With nearly one million online subscribers, who pay about $79 per year, the Wall Street Journal will pull in an estimated $65 million this year from online subscriptions alone.

So should WSJ.com rid itself of its online paywall, as Rupert Murdoch suggested?

"I think it would be an expensive thing to do in the short-term. In the long-term it may be a wonderful thing to do," said Murdoch.

A majority of newspapers and publications have opted for a free content model online. "So much content is free and I think that a lot of times if you put a price tag on it, there is a good chance someone will go elsewhere," says Chet Czarniak, managing editor of USAToday.com.

Yet WSJ.com has been able to reap subscription revenue until now because it can count on a prestigious brand name and quality content targeted toward a typically wealthier and more business-oriented audience.

According to Lehman Brothers' analyst Douglas Anmuth, the Journal currently charges on average about four times more than NYT.com per ad, because it is targeted toward this high-yield audience (from an advertiser’s point of view).

So the question is, would a significantly larger traffic for a free WSJ.com (currently 2.6 million monthly visitors) compensate for the decrease in WSJ’s ad premium – decrease caused by this opening to a larger public?

According to Dorian Benkoil, a senior consultant at Teeming Media, a free WSJ.com would initially lose about $29 million in annual revenue during the first few years. But if the online traffic increases to above 10 million monthly visitors – which it easily could – “the significantly larger audience and resulting increase in ads shown should more than make up for the lower ad rates and lost subscriptions,” reports Business Week.

The same source brings up an interesting point: the increased online traffic could potentially reap a lot of revenues in behavioral targeted advertising, as the company gathers information about its readers, and as behavioral targeting improves its own mechanics.

It seems the real issue is not whether a free WSJ.com would be profitable, but if one is ready to suffer the initial losses in revenue. And as Business Week sums up, “if anyone can endure such a hit, it may be Murdoch.”

Source: Business Week