Advertising isn’t Going Anywhere

Lately almost every quality publisher is experimenting with paywalls and subscription services.  They are now viewed as a panacea against the need to handle consumer data, and a hedge against the increasing use of ad blockers.

Of course subscriptions to newspapers and magazines were available back in the days of print, too. So why did print publications also run advertising?

One simple reason: subscriptions cannot support most publishers, unless they are in a niche category without a competitor. The Information, a technology business publication aimed at wealthy investors, falls into this category. But most publications do not. Even the Wall Street Journal, the leading financial publication and one that many people WILL pay for, cannot get by  on subscription revenue alone. Nor can the leading news sites like the New York Times and the Washington Post  support themselves solely by instituting paywalls.

Why not? Because the average middle class consumer, who has been reached in the past through advertising, cannot afford to subscribe to everything she needs to read, see, and hear. We live in the Information Age, and very few of us can afford to ignore the need to stay abreast of a very rapidly changing world.

She’d like to get the national and world news from a reliable source, so she visits the New York Times. But finding it too biased, she must also often visit the Washington Post.  Neither of them covers news from her hometown, so she reads her local news site. And since she’s a homeowner, she reads a lifestyle publication. Or a fashion magazine. Or Consumer Reports.

To save money, she cut the cord on cable TV a year ago, so for entertainment she relies on Amazon Prime video and Netflix. But some shows are only on Hulu. Her husband subscribes to ESPN. He’s also a reader of Bloomberg and Wired, and they just instituted paywalls, too.

And then there’s Spotify.

At the end of the year, she and her husband look at their iTunes bill and their credit card bills and realize that they have spent over $2000 on subscriptions to both video and text sites. They blew right through their budget. So they decide to cancel their subscriptions to save money.

Eventually they trade off the need for privacy and gravitate to sites where they can get news and entertainment free, just by tolerating a few ads. In the mean time, publications that have instituted paywalls find that they are experiencing a great deal of churn among their subscribers, leading to unpredictable revenue projections. Despite their paywalls, they must also run some, although perhaps not quite as many, ads.

And that’s how the great paywall experiment plays itself out. Advertising isn’t going anywhere.