get their news fix presumably by wireless handheld devices. Given that extra cost the consumer will expect free content with minimal advertising.

  2. User-created content should increase regardless of the advertising growth (or maybe even in spite of).

    Less that 1% of user-created sites make decent coin from advertising, and those sites that do tend to become more magazine-like as they become more successful (eg, hiring staff writers and editors) – effectively turning into small publishing businesses in their own right.

    But probably the top 3%-5% of user-created sites are worth reading, even though most make little or no money. So it seems the growth in good user-created content is largely independent of the advertising returns (eg this blog), and more to do with non-monetary rewards for the author.

  3. “Internet advertising now accounts for 7.6 per cent of total US ad expenditure. I’d be surprised to see this number go much above 20 per cent.”

    I find that statement a little surprising given that most traditional media is moving to the internet. I already get the majority of my radio listening via podcast. At least 20% of my television comes via the internet and that proportion is going to rise. As cheap broadband becomes ubiqitous all forms of electronic media are going to move to the internet along with their advertising revenue.

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