By Dan West (Strategy Director)
Just over a month ago the New Zealand Herald joined a long, distinguished, list of global newspapers that have put its premium content behind a pay wall online. This is BIG news. Apart from a couple of exceptions the news has been free online in New Zealand since the internet hit these fair shores. But it’s not a huge surprise. Decent journalism costs money and unfortunately advertising alone hasn’t picked up the tab left by the decline of print newspaper purchases. Global industry estimates suggest that for every online advertising dollar gained, newspapers lose up to $16 in offline advertising dollars. The online ad market has become slim pickings for papers thanks to Google and Facebook sucking up most of the ad revenue with their superior targeting. The NZ Herald estimates that a subscriber is 7x more valuable to them than a non-subscriber so you can see why it’s been done. We can expect many other NZ publications waiting with baited breath as to whether this works for the Herald so they can follow suit.
So what do we know about the NZ Herald paywall? The current cost for the content is $5/week with a $2.50 charge for the first 8 weeks as a sweetener. Alternatively an annual subscription is $199/year, which appears to be what most people are choosing. For your subscription you can expect “unlimited premium content from NZ, first class content from leading global publishers and daily news straight to your inbox”. Though, where the NZ Herald has focussed, is on its business content which it has considerably beefed up over the last year. This is the content that has been most successful at maintaining a paywall globally. Apart from that Sport content is performing well (who knew in NZ that we’d pay for news on the All Blacks?) as well as access to specific columnists writing and international papers such as the Wall Street Journal and Financial Times which also have content behind paywalls. The content that every paper has such as breaking news and fluff pieces, like Love Island gossip, will still be free. One pleasant side effect of the paywall is that the NZ Herald’s content is improving as writers vie to get their content to a standard to go behind the paywall, as well as improved speed to market as paying customers expect more.
Using technology from the Amazon-owned Washington Post and modelled on the Telegraph in the UK and the Australian (obviously in Australia) the NZ Herald has some proxies for how it expects to perform. These international papers have seen on average 6% of its readers subscribe. Based on these estimates, with between 1.7 – 1.8m unique visitors, the NZ Herald could expect around 100k subscribers paying $5 a week. They’re hoping to boost subscribers further through bundling, partnerships (like Netflix uses with Spark) and mass subscriptions with businesses. These partnerships in particular could be interesting for clients. For instance a bank could give its premium customers free access to all the NZ Herald finance and business articles through a bespoke, branded page as added value. Beyond that the NZ Herald will start promoting specific “subscriber-bait” content through social channels to encourage more sign ups once it has finished communicating the shift.
So what does this mean for advertisers from a targeting point of view? According to the NZ Herald: very little, at least from a negative point of view. Since they have been live they still feel they can achieve the reach figures advertisers want as well as delivering on their products like Showcase. They are also able to more easily prove the size of the audience as well as having seen improved engagement metrics from subscribers in terms of dwell time and page views. This means an increased likelihood of seeing advertisers communications. As we know, not all impressions or clicks are created equal.
That being said a study done by the American Marketing Association on the New York Times when they put up their paywall found it resulted in a 16.8% decrease in unique visitors with heavy users (visiting more than 4x a month) dropping by a whopping 57.2%. This was accompanied by a significant reduction in overall engagement metrics such as page visits and duration as people hit the paywall and leave.
However, the same study showed that the paywall also halted the decline of print subscriptions, noting a 1-4% lift in both weekday and weekend subscriptions reinvigorating the channel for advertisers. From adding the paywall The New York Times now makes more than 20 percent of its revenue on digital-only subscriptions, a number which has been growing quickly.
One major benefit of the paywall is that the NZ Herald now has accurate first-party user data, much of it gleaned from sign-up and logged-in user behaviour. That data effectively allows a subscription-based audience to be monetised again through more targeted and specific advertising. This means that, once the Herald sets it up, advertisers will be able to take advantage of custom audience and look-a-like targeting thereby improving relevance. They can also go after this wealthier and more premium audience which is very compelling for many brands. However, we expect the NZ Herald to add a premium price tag at some point for brands to advertise beyond the wall.
The biggest challenge is for advertisers who have mass-market, low margin products that need to be sold at scale. It is inevitable that the NZ Herald’s audience will diminish in size (though hopefully the value of those that subscribe will be greater). That will inevitably have an impact on the publisher’s relationship with these advertisers.
The NZ Herald have recently released that they’ve met their 10,000 subscriber year end goal already so they’re very happy with this. It seems advertisers and customers should be happy too, because without this change newspapers will continue to spiral into clickbait fluff pieces as they seek eyeballs at all costs in exchange for ad dollars, which in the end benefits no-one.