Last week, Rupert Murdoch gave an interview with Sky News where he repeated his claim that aggregators like Google and Microsoft were ‘stealing’ his content and that putting up a paywall will limit that. This resulted in an blogosphere frenzy as to his craziness. After all, if Google and Microsoft are driving traffic to your site why would you want to limit that?
I listened to the full interview today and while that opinion is expressed Murdoch clearly understands the implications of it. Moreover, he bends over backwards to point out that Google and others are respecting his copyright and that he has a choice as to whether his sites turn up in Google or not.
What was more interesting was his rationale for why he might want to throttle that traffic. His view was that those visitors pushed up count numbers but were not as valuable as loyal readers. He did not go into much more detail but in my recent work on this industry, I think that he might just have a point.
To see this, we need to start by accepting the notion that advertisements displayed in front of loyal readers are more effective than those in front of visitors. This is an assumption but the rationale might easily be that for loyal readers you know more about them, why they are there, what they like and what they do on your sites. All this together might mean you have a better case to advertisers purchasing impressions that those readers will be effective consumers.
In this world, non-loyal readers make it harder for you to measure and account for effective and less or ineffective ones. This means that if you want to charge advertisers for impressions, those advertisers will take into account the share of loyal readers amongst those page-views and discount their per impression price paid accordingly. Compare this to a situation where there is a paywall or something equivalent. Then News Ltd can claim that the impressions given are in front of loyal readers (or much more likely to be so) and this allows them to charge more per impression. The number of impressions goes down but only by shedding ones that the advertisers do not value.
The value for News comes because it is competing for advertisers in that advertising market. To be sure, grabbing more consumer attention can be valuable there but being able to account and verify a higher ‘quality’ of consumer is an advantage in competition with other outlets. In such a competitive environment, verifiable quality improvements add up to a significant competitive advantage. So while News may lose out from raw consumer share by having a paywall or cutting off Google etc, it could make it up and more in the advertising market.
Now I say could because my hunch is that competitive advantage is limited by current tracking technologies. For instance, if you can tell who the loyal and visitors are when viewing an ad, then quality can be determined. But again this will advantage News if it commands a good share of the loyal reader types.
The point here is that in analysing News’ strategy, focussing on competition for consumers is not enough. You have to consumer the complexity of the competition for advertisers too.