The newsonomics of the only metric that matters

Amid the big news of the News Corp. split, The New York Times announced its deal with Flip­board. Then, the next day, The Wall Street Jour­nal reported its own deal with Pulse. It looked like Tablet Aggre­ga­tor Wars, with the two big head-to-head print national news com­pa­nies going head to head.

In fact, there’s a lot more here than first meets the eye. Get beneath the sur­face, and we find two very dif­fer­ent approaches to sell­ing news con­tent away from pub­lish­ers’ own sites. But you can expect these two new approaches — each a major depar­ture from busi­ness as recently usual — to keep grow­ing together in the year ahead.

The deals:

• Now New York Times all-access sub­scribers will see the notion of all-access extend beyond the suite of Times sites and apps. Go to Flip­board, authen­ti­cate your­self as a paid sub­scriber, and enjoy the full run of Times con­tent via the Flip­board experience.
• Find your­self on Pulse and sud­denly run across three new paid ways to sam­ple The Wall Street Jour­nal. Pay 99 cents a month for 15–20 daily arti­cles through the WSJ Water Cooler, $3.99 a month for the WSJ Tech Digest, or the same for the WSJ Polit­i­cal Report (each with 30-plus arti­cles a day), all deliv­ered on the Pulse con­veyor belt of daily news.

The deals seemed out of the blue, but both rep­re­sent a mat­u­ra­tion in dig­i­tal cir­cu­la­tion think­ing. We’re mov­ing beyond Pay­walls 1.0, to a more nuanced world of dig­i­tal cir­cu­la­tion. The WSJ/Pulse deal took about four months to get done, while NYT/Flipboard took longer. We could say, though, that both deals took more than 15 years.

Top news­pa­pers are mak­ing deals with tablet aggre­ga­tors like Flip­board and Pulse. It’s a new stage in the quest to gen­er­ate reader revenue

Why? The idea that news com­pa­nies could get paid as some­one read their valu­able, and expensive-to-produce, news con­tent on an aggre­ga­tor sites seemed a dis­tant dream. First, of course, news com­pa­nies had to make the crit­i­cal deci­sion to charge for dig­i­tal access to their con­tent, a move­ment now sweep­ing the globe. The endur­ing prin­ci­ple, just re-learned by news com­pa­nies in the past three years: If money isn’t flow­ing, you can’t get a share of it. That’s a corol­lary of this tru­ism: If you don’t charge them, they won’t pay you.

Now dig­i­tal cir­cu­la­tion has opened up whole new hori­zons, not just for news com­pa­nies, but, sur­pris­ingly, for the aggre­ga­tors like Flip­board and Pulse. These com­pa­nies started up with germs of ideas that the tablet offered new ways for read­ers to enjoy read­ing. Nei­ther had much of an idea of how to make money, and both are still in the early stages of prov­ing out busi­ness mod­els. They may pass the way of tablet aggre­ga­tor Zite, acquired by CNN, or emerge as big­ger, inde­pen­dent com­pa­nies. Now, though, owing to money mov­ing where it hadn’t before, it’s not only the Jour­nal and the Times can fig­ure out new ways to money — so can the startups.

The new­so­nom­ics of these deals are intrigu­ing. In a way, they’re mar­velously sim­ple, so let’s call this the new­so­nom­ics of the only met­ric that mat­ters. Out of these part­ner­ships, we can see this new blind­ing real­ity: the met­ric that mat­ters most is dol­lars (or pounds, euro, yen or kro­ner). Both deals allow the news com­pa­nies to get more dol­lars for reading.

For almost two decades, news com­pa­nies have counted so many things: first unique vis­i­tors and pageviews, then con­ver­sion rates from Google and now Face­book and a myr­iad of other sites. They’ve tried to com­pute how use­ful and valu­able dif­fer­ing kinds of refer­ral con­tent really is: Does a Face­book refer­ral really read more pages, once they hit a news site, than a Google refer­ral? How likely is a refer­ral from Techcrunch or HuffPo or ESPN to actu­ally buy one of the new dig­i­tal sub­scrip­tions? What’s the per­cent­age of those that reg­is­ter on a site com­ing from Twit­ter as opposed to LinkedIn?

The per­mu­ta­tions are end­less. The Finan­cial Times has fairly won its rep­u­ta­tion for propen­sity mod­el­ing excel­lence — decid­ing which of these many met­rics, tossed into the mix­mas­ter of its smart ana­lyt­ics depart­ment, makes the most dif­fer­ence in dri­ving the FT’s busi­ness forward.

Yet all these cal­cu­la­tions — this search for num­bers that mat­ter in build­ing a big dig­i­tal busi­ness — can be summed up in the uni­ver­sal lan­guage of exchange: money. All these met­rics remain vital to under­stand­ing the new land­scape, but the dis­ci­pline of see­ing how much actual new cur­rency can be gen­er­ated by deals is the sin­gle great­est met­ric. All those other met­rics just serve that one.

So these deals are about reader rev­enue (“The new­so­nom­ics of major­ity reader rev­enue”), and max­i­miz­ing it. They begin to put a new face on all the talk of news every­where and any­where, terms that, like “dig­i­tal first,” are get­ting lots of lip ser­vice but wildly uneven execution.

As the Times’ Denise War­ren pointed out, 20 per­cent of cur­rent Times dig­i­tal sub­scribers reported in a sur­vey that they used aggre­ga­tion apps like Flip­board to read news. That meant extend­ing the Times’ all-access strat­egy to enable sub­scriber read­ing apart from The New York Times’ own prod­ucts. For the Jour­nal, news any­where means not only serv­ing WSJ sub­scribers on the evolv­ing mul­ti­ple screens of our lives, but also find­ing new read­ers every­where and any­where. Its first strat­egy with Pulse is find­ing new pay­ing read­ers, so it’s sam­pling, with its three less-than-full-access products.

Two dif­fer­ent strate­gies. Two dif­fer­ent tablet aggre­ga­tors. Yet, expect these two strate­gies to come together, and soon.

Expect The Wall Street Jour­nal to start offer­ing off-site — on Pulse and a cou­ple of more sites — access to full Jour­nal con­tent for its sub­scribers. Expect the Times to sam­ple for new read­ers, sim­i­larly to how the Jour­nal is now doing it, with dif­fer­ing pri­ce­points for sub­sets of con­tent. Expect the Finan­cial Times, a com­pany that has used par­al­lel third-party dis­tri­b­u­tion in its B2B busi­ness, to join in the test­ing as well. Expect mag­a­zine pub­lish­ers to adapt the strat­egy for their own niche con­tent, and maybe large, regional news­pa­pers as well.

Fur­ther, expect Face­book, as it fig­ures out how best to sell media, to become a mid­dle­man here as well. It’s only log­i­cal for a com­pany that is mak­ing pos­si­ble “social reading.”

These strate­gies are a log­i­cal exten­sion of dig­i­tal cir­cu­la­tion. It’s a recog­ni­tion that the rela­tion­ship between a pub­lisher and a reader, while para­mount, can be ful­filled on sites or apps other than a publisher’s. We’ve come to think of all-access as mean­ing multi-device access — smart­phone, tablet, desk­top, and lap­top, as well as print. These deals extend all-access to the read­ing expe­ri­ences — the mag­a­zine panache of a Flip­board or the ele­gant con­veyor belt of Pulse — as well. This exten­sion of all-access is sig­nif­i­cant. Where today 20 per­cent or so of Times read­ers may do a lot of of news read­ing on aggre­ga­tor tablet sites, we can eas­ily see a world in five years in which 80 per­cent of Times sub­scribers are. Who know what kinds of read­ing expe­ri­ences — new kinds of tablets, new pre­sen­ta­tion styles — will be avail­able? What’s impor­tant to the Times and all news com­pa­nies is main­tain­ing a branded, paid news experience.

As impor­tant to the all-access sub­scrip­tion busi­ness as these deals may be, the Journal’s deal with Pulse is poten­tially more interesting.

It breaks the one-product, one-price mold, and leads us into the future of many news prod­ucts at many price points (“The new­so­nom­ics of 100 prod­ucts a year”). It fishes for that elu­sive “will they pay for it” audi­ence — peo­ple younger than 50. And it may be as much about growth as reten­tion of cur­rent dig­i­tal subscribers.

Pulse matched up its most-used top­ics — tech­nol­ogy and pol­i­tics — with WSJ strengths, says Dmitry Sheve­lenko, head of mon­e­ti­za­tion for Pulse, and more top­i­cal WSJ pack­ages will fol­low. Some of those 99-cent-plus buy­ers will upgrade to a full Jour­nal sub­scrip­tion, cur­rently going for $260 a year. When they do it, Pulse will get a one-time com­mis­sion. The Jour­nal deal is a model for Pulse: “You can imag­ine a cat­a­log of pre­mium sources,” he says.

For the Jour­nal, it’s about “putting our toe in the water,” says Alisa Bowen, just pro­moted to chief prod­uct offi­cer at Dow Jones. “We’re hop­ing we acquire younger readers.”

Cur­rently, Pulse is using Apple to do its e-commerce of the Jour­nal 99-cent monthly pay­ments, with the small rev­enue splits among Apple (30 per­cent), the Jour­nal, and Pulse. The sim­ple check­out expe­ri­ence (because Apple iPad users can one-click their way to pur­chase, with a credit card already in the sys­tem) and the sim­ple 99-cent pric­ing is key to mak­ing pay­ments work, says Shevelenko.

As impor­tant as reader rev­enue is to these exper­i­ments, ad rev­enue plays a part as well. There’s a mix-and-match, we-can-sell or you-can-sell-and-we’ll-share-revenue approach to ad sales on these tablet apps going on. In the end, it’s the same two met­rics, adver­tis­ing dol­lars and cir­cu­la­tion dol­lars, and how many of each can be gen­er­ated through these off-site rela­tion­ships. Those are the met­rics that will mat­ter and will deter­mine how much news any­where grows in mean­ing to news consumers.

Says Sheve­lenko, describ­ing Pulse’s strat­egy, “Both [ad and circ] rev­enue mod­els are crit­i­cal to the future sus­tain­abil­ity of news, but both are in des­per­ate need of inno­va­tion and sim­pli­fi­ca­tion. The chal­lenge is not about pick­ing the right side — it’s about being bold enough to change how ads look and feel (mov­ing away from IAB units to native expe­ri­ences) and to change how sub­scrip­tions are priced and con­sumed (even at the risk of canna­bal­iz­ing exist­ing pay­wall struc­tures). This is the real story and we’d love to par­tic­i­pate in a sub­stan­tive explo­ration of it.”

• Orig­i­nally pub­lished at Nie­man Jour­nal­ism Lab by Ken Doctor