Tear down this paywall

by John Quiggin on September 21, 2007

The NYTimes experiment with putting premium content behind a paywall lasted a bit longer than I expected, but eventually the cost, in terms of separation from the Internet at large, has outweighed the benefits. The NYT columnists and archives will now be available to all readers. (Hat tip, Andrew Leigh).

As Jay Rosen says, this is good news for the conversation that is the blogosphere. Paywalls are an obstacle that we can’t get around individually, since, even if I have free access to a site, there is no point in linking it for readers who have to pay.

But there’s always a downside. The Times decision has been motivated not only by the increasing costs of a closed system but by the increasing returns to advertising, of which the lion’s share is driven through Google (and to a lesser extent, other search engines), which rely on links to place their ads.

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In my experience, growing returns to advertising are being manifested in more, and more obtrusive, ads. This may signal a renewed arms race with ad blockers. I’ve just installed Adblock Plus on Firefox, and am waiting to see if that gets me blocked from ad-dependent sites.

An issue for the longer term is that, although Internet advertising revenues are growing strongly, they are bounded. Internet advertising now accounts for 7.6 per cent of total US ad expenditure. I’d be surprised to see this number go much above 20 per cent, and there’s no reason to think that advertising should grow relative to national income. If advertising is the only source of commercial finance for Internet content and services, then the resources going into creating that content are bounded by the available finance, and we may hit that bound before too long.

An apparent implication is that the “Web 2.0” model of user-created content is going to become increasingly dominant. This idea appeals to me (Dan Hunter and I have a paper coming out that makes this argument), but I’d be interested to see what others have to say.

{ 47 comments }

1

almostinfamous 09.21.07 at 9:01 am

here’s what Jon Schwarz thinks of it, and i tend to agree a little bit.

the comments are interesting too :)

2

almostinfamous 09.21.07 at 9:01 am

yikes! that should be Schwartz!! my apologies

3

Doug 09.21.07 at 9:04 am

Is there reasoning behind the 20 percent upper bound, or is the number strictly ex aero?

4

abb1 09.21.07 at 9:40 am

20% is $15 billion; that’s a lot of content. Plus commercial start-ups – people spending their own funds trying to get to a position where they can start competing for a piece of that pie. Also, Internet is a world-wide phenomenon; the US expenditure is a big part, but it’s only a part.

5

sanbikinoraion 09.21.07 at 10:02 am

I would be amazed if it were possible for sites to block you for using Adblock Plus – AFAIK it is a client-side technology that simply hides the ads once they’ve come down the pipe to you.

The worst that could happen is that they manage to get some ads through the filter. And Adblock Plus allows you to whitelist certain sites, so even if they are using some kind of groovy flash challenge/response whatsit, you could always still just allow ads for that domain, as annoying as that would be.

6

John Quiggin 09.21.07 at 10:10 am

20 per cent is a guess at the proportion of media-viewing time that goes to the Internet. Feel free to find a source on this.

7

JP Stormcrow 09.21.07 at 10:58 am

It seems clear to me that if you are talking overall content (absent any quality threshold) versus attention, that attention is the scarce resource. So in some sense the content consumer will continue to have the upper hand. And I do think that “Web 2.0″ type content creation will continue to push this.

Now of course large organizations pursuing their narrow economic self-interest can (and do) play the Web 2.0 game as well. What I see is increasingly sophisticated blending of “advertising” into content (Analagous to infomercials on TV and product placement in TV shows and movies… and one clearly interpretation of “regular” TV news, sports etc. is that they are lifestyle infomercials.) Actually I see this as part of a general trend in society (Question: My assumption is that the total “adverstising” pie is increasing, is there any data on that?), the increasing ubiquity of advertising woven into the basic fabric of life.

But the margins of the global dance of commerce are adequate to fund a pretty cool Internet – and right-minded folks can easily separate out the wheat from the chaff… (Ah, self-delusion – the straw that really stirs the drink.)

8

Stuart 09.21.07 at 11:25 am

Well the other possible trend for web advertising is the extension of sites setting up ads that people actually want to look at – when I go to various webcomic sites, gaming sites like Penny Arcade, or places like Web Grognards, I will almost always briefly check out the ads, and will relatively frequently follow them. The difference between these sites and the general ad supported web site is they actually bother to limit ads to ones that are likely to be of interest to the general site user, rather than just getting random unrelated ads (or even in the case of google links, at best sometimes vaguely related ads).

9

Eszter 09.21.07 at 11:49 am

The part I wonder about is how long people will continue to supply quality UGC (user-generated content) for no compensation. That is, I don’t doubt that there will continue to be considerable amounts of it, but one has to wonder at one point the people creating the high quality material will decide that they want something in return and aren’t willing to do it for free. This would suggest that more of this limited pot of ad revenue would have to be split with content of that sort and while I’m not sure right now what exactly that implies for the above, it seems like it would complicate things further.

10

john b 09.21.07 at 11:53 am

data point that appears to support John’s 20% estimate: the UK is the most developed online media market; online accounted for 8% of total UK ad spend in 2005 and 12% in 2006, and my friends in marketing agencies tell me that online is the only advertising channel that’s still showing strong growth this year…

11

des von bladet 09.21.07 at 12:15 pm

whyfirefoxisblocked.com used to be a rant-site used as redirect for firefox users, on the grounds that they might have adblock installed. It seems to have declined in lucidity of late; I don’t know about usage.

Personally I am mostly OK with adverts unless they are animated. Animations are bad, and Flash is extra-super-bad.

12

Seth Finkelstein 09.21.07 at 12:16 pm

“An apparent implication is that the “Web 2.0” model of user-created content is going to become increasingly dominant.”

Well, I wouldn’t put it that way (prefering “digital sharecropping”), but people have definitely thought about it:

http://seattlepi.nwsource.com/business/298894_wetpaint09.html

“Both companies plan to make money through advertising, a model that Penchina said can be highly profitable for a company such as his that employs about 30 people and relies on open-source software. “You can make a fair amount of money on advertising when you have basically no costs,” he said.”

13

abb1 09.21.07 at 12:53 pm

…one has to wonder at one point the people creating the high quality material will decide that they want something in return and aren’t willing to do it for free.

It serves as a springboard for ambitious amateurs to become professional musicians, pundits, journalists, etc. Being noticed is what they get in return; those who turn professional will probably stop producing for free but they will be replaced by new cohorts.

14

JP Stormcrow 09.21.07 at 1:06 pm

Trying to answer my own question above on overall advertising spend. (And I’m not really sure what all gets included in “advertising spend” – the article quoted below had US total at ~$200B, while this one has it at ~$300B and with slow growth.) And US at nearly half the spend seems too high – or maybe it just shows how much more saturated we are with advertising in the US than elsewhere and the potential for increase in the rest of the world.

Worldwide ad spending to reach $427 bln in 2006 and $451 ln in 2007 by ZDNet‘s ZDNet Research — Worldwide ad spending will maintain a 6% growth rate for the next 2 years, climbing to $427 bln in 2006 and to $451 bln in 2007, according to ZenithOptimedia. That’s slightly better than the 4.8% growth to $403.6 bln for 2005. US spending growth will increase moderately over the next two years, per the forecast, […]

One thing that all sources agree on though is that Internet is gaining marketshare.

US Online Ad Spending (billion dollars) Year Online Ad Spend 2004 $9.6 2005 12.5 2006 16.4 2007 19.5 2008 23.8 Source: eMarketer, December 2006

15

Jay Rosen 09.21.07 at 1:08 pm

Thanks for the mention!

On the demise of advertising and the transformation this will force in journalism (since subscription revenue is also hard to get) I highly recommend the speculative analysis by Doc Searls, Toward a new ecology of journalism. He argues that advertising is itself an inefficiency that is being boiled out of the market.

16

Matt 09.21.07 at 1:09 pm

For some reason quicktime and flash won’t work properly w/ firefox on my computer at home. I must have an incompatability somewhere I can’t find. They work fine with IE. The nice side-effect of this, though, is that I don’t see quite a lot of adds- they just come up as broken links and I skip on, blissfully oblivious to what someone was trying to sell me and all the happier for it. (If I need to watch video I just use IE. It’s a small annoyance but worth it to not see the adds.)

17

Seth Finkelstein 09.21.07 at 2:01 pm

“He argues that advertising is itself an inefficiency that is being boiled out of the market”

Please note that no reasonably falsifiable statements are made, and it’s all in the service of marketing.

18

M. Gemmill 09.21.07 at 2:39 pm

I hate hate hate hate hate ads that fly out over the text–I have to find the tiny little box to make it go away. The only clicks they get from me are accidental. And ads that make noise. The noisy ads aren’t a problem when I’m sitting in my living room, but in the library? Urk.

19

joel turnipseed 09.21.07 at 4:29 pm

Honestly? I don’t mind the ads. In fact, one of the things I miss about getting the Sunday Times at home is the Magazine, whose raunchy excess is a kind of cheap thrill/voyeuristic journey into the minds of the rich and ultra-rich.

I also think the NY Times folks looked at the future landscape of news publishing and said, “You know, the lion’s share of newspaper ad publishing online is ours to lose.”

The days of a metro area like the Twin Cities supporting two major newspapers are over, and there’s some question about what shape/form even the Star Tribune, the larger and more established of the two, is going to take. Almost all the educated professionals I know here in town read WaPo and NYT online every morning (and, if they’re a little more educated and to the left, The Guardian), and maybe get around to the Strib if there’s something local going on. In effect, online advertising for the NYT has a much higher possibility for growth, as they start to go after local advertising targeted by readers’ account zip codes (should they decide to do this).

As for UGC, well–depends on what they’re looking for. A smart ad-writer or designer or techie who builds a strong blog audience can probably make a lot more from the marketing presence that builds than they can from their site’s direct revenue–or than they’d otherwise have been able to make shaking out consulting/freelance gigs the old-fashioned way. For more wonky, content: group blogs like CT don’t make much (have you ever tried? No need, but curious…), but TPM evidently does all right, as does Kos. So there’s a new market, too.

I think what we’re seeing is the apprentice mode getting shifted from small papers to blogs, with the big hitters gaining even bigger market share/more revenue than was ever possible before. I don’t like the model much (w/shrinking of weeklies/dailies in local markets, there’s no editor to teach you how to sculpt a piece; no senior reporter to teach you ethics/how to source/etc), but it’s not hopeless.

20

Doug 09.21.07 at 4:34 pm

19: Can you get the FT on paper in the Twin Cities? And if so, does the US version on (sorry, at) the first weekend of the month carry How to Spend It?

The supplement is raunchy excess and cheap thrills on a global scale, leavened with just a little bit of Brit archness to make readers wonder if they are taking all of this seriously.

21

joel turnipseed 09.21.07 at 4:40 pm

Doug,

Funny you should ask: My wife just started an executive management program at the U of MN and one of her profs basically told the class, “Subscribe to The Financial Times.” We haven’t actually done so yet, but apparently, yes, we can get the paper edition–and reasonably priced (much cheaper than the Times, which used to cost me a fortune when I got it daily).

22

joel turnipseed 09.21.07 at 4:49 pm

… it occurs to me: the reason I stopped getting the Sunday NYT was: about 20-30% of the time, I just didn’t get the Sunday NYT. That is: I got it, but not the supplements (which is what you’re really paying for). I don’t know, maybe the NYT is printed here now, but when I used to actually know such things, it was printed in Chicago and flown in for distribution (which is what I imagine FT does), which was subcontracted through (I believe) the Star-Tribune. Well, that’s one ugly logistics/marketing hairball (the support people at The NYT had to pass me off to the Strib distribution center to investigate the delivery problems… bet that grated their gonads).

So, if you can go online, but capture the local market ad revenues: voila! Many birds killed with one click.

23

SocraticGadfly 09.21.07 at 5:01 pm

Newspapers, namely the AP as an organization, blew it by not taking the Net seriously enough soon enough and therefore not charging Yahoo and other “content providers” high enough rates to recoup enough money.

If those rates had been charged, folks like Yahoo might well have instituted a “Yahoo Select,” and, eventually, people would have come to accept it.

We haven’t even mentioned the ongoing Darwinian escalation between Net ads and Net ad-blocking software. Unlike “passive” media like the newspaper and TV, ads definitely don’t work if they’re not even being seen.

24

James Wimberley 09.21.07 at 5:25 pm

The true economic cost of the Internet is falling all the time per bit. The underlying technologies – optical fibres, routers, disc drives – are still getting cheaper; and there must be economies of scale. Some of this cost reduction has of course been swallowed up in bandwidth-greedy applications like video. But you don’t actually need an ever-expanding income to finance what CT readers want.
Blogs run on an eighteenth-century coffee-house and salon basis. Fame is the spur, patronage the fodder. Samuel Johnson barely made a living.

25

Danielle Day 09.21.07 at 6:25 pm

…if that gets me blocked from ad-dependent sites.

Firefox doesn’t seem to block the entire site, but I’ve had some difficulty filling out online forms, and so forth. It doesn’t seem to work that well in general. It’s probably a matter of tweaking the preferences– time I’m unwilling to spend (like now!).

If I could figure how to turn the whole darn thing off, I would.

26

John 09.21.07 at 6:27 pm

It’d be fairly easy for a site to design advertising technology to block Firefox w/adblock. If, for example, the first thing a downloaded ad script was to do was to ping back the original content page, then the server could wait until it got all of those responses before it displayed the content.

Bingo. Anybody using adblock would never get to see the actual content, either.

27

stuart 09.21.07 at 7:27 pm

And then adblock could run the all scripts provided in ads, in case they do any ping backs, but not bother rendering it still.

28

joel turnipseed 09.21.07 at 7:49 pm

Warning: Rant Coming Down Range…

Why don’t you all just look at the damned ads? Do you expect these sites (their network administrators, copyeditors, writers, graphic designers, et. al.) to work for free?

Honestly. It’s not the biggest social justice issue in the world, but for whenever I hear a person bitch about the free-loading rich in one conversation, and then talk about their bit-torrenting and ad-blocking in the next, I start to wonder about their sincerity…

29

engels 09.21.07 at 7:51 pm

I may be completely wrong, but couldn’t a website make adblock ineffective just by using the same subdomain for ads as it does for image content, since adblock works by blocking images from particular subdomains?

30

engels 09.21.07 at 8:00 pm

Joel’s right, every time I look away from an ad I hear a little violin playing just for the megabuck media conglomerates. And I can never forgive myself for what happened to Kid Rock.

31

abb1 09.21.07 at 8:10 pm

Instead of these sophisticated adblock scripts, you could try to download the hosts file from here (if you’re running Windows).

32

Matt Weiner 09.21.07 at 8:12 pm

Joel, I assume your argument is that if everyone blocked the ads, no one would advertise, and so the graphic designers etc. would have to work for free (or stop working, or find a new business model)–and therefore everyone is obliged to look at the ads.

That seems like a dangerous argument. Similarly, if no one who looks at the ad buys the product, no one will advertise, and the same bad things will happen. Does that mean that everyone who looks at ad-supported websites is obliged to buy some product advertised on those sites? That would be absurd.

It seems reasonable to say that advertisers are only counting on some people buying their products after seeing the ads; is there any moral difference between the ones who don’t buy the product because they ignore the ads, and the ones who don’t buy them because they use AdBlock? If advertisers reach only the people who don’t bother to use AdBlock, they can still make money.

33

joel turnipseed 09.21.07 at 9:06 pm

Look, free media comes with an implicit promise (a promise predicated on a system effect): if you look at our sponsors’ ads, we’ll give you this content for free. We can gauge how much to spend putting this together based on feedback from our sponsors, who know (more or less) how effective their ads are for any given audience. The larger the audience, and the better the ads (and products), the more we’ll have to spend putting our free media together. To the extent that our sponsors are not getting results, we’ll have less money to put together our news, documentaries, sit-coms, sports coverage–whatever.

What’s more: you are in the driver’s seat. If you don’t like Thomas Friedman, don’t click on his articles in The Times. They’ll notice. If you love Paul Krugman, read his article–and maybe check out the Subaru or Visa or Weinstein Co. ad while you’re there. What does it take up? 50K of bandwidth and 200 pixels of your screen? Is that so inconvenient you can’t stand it?

As for Kid Rock: if you don’t want to listen to him, don’t. But if you like Tapes-n-Tapes or Tom Waits or Thomas Ades, buy their damned album. If you think Jerry Bruckheimer only puts out dreck, don’t watch it. But if you love Pedro Almodovar or Wong Kar-Wai or the Coen Brothers, buy their DVD. It’s not an argument to say, “I download it free because they suck anyway.”

This just isn’t that complicated–or expensive. And it’s certainly not “dangerous.” What’s also not dangerous, exactly, but is troubling and hard to figure out a way around (blogs are one answer, in part), is that, for instance, The Minneapolis Star-Tribune’s revenue is down something like 25 percent this year. That Village Voice Media is bleeding money and increasingly runs wire articles in The City Pages, which used to be–until very recently–an incubator of great national editorial and reporting talent. And that the same thing is happening all over the country.

I think there’s plenty of room for gift economies of arts, for professionals otherwise-subsidized to participate in our arts and journalistic culture, for actors and musicians (alas, much harder for writers) to make a living with live performances, etcetera. If Ticketmaster and Clear Channel went away tomorrow, I wouldn’t shed a tear. But if The New York Times slashed its editorial room by half or Viacom dropped The Daily Show because half its audience found it easier to watch it on YouTube or The Criterion Collection had to double its DVD prices because everyone was getting Andrei Rublev via BitTorrent (and bloody hell, they’re expensive enough as it is), I would be really, seriously bummed.

34

joejoejoe 09.21.07 at 9:26 pm

JQ: “If advertising is the only source of commercial finance for Internet content and services, then the resources going into creating that content are bounded by the available finance, and we may hit that bound before too long.”

Isn’t there a lot of room for growth beyond the ‘available finance’ based on the kind of social capital discussed in ‘The Wealth of Networks’ by Yochai Benkler?

35

engels 09.21.07 at 9:34 pm

I don’t care about the bandwidth. I just don’t like being sold crap I don’t want and probably can’t afford 24 hours a day. And yeah I’d hate to put the Guardian out of business (I’m not so sure about the New York Times). Maybe I’d consider sending a donation if it was possible. But I still don’t see why I am under any obligation to read their ads. If I had actually made the promise that you are talking about then I would consider myself bound by it. But I haven’t, so I don’t.

36

pdf23ds 09.21.07 at 9:44 pm

I may be completely wrong, but couldn’t a website make adblock ineffective just by using the same subdomain for ads as it does for image content, since adblock works by blocking images from particular subdomains?

This does happen with the built-in ad-blocking in Firefox, but most people use extensions, which are much more flexible. Still, there are ways to prevent that from being effective too. I believe yahoo (last time I checked) uses a URL scheme where every image has the same URL format, so it’s impossible to filter out just the ads.

37

Matt Weiner 09.21.07 at 11:20 pm

free media comes with an implicit promise (a promise predicated on a system effect): if you look at our sponsors’ ads, we’ll give you this content for free. [etc.]

And advertising depends on the idea that we’ll give you free content if you (some of you) buy this stuff. Unless the notion of implicit promises and system effects is doing some work here, I still don’t see what the difference is supposed to be between “If no one looks at the ads, media will go out of business” and “If no one buys the products, media will go out of business.”

And people have used an argument like yours to claim that it’s immoral to watch TV programs without the ads (my snarky response in comment 6), so it isn’t like there’s no slip in the slope.

I didn’t defend BitTorrenting and downloading, btw. What do you think about BugMeNot, though? Logging on under someone else’s name is a violation of an explicit contract, I’d bet.

38

Dirty Davey 09.21.07 at 11:37 pm

Quick comment re: “The NYTimes experiment with putting premium content behind a paywall lasted a bit longer than I expected…”

In some sense it ended at the only point it could–on the anniversary of its kickoff. Assuming that a significant chunk of the paying customers were charter subscribers, killing the service on the anniversary was the best way to avoid owing significant refunds or alternative compensation.

Stop it sooner and they’d have been liable for the tail end of the second paid year; let it go longer and they’d have had to start collecting year three payments.

I actually heard the rumor that TimesSelect was going away some months ago, at which point it was obvious to me that the second anniversary was when they’d pull the plug.

DD

39

John Quiggin 09.22.07 at 12:09 am

joe @ #34 That was what I was trying to get at in my last para

Joel – my version of the implicit contract says I don’t mind static silent ads, but I’m not going to put up with singing/dancing/popup versions. So, I only upgrade my adblocking when the latter become pervasive, as they have done recently.

You might say I should just avoid the sites that have these ads, but this set changes over time, and they don’t announce themselves in advance.

40

joejoejoe 09.22.07 at 1:10 am

JQ @ 39. Thank you.

I’ve upgraded to Reading Comprehension 2.0 and now get your initial point.

41

joel turnipseed 09.22.07 at 1:19 am

Yes: the moving, unannounced, obscures-the-article-I”m-reading-in-mid-sentence ads are annoying. As is any site (are you listening, ESPN?) that auto-loads audio or video content.

I’m not trying to say that no one should ever click “skip this ad” or block pop-ups, just that: to the extent that I or you or anyone does, and that we remain unwilling to pay subscription fees, we’re encouraging an increasingly hostile arms race for ads and eyeballs–or setting up the conditions under which we’ll lose free media altogether. And to pretend otherwise, or to be outraged by it, is not really to get the dynamic at work here.

Matt @37: you know who I blame for the omnipresent, mid-show (or for Sci-Fi channel, it seems, ALL-SHOW) advertising crawl? TiVo.

42

Matt Weiner 09.22.07 at 3:06 am

Joel, the moving ads don’t seem like they address the problem of ad blocks. If ad blocking leads to an arms race, it should be an arms race of ads that are hard to block, not ads that are increasingly obnoxious if you don’t block them. I suspect that the reason for more increasingly obnoxious ads is that increasingly obnoxious ads grab more attention, and that they’d be coming even if there weren’t any adblocking. Similarly, I doubt adblocking software is a big reason for the drop in revenue you cite, though if there’s evidence for this I’ll back down. Though you may be right about the ad crawl; I don’t watch much non-DVD TV. (Incidentally, I was under the impression that the Voice’s reporting had been crap for a while.)

43

MissLaura 09.22.07 at 4:30 am

Lord knows I don’t know the tech side of it, but Daily Kos identified the people using adblock and put up a nag on them – right where one of the ads would be was a very polite but fairly long message asking that if they were going to deprive the site of ad revenue, please subscribe.

44

stuart 09.22.07 at 4:27 pm

Lord knows I don’t know the tech side of it, but Daily Kos identified the people using adblock and put up a nag on them – right where one of the ads would be

Probably they put some text up on the page behind where the ad would be – so those that don’t block the ad, it was rendered over the top of the text and they would never see it. They probably never identified who was using adblock and who wasn’t, only the users themselves see the difference.

45

Ancarett 09.24.07 at 1:02 am

I actually don’t mind ads on websites. Unless we’re talking about audio on ads, in which case, I am filled with sudden burning rage and a loathing so strong it can only be assuaged by plotting the imminent demise of the corporate entity that sponsored that evil.

Yeah, I know I can turn off my computer’s audio entirely, and I do a lot of the time, but it sucks when I’m listening to MP3s or audiobooks, surfing the web and I get hijacked by some stupid shill!

46

JP Stormcrow 09.24.07 at 4:40 am

This thread is way over, but if I had known about the folowing site when it was live, I would have posted this highly recommended link to an interview with Kenneth Goldsmith, founder of UbuNet. A real interesting look at free content in the “avant-garde” space. Via Bill Benzon at TheValve and waagnfnp.

47

stostosto 09.25.07 at 2:13 pm

What’s the source for the graph?

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