Digital advertising revenue could be exceeded if just 3-4% of users paid online

Posted by Emma Heald on November 3, 2009 at 9:58 AM

If national newspapers in the UK could persuade just three or four per cent of their online audience to pay for content, they could make more money than through advertising, a private equity financier told the Guardian. Dharmash Mistry, a former senior Emap executive who is now a partner at private equity firm Balderton Capital, said that if these 3-4% of users paid £3 a month, that would exceed current digital advertising revenue.

Mistry suggested that £3 a month was about 10% of the monthly price of buying print editions daily, and said that the statistics were based on analysis of a print website attracted 20 million monthly uniques. He estimates that national newspapers are probably each making less than £20 million in online ad revenue per year. If 3.5% of users of a newspaper website with 20m uniques were to pay £3 a month, that would generate £2.1m per month, or £25.2m per year. Mistry told the Guardian that currently, "if any make more than £30m I would be shocked."

He advocates a part-paid, part-free strategy, and highlighted the fact that as paying users are seen as more valuable by advertisers, newspapers can charge higher rates for ads placed alongside subscriber content: a premium of 30% or more. He believes, however, that newspaper groups are resisting putting content behind a pay wall due to fear of their digital audiences shrinking. "They all measure themselves by audience size," he said, and therefore find it harder to accept the economic reality of the situation.

To charge or not to charge online is one of the most fiercely debated questions in the newspaper industry at the moment. Various polls have been carried out on paid online content in the UK and US and have generally shown somewhat discouraging results, for example a paidContent:UK/Harris Interactive found that only 5% of UK online news readers would be prepared to pay. But according to Mistry, this figure would in fact be enough.

Journalism Online, the start-up founded earlier this year dedicated to helping newspapers find the best ways to charge online, has presented similarly convincing figures. Announcements about paid online content are anticipated in coming months from News Corp properties and the New York Times, amongst others. Will paid online content become the norm for general interest newspapers? If so, how will the news landscape change?

Source: Guardian