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The list of major newspapers that haven’t at least experimented with a paywall or subscription option for online content is pretty short, and one of the most prominent abstainers is the Washington Post. While the success of the New York Times metered paywall has sparked a wave of imitators throughout the industry, the Post has remained steadfast in its opposition to that approach — despite the financial pressures the company is under. At a recent technology conference in Colorado, CEO and controlling shareholder Don Graham talked at some length about why the newspaper hasn’t jumped on the paywall bandwagon, and his reasons make for an interesting counterpoint to much of the conventional wisdom in the media industry.

Graham’s comments occurred during an interview with author Walter Isaacson, the author and CEO of the non-profit Aspen Institute, where the conference was held. In addition to the Washington Post publisher, the interview also included his daughter Laura O’Shaughnessy — the CEO of Social Code, a subsidiary of Washington Post Co. that manages social advertising campaigns for companies on Facebook and elsewhere (and recently hired 15 staffers who made up the core of the social-sharing community Digg) — and Graham’s son-in-law Tim O’Shaughnessy, the founder and CEO of the group-buying service LivingSocial.

A digital paywall would have more downside than upside

In response to a question about why the Post remains steadfast in its opposition to paywalls, Graham said that a subscription option like the New York Times or Wall Street Journal offers wouldn’t make sense for the paper for one simple reason: because the vast majority of its digital readership comes from outside the print newspaper’s circulation area, and therefore there isn’t any way to tie an online subscription to the print publication the way most of the Post‘s competitors do. As he put it:

The New York Times or Wall Street Journal… can say we’re going to charge, but we’re not going to charge you if you subscribe to the newspaper. The Washington Post circulates in print only around Washington, D.C., but way over 90 percent — I think over 95 percent of our Internet audience is outside Washington, D.C. We can’t offer you that print or online choice. So, the pay model would work very differently for us.

In that sense, the Post is unlike most other newspapers in a fairly critical way: because of the impact that news coming out of Washington, D.C. has on the rest of the world, the paper’s influence and/or potential readership is much broader than its print distribution. So in print, it seems more like a small or medium-sized metropolitan paper — with about 500,000 readers, according to recent figures from the Audit Bureau of Circulations — but its online audience is about 17 million unique visitors a month.

The other major newspaper that has resisted implementing a paywall, The Guardian newspaper in Britain (see disclosure below) is in a similar situation to the Post in many ways. Its influence, particularly online, is much larger than its print circulation could ever be, and that influence and readership would likely be dramatically reduced if it were to erect a paywall around all of its content — and there would be no corresponding benefit for its print business. So while the NYT meter has boosted its Sunday print circulation, which has an impact on advertising revenue, the Post likely wouldn’t see any boost at all.

Paywalls are backward-looking, not forward-looking

In his comments at the Aspen conference, Graham made it sound as though the Post was more or less thrust into this situation by the nature of its market and its content. As he described it:

Circumstances have made it so we are the one great news site, stemming from a company with a big news room, that’s free at this point, and we’re going to try to make something of that.

That said, however, the rest of the interview makes it fairly obvious that there’s another reason the Post hasn’t jumped on the paywall bandwagon: because the Washington Post CEO’s inclination leans far more towards experimentation with new media formats and platforms than it does towards backwards-looking efforts like paywalls. It’s no coincidence that the Post is probably (next to The Guardian) the newspaper that has tried to innovate the most in digital media, with projects like the Trove news-recommendation service and the Post‘s Facebook social-reader app — or even Social Code itself, which in many ways is a potential alternative to traditional newspaper banner advertising.

As Graham described in an interview with Om last year, the reason why he is interested in experiments like the Facebook reader is because he wants to “go where the readers are” instead of pursuing the traditional media model of trying to convince readers to come and spend all their time at the newspaper’s website. And the Washington Post CEO said at the Aspen conference that he remains committed to doing this despite the fact that Facebook occasionally makes changes that dramatically affect the impact of things like the Post’s social-reading app.

The Post‘s critics would no doubt argue that the success of these efforts is questionable at best, particularly for a company that has seen the same kind of widespread layoffs and belt-tightening as the rest of the industry, and yet still faces some considerable financial pressures, as Ryan Chittum of the Columbia Journalism Review detailed in a recent piece abut the paper. And it may be that the kind of balance that Graham is trying to strike — with a small-circulation print paper that punches far above its weight in terms of online influence — simply isn’t financially sustainable. But it is fascinating to watch.

Disclosure: Guardian News and Media Ltd., the parent company of the Guardian newspaper, is an investor in the parent company of this blog, Giga Omni Media

Post and thumbnail images courtesy of Flickr users Giuseppe Bognanni and George Kelly

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As CEO of CNET Networks, Ashe helped engineer the sale of the tech media company to CBS with impeccable timing — selling in mid-2008 for $1.8 billion ahead of the market shift. He spent six years at CNET, including the last two as CEO while the public company was under tremendous pressure. He managed the integration into CBS Interactive, sticking through his original commitment to CBS CEO Leslie Moonves into what he called “an operating job.”

This new job promises a mix as Walmart pushes ahead with what CEO Mike Duke calls “a long-term vision to win.” Walmart has yet to achieve the kind of success with digital content that some think it should have. His background at CNET and CBS could be a major plus.

Working for Walmart (the job is effective immediately) marks the first time Ashe has been on the retail side but his last two jobs included international aspects, something Walmart played up in the late Monday announcement.

He joined the board of LivingSocial during his break, so is familiar with the volatile daily deal space. LivingSocial’s investors include e-tailer Amazon (NSDQ: AMZN), among Walmart’s largest online competitors.

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The Office of Fair Trading — the U.K.’s equivalent of the Federal Trade Commission — looks set to step up its ongoing investigation of the company’s business practices after another watchdog joined the fray.

The Guardian reports that Groupon UK was referred to the OFT by another regulator, the Advertising Standards Agency, which monitors complaints about commercials for false and misleading claims. It has found Groupon to be a persistent offender of advertising rules, found in breach of its codes almost 50 times so far in 2011.

In a statement on the ASA’s website, the organization says it is referring complaints to the OFT about Groupon’s failure to conduct promotions fairly, failure to provide evidence that offers are actually available and for making exaggerated claims about the amounts that can be saved.

“We are taking this approach because, given Groupon’s track record, we have serious concerns about its ability to adhere to the Advertising Code. It is in the public interest that we refer the matter to the OFT, the OFT being better placed to address the underlying issues concerning Groupon’s trading practices generally.”

Groupon’s UK operation was previously known as CityDeal, a pan-European service run from Berlin that was acquired by the Chicago-based company in May 2010. It has proven controversial from the beginning, raising many complaints from customers and clients and in July the OFT announced that it was undertaking its own investigation of the business.

An OFT spokesman would not comment on the ongoing investigation, but the “will not be in a position to determine whether it considers the law has been infringed until it has completed its investigations and assessed the available evidence”.

Groupon issued a statement saying that it was cooperating with the investigation:

“Groupon constantly strives for business practices that are in the best interest of consumers. We are constantly evolving business process to ensure customers receive the best possible experience at the highest standards. We are cooperating fully with the OFT to ensure that the rights of consumers are protected.”
But though Groupon is the only daily deals business under official investigation right now, it may not be alone for long. As the Guardian points out:

The OFT is expected to launch a wider investigation into the online daily deals market, which has seen a proliferation of daily deals companies including Groupon’s arch-rival Living Social, to examine advertising and pricing practices.

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And the result may have even been something of a surprise to Groupon and its financial advisers: the company had originally planned to sell 30 million shares priced between $16 and $18, before increasing the number to 35 million priced at $20.

The price of those shares closed up 31 percent on the day, up $6.11. At various points during the day the stock flirted with the $30 barrier before settling down as the weekend arrived.

The $700 million raised sets a record for recent IPOs and could set the pace for what will be expected of other IPOs still to come, such as those from Facebook and Zynga. Still, Groupon’s public financing round is still less than half of what Google raised in its IPO in 2004, of $1.9 billion.

However, opinion seems divided over whether the company will be able to sustain the hype that is surrounding the company today. Over the past several weeks there have been plenty of questions raised about the company:

Perhaps most significantly, there is the number of companies mimicking its business model of offering daily discounts for goods and services, and whether the company will be able to grow as fast as it has as a result — not to mention whether longer term people will remain interested in the proposition of buying through sites like it.

Living Social, Amazon (NSDQ: AMZN), Google and Facebook are just four names to watch in this space, and that’s before you even get to the many local and more vertically focused daily deal offerings out there. (One of the sites I use most here in London is a one that only offers daily deals on food.)

The company has also been the subject of scrutiny over how it runs its accounting and at one point had to restate some figures along more traditional metrics.

When Groupon was in a quiet period leading up to the IPO, an internal memo leaked out from the CEO, Andrew Mason, in which he tried to rally the troops in the face of naysayers, which painted an unflattering picture of the company, however you looked at it.

Some of those issues are longer-term ones, but others appear more immediate. As Bloomberg notes, in September Groupon owed twice as much in payouts to its merchant partners as it had in cash. Marketing was up by 37 percent in the last quarter as well to cope with the rise in competition and as Groupon tried to ride the wave of its growth as a business.

Although the company has claimed it would be “wildly profitable” soon, in the first three quarters of this year it has had a net loss of $214.5 million.

In August, it was reported that Groupon had some 115 million subscribers worldwide.

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