January 18, 2005

Why online newspapers require registration

Why online newspapers require registration

John Dvorak, in a PC Magazine article (found via Greg), wonders why newspapers put up registration barriers to reading their articles:
I have to conclude that the typical newspaper in this country does not want you going on its Web site, and deliberately creates a barrier in order to prove to the shareholders that the Web is losing them money. It's a feeble attempt to emphasize the printed version of the paper at the Web site's expense. The Web seems to be just something that newspaper people feel they have to do because everyone else is doing it.
This is yet another example of net head-scratching about why online newspaper sites don't seem to be pursuing "normal" success goals for websites -- increasing traffic, return users, and so on. Putting up a registration barrier clearly devastates traffic -- check out this excerpted Alexa graph of one online newspaper that went registration in April. So why are they doing this? To collect better marketing info? But banner ad networks can't make use of any of that data. The media kit has reader demographics, but it's easy to get those with a survey.
Two factors are pushing newspapers into putting up registration gates on their content: an innovator's dilemma between print and online ad sales, and the high value of obtaining email addresses for email list marketing (i.e., spam).

First, there is an innovator's dilemma at work between the print and online ad sale at newspapers. The print ad has been around forever, and is expensive, since paper and ink need to be consumed, and trucks have to carry the result all over town. The paper's new website can't justify the same cost of sale; it may not have as many users yet, the ad impressions it does have are tracked far more effectively than the print newspaper's (does anyone really see your ad on page 22 of section E?), and since moving physical paper and ink around isn't involved, the actual impression is naturally a lot cheaper.

So newspapers are often throwing the online ad in for free with a print ad sale. What this does is value the online ad at zero. And if online ads are worthless, then incremental traffic to the website is worthless too.

In fact, website traffic is worrisome, since it indicates users are shifting from the print newspaper, which is where all the value of the ads being sold is. At this point, the success goals for the newspaper's website have been completely undermined. Not only does additional traffic not yield additional revenue for the website, but success for the website is a barometer for erosion in the existing print business (as is apparently the case at the UK's Sun Online). This sets up formidable challenges for the online staff to work against to achieve success.

The second cause of registration site is that there are a number of aggressive email list marketers pushing registration gate solutions to newspapers. (They even approached us during our last tradeshow.) In short, newspapers are putting up reg gates in order to collect your email address and demographics to rent for spam. The more intrusive the ad product, the more it pays ... and email lists are worth $300 CPM per rental.

A typical notice on the registration page will say something like:

"From time to time, we will send you e-mail announcements on new features, products and services from [us] and selected advertisers and affiliates...
Please check this box if you do not wish to be contacted directly by a non-affiliated advertiser.... HOWEVER, we will continue to include you in our e-mail announcements, as explained above. Information is used as described in our Privacy Policy."

Once you sign up there, you can be emailed for marketing purposes by anyone who rents the email list from the newspaper, forever. You have agreed to receive third-party marketing messages from affiliates of the newspaper. In other words, anyone the newspaper's email list manager rents their list to. Email lists are worth a lot of money. More than they can make from pop-ups, or AdSense, or having their salespeople try to sell ads on the website to local businesses.
The combination of these two factors means that newspapers don't receive value from incremental users on their web sites -- or keeping existing users there. Since online ad impressions are valueless to them, and since, once registered, you've permanently transferred the economic productivity of your email address to them, it doesn't matter whether you ever come back to the site.

This isn't meant to be a condemnation of sites that have put up registration gates. In many ways, it's a completely rational decision when seen in the context of the newspaper business, and current online advertising market. The question of whether they make good long term strategic sense remains to be seen however.

Posted by MoMo at January 18, 2005 03:18 PM
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