On Porous Paywalls

Felix Salmon has a couple great posts on the New York Times' paywall. He notes that it has been successful and explains why. Felix says:

Yes, the NYT paywall is porous — but that’s a feature, not a bug. It allows anybody, anywhere, to read any NYT article they like. That makes the NYT open and inviting — and means that I continue to be very happy to link to NYT stories.

I've been a fan and a proponent of porous paywalls since studying the FT's model a few years back and was very pleased to see the NY Times go with the FT's model. 

Monetizing digital content requires a different mindset than monetizing analog content. The marginal cost of another unit of digital content is nominal. Unlike printing and delivering a paper, serving up another page view doesn't cost the New York Times much. So while the New York Times must charge its customer to recieve the paper, it doesn't necessarily need to charge a customer for every page view, particularly since they do run ads on every page served.

This doesn't mean that the New York Times can't and shouldn't ask their most active readers to pay. My partner calls this ex post facto monetization. You get paid after the fact, not before. And that's a mindset that many people used to getting paid before the fact have a hard time understanding.

Felix explains that since turning on the "paywall" at the end of March, the New York Times has signed up almost 400,000 paying customers for its online product and links to Seth Mnookin's excellent NY Mag piece on the Times.

The internal projections have been closely held, but several people have confirmed that the goal was to amass 300,000 online subscribers within a year of launch. On Thursday, the company announced that after just four months, 224,000 users were paying for access to the paper’s website. Combined with the 57,000 Kindle and Nook readers who were paying for subscriptions and the roughly 100,000 users whose digital access was sponsored by Ford’s Lincoln division, that meant the paper had monetized close to 400,000 online users. (Another 756,000 print subscribers have registered their accounts on the Times’ website.)

These 400,000 subscribers have been obtained with seemingly no loss in visitors and traffic to the NY Times' website since the paywall launched at the end of March this year:

Times traffic

So that's $80mm in annual revenue with no loss in traffic. That's what a porous paywall can do for you.

I'd encourage the Times to be even more agressive with it's porous paywall stratgy. The mobile situation – where I have to pay for the mobile app but can read the website in the safari browser for free makes no sense. With ex post facto monetization, you want your customers to want to pay, not force them to pay. I think they can be smarter and more creative with their mobile monetization strategy.

But all in all, I'm very pleased to see that content creators are starting to find new online models to fund their content creation costs. It costs a lot of money to send journalists around the world reporting on the important stories of the day. Printing presses and delivery trucks will be a thing of the past someday. But journalism will never be a thing of the past and we need to make sure it can be funded.


Comments (Archived):

  1. Rayhan Rafiq Omar

    So is this a reversal of the disruption to journalism? Everything was published on the internet for free and that meant doom for newspapers. Newspapers are still around and are now leveraging their massive brand and reach to produce more sustainable revenue.Where does that leave journalists that don’t have enough content for a paywall? Do they have to sell themselves to established publications to get attention for their work? Are big media platforms still relevant?I have to say I have been quite disappointed in the lack of progress from aggregators like Google News. Even more disappointed that the internet seems to have not come up with any killer journalistic platforms beyond what AOL and Yahoo are buying up.On the upside, it was nice to see the incredible reporting via twitter and Youtube during the London riots… if only journalism like that had a real home on the internet.

    1. fredwilson

      no, i think it is part of the reconstruction of the journalism business

      1. Rayhan Rafiq Omar

        Do you have a vision of what you think the journalism ecosystem will look like?

        1. fredwilson

          i think there will be large organizations like the Times to fund some of the hard stuffbut more and more journalists will be entrepreneurs making money on their own properties

          1. matthughes

            The idea of a journalist as an entrepreneur is still un-lit…I wonder if NY Times, Disney and other major media conglomerates lose any sleep over this idea?

          2. Matt A. Myers

            I agree, however it can happen relatively easily. I wonder who’s going to take the initiative..

          3. andyswan


          4. JamesHRH

            I think Drudge, and more particularly, Perez Hilton are not terrific blueprints for the future of ‘serious’ journalism. While Perez knows his audience, knows his beat and turns a dollar, he is a mass marketer.Serious journalism has a greater chance to be ‘spikier’, from the entrepreneur’s PoV.Someone can be an on the ground reporter in the Middle East, make a base living (maybe a nice one?) from a core audience, and then harvest huge eyeballs when something big happens on their beat.I think a business model can be based on the credibility of the individual reporting source, rather than the editorial credibility of a ‘name’ property, given Fred’s above started economics of internet distribution.Getting the job @ the NYT was the hurdle, pre-digital. Maybe getting the credibility & initial base audience will be the digital hurdle…….

          5. brisbourne

            Which areas are ‘hard’ Fred?War reporting is the only area I can think of which possibly falls into that area, and even then I’m not sure that couldn’t fit into the cost structure of an outfit like Techcrunch or SAI.  I’m thinking he bulk of the extra costs for an NYT come from fact checking and other ‘quality’ oriented processes which are hangovers from the days when it was hard to make corrections.I wonder how many of the NYT’s subs are down to the strength of its brand.  A news startup with a successful porous paywall would be very interesting to see.

          6. fredwilson

            fact checking is alive and well in bloggingkara swisher, for example, fact checks her stories before publishing themand she is one of the few people in the tech blog world that i pay attention tomost everyone else will publish a rumor. i’ve read stuff about deals and companies i’m involved in that is so far from the truth that it blows my mind that it gets written

          7. leigh

            don’t disagree but i think we are also as likely start to see an evolution similar to what we are seeing with film and TV — multiplatform news ecosystems co-created by those experiencing it vs. the current separation of TV – Magazine – Papers – Microbloggin – Photo services etc. 

          8. ShanaC

            i disagree slightly. It makes far more sense to get into a revshare agreement as a writer, let someone else handle the tech and the audience gathering while the writer hones his/her craft.

    2. Matt A. Myers

      Eventually when everyone in a society is taken care of they will have enough free time to create content they are passionate about, to affect change, to bring happiness and joy to people, etc.. If they become good enough or have many interests, I suppose they can get a job doing so or just slowly work their way up into a co-operative of sorts.

      1. Rayhan Rafiq Omar

        Surely the big issue in media is marketing/exposure. Those with the best exposure are the ones who are read. Digg was great for giving people the power to vote up another person’s work so that others could see quality rise up. I guess it broke somewhere along the way.My point is that there still seems to be a sytem ‘curated’ by experts and less curation by public opinion, because the platforms are skewed that way.

        1. Matt A. Myers

          Digg broke because of the design changes they put into place; The board or whomever forced / decided to do it that way didn’t understand why Digg was successful, they didn’t know the leading metrics as to why it was working.Reddit as another example, is growing, and thriving. Perhaps they’ve been lucky to see what happens when you change things to quickly and don’t allow your users to be involved to be involved in the process..Public opinion and those who are good with words and reaching out will be who’s opinions are most heard; But that doesn’t mean that 5 people reading something you wrote isn’t just as important as something 10,000 read. Planted seeds are powerful.

  2. Matt A. Myers

    I’m glad NYTimes did this. It’s a great case study to show that if you have quality content and provide a useful service then people are willing to pay; Don’t fear life, manage it.It’s interesting how close to freemium it is too. The difference with freemium is actual features are prevented from being accessed (as well as limits usually). Actually, I guess NYTimes limits mobile use currently too..I’m really curious if and how this could work with different information-based paywalls; I imagine it comes down to a very per-case basis on how users use a service and what level of usability they need to maintain use.

    1. fredwilson

      i think this is just another way to execute a freemium model

      1. Matt A. Myers

        Fair enough. 🙂 Just trying to wake my brain up by overanalyzing things to see if I can learn / figure out anything new. :)There is something to be said of their success based on their history, how branded they are, etc., just to point out that new companies aren’t necessarily going to obtain the same success even if they have the same quality content.Do we know their previous subscriber / user stats and overall web traffic levels?

    2. Content Currents

      While there are similarities between the freemium model and the porous paywall, there are also key differences. Perhaps there are lessons in these differences for content providers looking to charge consumers. The freemium approach is working for SaaS providers like Evernote and Dropbox. For their users, value increases over time. Content site visitors, on the other hand, face little switching costs. Perhaps adding sticky features will keep users around longer. E.g. Netflix personalized recommendations, AOL Daily Finance’s stock portfolio. Also, I suspect Evernote and Dropbox customers use them for both personal and business purposes. They may use them first or foremost for personal reasons. But they ultimately justify the purchase with a business purpose or fund it with a business account. Indeed, WSJ and FT, with their mix of personal and business news coverage, are among the most successful paid content sites. Perhaps this is a formula for other content providers wishing to charge. E.g. local newspapers beefing up their online business sections.

      1. Matt A. Myers

        “Perhaps adding sticky features will keep users around longer.”I think this holds true for any kind of website, whether it’s free or pay.” I suspect Evernote and Dropbox customers use them for both personal and business purposes. They may use them first or foremost for personal reasons. But they ultimately justify the purchase with a business purpose or fund it with a business account”I think this is a very great point. People will be much more willing (and perhaps even enabled) to pay when it can be written off and/or there’s synergetic use with business/personal lives.

      2. Fernando Gutierrez

        Being business related has another consecuence: many companies pay for it (be it directly or expensed by employees). Linkedin used to say that a big percentage of their premium users expensed it.

        1. Matt A. Myers

          It would be interesting to see what the breakdown for content browsed is by paying users. 🙂

  3. Guest

    Bravo! “It costs a lot of money to send journalists around the world reporting on the important stories of the day.  Printing presses and delivery trucks will be a thing of the past someday. But journalism will never be a thing of the past and we need to make sure it can be funded.”

  4. JimHirshfield

    NYT, FT, and WSJ are all great examples of paywall success stories. It has a lot to do with the architecture of the paywall, but I don’t think would be possible if not for their unique content and (more so in the case of FT and WSJ) their core target audience (financial services professionals).What works for these 3, is much harder to do, if not unrealistic, for other publications such as “ye olde hometown newspaper” – whose local reporting is being usurped by bloggers (journos of the future, as you pointed out). I’m not crying a sentimental tear for local newspapers, just saying that what works for one publisher doesn’t necessarily work for others.

    1. Fernando Gutierrez

      I think that the problem with those other publications is that many times they have settled with publishing the same news everyone else was publishing, many times from agencies, and adding some local content. As you say the local content is now done by bloggers and they have nothing really theirs.People maybe ok with paying for sending journalists around the world, as Fred says in the post, but not for having a few journalists doing what other people enjoy doing for free (bloggers and local content) or is free online (generic news).

      1. JimHirshfield


  5. JimHirshfield

    [update: originally in reply to deleted comment by “SW Omaha”]Clearly the paywall at NYT can be end-arounded, that’s why it’s called porous, and that’s the point Fred is making – that it works so well because it is porous. Candy bars can easily be stolen from candy stores – and some are. But that’s not a business model flaw on the part of the candy store.As for copying and pasting of content, I can speak to that directly given that I work at Tynt where we anonymously track every word copied off of 500,000+ publications. (We do this to gain insight, not to combat copyright infringement). I’m doing some analysis on the data, but not surprisingly, readers are copying more than 500 words much more frequently on paywall sites than from non-paywall sites.

  6. Imran Ali

    More of a Payveil than a Paywall 🙂

  7. William Mougayar

    These are great numbers, but I wonder how this surge of online subscriptions has affected or is related to their print subscribers:- is this replacing print subscribers?- what’s the overlap between the two? – what % are new subscribers that have never paid for the print one? We need to see if these are shifting segments or new ones.

    1. fredwilson

      well compete is total garbage and quantcast is too if the site is not quantifiedi prefer alexa when a site is not quantified

      1. jonathanmendez

        google data is also showing a drop. off to check comscore….:)http://trends.google.com/we…

      2. ShanaC

        why is compete garbage?

        1. fredwilson

          i don’t really know. probably because they don’t have a truly representative sample. but i know the numbers for many websites and compete isn’t even close

  8. Dave Pinsen

    The FT’s paywall doesn’t seem porous at all. Also, unlike the NYT, print subscribers to the FT have to pay extra for full access to the FT online.As for the NYT, they make it so frustrating to pay them that I canceled my (weekend) subscription recently. I had to close a credit card a few months ago, due to fraud, and the NYT kept billing me, so I ended up owing them a small balance. They sent me an invoice in the mail for that balance, which offered the option of paying by phone or mail, but not online, for some reason.When I got my new credit card, I updated my billing information online, figuring that the NY would automatically charge me for the outstanding balance. To be sure, I e-mailed them and asked just that. They responded that they would, so I could disregard the invoice. A few days later I got a collections call from them. When I told them about the e-mail, the NY Times rep pleaded ignorance, saying that was a different department. I told them to send me another invoice, to make sure I wasn’t getting double billed.When the new invoice came, I tried to pay by phone, but a recording said the pay by phone system was down.

  9. Luke Chamberlin

    Consumers of journalism have never paid their fair share for content. The Times and other papers have never made much, if any, profit from home delivery or newsstand sales. Their profits came from advertising. The newsstand price is just to offset the cost of printing and delivery.I hear a lot of people make statements along the lines of “people are not willing to pay for journalism” as if it’s the fault of readers that newspapers are struggling.The truth is this was never the case. People used to pay to offset distribution costs, but never paid for the true cost of creating the content. The real challenge in the publishing industry is that advertisers are not willing to pay as much for online advertising as for print.These sorts of paywalls are significant because they represent the first time newspaper are actually setting out to make profits directly from their readers. This is not just a “print to digital” shift, it’s a complete change of business model.

    1. Dave Pinsen

      I get the sense that print consumers of the FT are paying for more than print & delivery, with a newsstand price of $2.50 for an often thin paper. But I don’t mind paying (particularly their $200 for six months delivery deal), because it’s an excellent paper — and because most of it’s not available free online.When I was getting the print subscription of the weekend NYT, I often found myself not reading most of it, since people were already linking to parts of it online days before the print version arrived, making the print version’s arrival seem a little anti-climactic.Also, the Sunday Times had gotten watered down over the years, due to a combination of political correctness (e.g., replacing the “About Men” column with the “Lives” column in the magazine), cost savings (shrinking the size and quality of the magazine), Internet-wannabe-ism (the pseudo-online layout of the magazine), semi-solipsism (travel articles more about the neuroses of the NYT reporter than the places in red state America he visits; an article about a former foreign correspondent’s experience using a Manhattan health club; an article on the day of the NYC Marathon about a reporter who decides to walk around his block enough times to equal the distance of the marathon, etc.).

      1. ShanaC

        I find this is also true of magazines like the economist – I sort of wish that their digital content felt more like digital content, rather than a redo of their print…

    2. JimHirshfield

      Good point re consumers traditionally not paying the way. I’d just add to your point about complete change of biz model by saying that it was more so disaggregation of newspapers’ revenue streams when CraigsList and the like redirected those revenue streams (classifieds, etc) away from newspapers.

    3. Jennifer McFadden

      Subscriptions have actually traditionally represented 20-30% of a newspaper’s total annual revenues (with the rest coming from ad revenues). So, subscriptions have always contributed a fair amount to top-line revenues.

  10. Tereza

    My longtime bud led this project.  So proud!Hmmmm…..can lure him into the thread?I will try. 🙂

    1. fredwilson

      that would be cool

      1. Tereza

        bat signal sent.  funny sliding door story.he’s my wharton classmate *and* 1st gen hungarian-american *and* really tall, super affable guy…basically my male twin.  we got the same consulting offer straight out of b–school but he bailed last minute to go to an upstart firm — surely Fred you remember the “-ant” and “-ent” firms —  hahaha!  funny part is at the time I was the one w the startup chops. but after getting beaten up in startup land for a few years i desperately needed to detox and pay off major school debt.  took me 8 years to finally leave the big consulting firm.  good times.

  11. Nick Giglia

    I agree architecture is a major issue for paywalls.  You can look at what Newsday tried to do that got them less than 30 (not 30,000, 30 people) paywall subscribers:- It cost around $250 for access- If you were a print subscriber or subscribed to Optimum Online (Cablevision also owns Newsday), you didn’t have to pay- Internet traffic plummeted to the point that advertising revenue on the site is probably useless now.- There’s no paywall on the mobile site, which you can access from a regular computer, so thousands of readers would do an end-around on what they wanted.Ultimately, unlike the NYT, Newsday made it an all or nothing.  If you only wanted to read it for its coverage of local high school sports (say you had a kid playing high school baseball), you had to pay for the whole enchilada.  In addition, they left gaping holes you could drive a truck through and cut off all stories (when not logged in) after 2 lines….besides all that, it never remembers you.  Ironically, I know some very senior people at that paper, and they laugh about the mobile loophole and don’t seem to have any motivation to close it.That’s a huge difference: Paywall as World War I-era No Man’s Land vs. paywall as moat with drawbridge.  Newsday and many many others got it horribly wrong.

  12. William Mougayar

    Doing the math- 100,000 x $200 = $20 million. Isn’t that an expensive campaign for Ford?Nonetheless, it’s a brilliant tact to suggest paying after you get inside, instead of at the door. But a paywall that works is only one positive signal in the metamorphosis of the news industry. There are other factors at play.

  13. Derek Gottfrid

    The numbers they report are highly inflated and the fundamental issue is that the loyalist base is not a growing segment. So while this is an effective short term strategy, it fails to address more fundamental long term issues. The challenge will be how to move beyond their built in loyalist base and engage a new generation of users.  They have made a number of attempts but the pay model had for them is more of a retrenchment and retreat from engaging new users.  I hope they work hard and move beyond being a newspaper website. Porous paywalls are great but product innovation remains a challenge.

    1. Jennifer McFadden

      Well said. And, from someone who knows 🙂

  14. Jennifer McFadden

    Would make sense that they’re shooting for 300K users. There is a pretty standard number in the news industry that is used to predict the conversion to paid users once the paywall goes up–10%. It is pretty amazing how consistent that number is across sites. Prior to the paywall, NYT had roughly 30M monthly uniques for a while (see: http://news.yahoo.com/huffp…. Good to see that they are hitting their numbers. I worked w/Paul Smurl (who’s heading the project) when I was at the Times and he deserves a win. And, they finally got me this week–I signed up on Thursday!

  15. maxniederhofer

    I’d like someone to offer me paid access to the NYT, FT, Economist and WSJ for – don’t know – $50/month as a package? I absolutely hate having separate subscriptions everywhere, getting the calls and reminders to renew or forgetting about one that I don’t use and then paying for an extra year.

    1. fredwilson

      netflix for journalism?

      1. Dave Goldberg

        You can try Ongo. It has NYT, FT and many others (unfortunately no Economist or WSJ), and it is less that $20/month.

        1. maxniederhofer

          I will go check that out. Thanks, Dave!

  16. testtest

    1. fredwilson

      great points chris

  17. ttunguz

    It’s great to see these paywalls working because as you say, journalism needs to have a sound business model. By my analysis, there are at least 5 print publications generating greater than 10M annually (run-rate) in paid subscription: the NYT, FT, WSJ, Times of London and the Guardian.http://tomasztunguz.com/201

  18. paramendra

    I am happy for the New York Times. I remain against paywalls, though, just like I stay opposed to native apps. But better is not here yet. So. 

  19. Christian L. Tom

    Nitpick but worth mentioning from the grammarian in me: “I’d encourage the Times to be even more agressive with it’s porous paywall stratgy.” it’s –> its

    1. fredwilson

      Ugh. Thanks

    2. Dave Manningsmith

      further nit: “strategy”

  20. ShanaC

    Does this mean that long term we could think of pay to play UGC models, considering how there seems to be a will to pay for content?

  21. digidave

    I agree with all this – but I also think calling it a porous paywall is a misnomer. Since ‘access’ is not what people are paying for – it is a membership program similar to NPR without the tote bag.You write: “I’d encourage the Times to be even more agressive with it’s porous paywall stratgy.”I would too – but again, I’d encourage them to realize that ‘access’ is not what they are selling. Just as NPR doesn’t sell ‘access’ but affiliation. If I am a digital subscriber to the NYT one month – why would I continue the next month? It certainly isn’t for access. Maybe for the tote bag….

    1. fredwilson

      terrific points. spot on

    2. heuristocrat

      The idea of a porous paywall is great. I’d also say it relates to other things discussed on this blog like freemium and the ratio of readers to buyers. By reading the NYT you can become a fan of the writers, the editors and the content. Fans are happy to pay. They may be a 10% of 30% but on the 1 billion + person and growing Internet that shouldn’t be a problem if you are doing good stuff.

  22. gregorylent

    the news business = the entertainment business … maybe, the “diversion” business, with more than a touch of propaganda and a rigidly status quo world-view ..pay for it? ok, but why can’t i buy just the book review? or science tuesday, if the nyt still does that?long term, the brand will not be worth more than the sum of its parts … fragmentation on the way to niche ..

  23. Ciaran

    Frankly I’m amazed that they’ve managed to get so many subscribers. Their wall isn’t porous, it’s practically non-existent http://searchengineland.com…

    1. fredwilson

      that’s the point. the more porous the better.

      1. Ciaran

        But if people start to realise quite how porous it is, will anyone bother to subscribe? And yes, I guess the stats to date would suggest that they will, but I’m amazed nonetheless.

        1. fredwilson

          that’s the whole point of the postyou have to stop thinking that people will only pay if you block thempeople will steal if you block them and will pay if you don’t block them it doesn’t make sense initially but it does once you think about it

          1. Ciaran

            Clear as mud! I guess that’s why you’re the VC and I’m not!

      2. Craig Bromberg

        fred> “that’s the point. the more porous the better.”Agreed. But then why not also work on monetizing the unsubscribed (porous) customer? Double Recall and Solve and otherss each have captcha ad models that “proxy-monetize” both readers and advertisers. Readers have to pass through a brand-captcha (type two ad-targeted words) to get to full articles (once a day, per pub. requirement); advertisers are forced to recognize the brand captcha as a meaningful (and thus more highly compensated) ad vehicle. At least this way, the porous reader who grabs between 1 and 19 articles read isn’t going un-monetized.    

  24. Aviah Laor

    Reminds me of my first trip as a kid to Switzerland- they used to sell newspapers in an open boxes, with a slot for a coin. You could take one, or ten, or as many as you like without paying a dime. It’s a reciprocity issue.

    1. fredwilson

      the subways/trains in berlin work this way toowhen we walked into the subway station in berlin, my son and his friend, who have grown up on the NYC subways, both said “the subways are free here” i told them they weren’t free, but they ran on the honor system. it wasn’t easy but we figured out how to pay

      1. Ja Reed

        NY Times can do this because it’s an upscale audience.It’s hard to charge for news, especially the average person.For God’s sake, it’s news. And news is mostly aggregated happens, not created content so much.

  25. Rick Wingender

    I hope someone at ESPN’s “Insider” service sees this!!

  26. Morgan Warstler

    I bet it would be possible to increase traffic by requiring folks who want to read free gated posts to share them.

  27. fredwilson

    great points. you need the tech to work for the model to work

  28. Debra Jenkins2745

    Spammers = Scammers

  29. ShanaC

    Thank you!