October 18, 2013 Last Updated 1:09 pm

Newspapers employ porous metered paywalls designed to limit the damage

Have paywalls proved their worth at consumer, non-financial news properties?

Every election year, and during every crisis – either natural or man-made – the websites of major newspapers and blogs spike. Then they fall off somewhat after the crisis or event has passed. During the last election cycle, Nate Silver’s FiveThirtyEight blog accounted for 20 percent of traffic, driven by Silver’s state by state analysis of the race between the President and his challenger.

But the NYT, like many other newspapers with metered paywalls, have huge holes in their system. Most recognize that the holes are there on purpose: designed to let in casual readers through search results, while forcing regular readers to pay up.

WaPo-paywall-lgBut unless the paywall is, in fact, a wall, readers can easily circumvent the system.

The Washington Post, which launched its paywall this summer, requires readers to pay $9.99 for unlimited web access, or $14.99 for unlimited web and app access. All this comes into play after the reader has read 20 articles during a month. With the government shutdown and a possible default looming, many new readers undoubtedly started frequenting the WaPo’s website several times a day – they are probably hitting that paywall right about now.

The problem with the strategy, though, is that it actually discourages brand loyalty by cutting off the reader right about they time they are going to become a regular customer. The system really isn’t designed to get new customers, but to get a few dollars out of existing customers. In that sense, it is a more of a beggar’s hat strategy than anything else – ask the reader for a contribution knowing that the reader knows damn well how to circumvent paywall.

Publishers and editors will say that their news sites are worth paying for, and though some dispute this, I won’t. But if they really are worth paying for then the paywall wouldn’t be so porous.

I think the reason that metered paywalls exist is because of the dirty little secret that most news publishers know: on the web everything is free unless the content makes you money. I won’t pay for the some local newspaper’s content in a far off city but because its paywall is so porous I will never have to. For local readers, loyal to the brand, the decision then is to either support the paper with a few bucks or circumvent the paywall using the widely known techniques.

We used to try this strategy with our readers at several B2B magazines. The circulation department would send out payment notices to readers and see who paid up. Usually a very small percentage would send in their checks, but at least the circulation department had generated some revenue to offset all those expenses. No reader who did not pay ever got dumped from the circulation file.

I think the newspapers employing their metered paywalls are doing the same thing: hoping for some added revenue, while also hoping that traffic does not dive too much, thus hurt advertising. Meanwhile, they really are praying that they are not driving away potential new readers.

I think it won’t be long before the WaPo, now owned by Jeff Bezos, dumps their paywall. At many newspapers, pointing to the incremental gains in circulation revenue is used to put a happy face on a P&L that continues to show huge declines in print advertising. But Bezos isn’t one to value profits over growth. A few dollars of growth in the digital circulation column won’t float his boat, so to speak. He’ll want to see growth – and it doesn’t have to be in dollars, it can be readership, engagement, or any other metric you choose, including driving readers to transactions elsewhere.

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