Summary:

It’s impossible to fund an online content business through ads alone, and the return of paidcontent could benefit the whole industry, accord…

It’s impossible to fund an online content business through ads alone, and the return of paidcontent could benefit the whole industry, according to FT.com publisher Rob Grimshaw. Despite now giving just 10 free articles a month outside its £99-a-year pay wall, FT.com is growing by up to 15,000 free registrations a week and has reached 1.3 million non-paying registrants, 110,000 paying subscribers and a publishing business that’s two-thirds digital.

With publishers including News Corp and GMG now contemplating paidcontent strategies, Grimshaw told paidContent:UK: “News Corp (NYSE: NWS) are a huge media organisation – I’d be surprised if they couldn’t produce some great content that people would want to pay for. The more publishers that go down this route the better, as far as I’m concerned.

“We’ve done the sums – it’s really difficult to see how an advertising-only business can stack up unless you’ve got enormous volume. If you start doing some simple maths on this thing, it becomes clear what a challenge it is. If you’re aiming to make $50 million a year from your online advertising business, which is not massive, you’re going to need 833 million page impressions per month at CPMs of $5 a time. If they drop to a dollar, you need 4.1 billion. There are hardly any websites that have anywhere near that volume and few can aspire to it – you’re going to need some other way to make money other than adverts.”

Can’t charge for abundance: Even non-business publishers can succeed but, to any considering the switch, Grimshaw repeated his often-aired belief – you’ve gotta be unique: “We have a strong position that makes it relatively straightforward for us to have a subscription model, and I don’t see any reason why that can’t be replicated in other categories like consumer categories, for example. But you have got to have that quality and uniqueness. There are an awful lot just churning out reproductions of newswire content, barely rewritten. Consumers aren’t stupid – if they feel they can get exactly the same somewhere else, they are going to do that.”

A new wave of pay-for models, compelling newspapers to offer only content readers can’t get elsewhere, would be “a positive thing for the industry and will also lead to benefits for the reader”: “It forces publishers to think very hard about their content output and what is valuable for the consumer.”

Simplify payments: “The one piece of advice I would offer to any publication is – as well as having great content, they also need to think very hard about payment processes. Whilst consumers don’t object to paying for content online, they do object to hassle and they want to see payment models similar to iTunes’ it’s very simple and straightforward to pay for what you want.”

Steer clear of cheap ads: Why is paidcontent, which many publishers looked at earlier in the decade, the hot topic again? Persistently small, if any, online profits, exacerbated by the plateauing online ads boom. Will ad-dependent publishers simply regain confidence in the model when advertising recovers late in 2010, as projected? Grimshaw: “If they do, they are being quite short-sighted. CPMs in the marketplace are pretty low and getting lower. I’ve seen reports that networks in the States are selling at less than $0.10 per thousand, certainly commonplace is less than a dollar and, increasingly, those rates are prevalent in the UK market as well. We’ve done everything we can to stay clear of that.”

But FT.com doesn’t eschew ads: “People talk about the advertising-subscription issue like there’s a choice to be made – from our point of view, it’s actually the subscription access model that drives the advertising side of the business, because the demographic details we collect allow us to have a high-yield ad model on the site where we can offer very sophisticated targeting.” Still, visit FT.com most days and you’ll see loads of ads for, well, FT.com. That’s spare inventory, because FT.com doesn’t use online ad networks, instead doing direct sales for what Grimshaw says should be expensive slots.

“The FT is a niche business. I’m not sure that there are more than a couple of million people who you’d really say are in our marketplace, and the paper is read by over 400,000 a day sells four million a day – that’s indicative of our market. The objectives are getting us to having (just) a few hundred thousand subscriptions on FT.com, not millions and millions.

A premium Alphaville?: One feature FT readers value is Alphaville, the award-winning blog that’s currently free. Could it go behind the pay wall? Grimshaw says such experimental developments are always launched as free until they prove their worth. “We generate a substantial amount of revenue from Alphaville, so it’s a robust commercial proposition for us. But it’s still very much a platform for innovation, so it’s not an area of the site where we’re thinking we must make pay for tomorrow but, like any part of FT.com, it’s under long-term discussion.”

Restructuring the business: After laying off 80 staff for further multi-platform integration in March, are any more likely? “We don’t have any specific plans right now going forward – as with any business, you can’t predict what’s coming down the line. There’s a long-term transformation we’re pursuing that will involve changes to the organisation from time to time on how we structure things. We’re moving to where consumers will want to receive content through a whole range of different channels – we have to have an organisation that is set up to deliver through any channel in a successful, efficient way, and a profitable way – we don’t believe in one channel subsidising another.”

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