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Turning WSJ.com into a free site would require a 12x increase in traffic growth to offset the lost revenue, according to a new report from Bear Stearns analyst Spencer Wang. WSJ.com revenue is currently pegged at $78 million annually, based on an estimated 989,000 subscribers paying $79/year. Including non-subscriber traffic, the company claims 122.4 million monthly page views. Based on an estimated CPM of $6 and a few other assumptions about sell-through rate and ad impressions per page, Wang arrives at the 12x conclusion.
So that’s the math, but is it achievable? That’s where things get dicier. More after the jump….
If WSJ.com only grew to the average of its peers (nytimes.com, CNN Money, usatoday.com MarketWatch and Yahoo (NSDQ: YHOO) Finance), the site would only be about halfway to the 12x goal. To really see direct revenue growth from going free, it would require the site grow as big as Yahoo Finance itself. That would obviously be a huge challenge, since Yahoo Finance is a portal aggregating content from multiple third party sources. Note that in August, an analyst at Lehman estimated it would only take a 2x-3x rise in traffic to offset the revenue loss. That analysis didn’t spell out the expected CPMs though — it only referred to them as “high” — so that could explain some of the difference.
But even this doesn’t tell everything. As Wang notes, $78 million in revenue only accounts for an estimated 4 percent of Dow Jones (NYSE: NWS) revenue, so from a strictly financial stance, it doesn’t much matter either way to News Corp. If Murdoch does set WSJ.com free, as is widely presumed, there will likely be a broader strategic rationale than simply wanting more ad revenue in the short term.
Meanwhile, for News Corp.’s fiscal year ending June ’08, the Dow Jones buy will likely shave a penny from earnings, according to Wang. This is based on higher interest payments and an expanded share count. (Click on the chart below for a larger version.)