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Learning from Murdoch’s Internet Missteps

With paid content, it’s better to let others blaze the trail.



Stephen M. Saunders By Stephen M. Saunders
12/23/2009

The history of the Internet is peppered with important dates: there’s the invention of IP (Vint Cerf, 1973), the creation of the World Wide Web (Tim Berners Lee, 1989), the first cat video on YouTube (three seconds after it was launched in 2005). So, what will 2010 be remembered for?

I’m going to stick my neck out and prognosticate: It will be recalled as the year a highly influential publisher tries to invent a new way to monetize digital. And fails.

While the most common answer to the ‘how to make money online’ question has been to sell advertising, now there’s a new option on the block. And its champion is none other than the most powerful media baron on the planet: Rupert Murdoch, who has decided to charge for access to News Corp. sites using micropayments.

I doubt there are many people with less in common than me and Mr. Murdoch. Certainly I find the content of many if not most of his network to be revolting (Fox News and the UK’s Sun newspaper are top of mind). But in terms of this strategy, my hat (if I had a hat) would be off to him. Because this is a bold, bold move—the sort of thing that only a real leader would try to pull off on such an extraordinary scale.

Nothing New

The irony is that this isn’t really new at all. Essentially it’s just a reversal of what happened in the magazine publishing industry in the late 1980s and early 1990s. That was when many business and technology publishers stopped charging readers for magazine subscriptions and switched to sending them the magazines for free, provided they filled out a qualification card that proved they were exactly the sort of top-notch, huffy-puffy important decision-maker that advertisers would fall over themselves to reach with high-priced advertising.

So in a sense, the Murdoch model doesn’t move us forward at all. Rather, it takes us. Back. In. Time (cue wobbly screen sfx). The technology may have changed, from print to online, but the business model (make people pay for content) is the same as the one magazine publishers relied on prior to the 1980s. 

Murdoch’s gambit has many others in our industry wondering if they should follow suit. It’s tempting when you factor the Wall Street Journal and Financial Times’ success charging for online content. My advice: don’t do it.

To start with, Murdoch’s track record in Internet strategy suggests he may not be exactly the best person to turn to for online business advice (he is, after all, the man who spent over $320 million to buy MySpace—a crappy deal, in hindsight).

More importantly, people are prepared to pay for the WSJ and FT because they consider the content unique, high value, essential. That makes it a true exception to the rule on the Web, where the perceived value of content generally falls somewhere between less than nothing, and almost imperceptibly more than nothing. And, contrary to what most people think, significant trends on the Internet take years and years to develop. Micropayments are no exception.

Rupert Murdoch may actually be correct that at some point in the future, more people will be prepared to pay for content online. But before this can become a real business model for publishers, the pendulum needs to swing to the point where the majority of content producers gate their sites and charge for access. And that will take a long time (between five and 10 years, if I had to guess). People will simply switch allegiance from sites that move to the paid model from those that are gratis.

Bottom line, this is one trend where it will pay other publishers not to be in the vanguard. Rather they are better off observing, and learning lessons from, Mr. Murdoch’s first mover disadvantage. At the same time, they could do a lot worse than to focus on implementing registration programs that demonstrate the value of their audiences.

Publishers in the ‘80s realized the important connection between a qualified audience and making money from advertising. It’s even stronger today. To paraphrase JFK (badly): “Ask not what your reader can pay for your content—ask what purchasing authority your reader has in their company.”


Stephen Saunders is an independent media consultant and the founder of Internet Evolution. He can be reached at saunders@internetevolution.com

Stephen M. Saunders By Stephen M. Saunders
12/23/2009







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