There is significant debate within the newspaper industry, as well as internally at many newspapers, about putting all or part of the Web site behind a pay wall. As part of our ongoing coverage of the industry we follow the debate in an effort to consider how it will affect our clients and their company goals in the long term.

If your company wishes to pursue paid content strategies, you must begin by asking yourself what unique and engaging content will consumers pay for. You must do two key things:

• – Embark upon research efforts to determine if there is a demand from consumers and advertisers to generate both subscription and advertising revenue.
• – First, put considerable effort into improving your existing products online to develop the editorial skills, engaged audience and multimedia coverage that would generate enough value online. If your existing site does not exhibit those qualities, (and I would argue many aren’t there yet), that would need to be developed more fully before you could consider any level of pay wall.

Several sites have experimented with paid content with similar results:

• – Where they have generated revenue, it has quickly flattened out: There are only so many people who will find the information you provide valuable enough to cross the barrier from free to paid. Even The Wall Street Journal has experienced significant flattening in subscriptions both online and in print. Both Boston.com and The Dallas Morning News have experimented with paid content for very passionate fans of the Red Sox and Dallas Cowboys respectively, and killed the efforts because they saw no revenue growth and rather were managing churn. As much as users valued that content, and loved getting it in all one place, they became satisfied with finding information in other (free) places.
• – Barriers to entry offer your audience a chance to find another solution: Several years ago many sites experimented with forced registration on their sites. You needed to create an account to get in. The intention was to be able to use the information about site “subscribers” to create stronger advertising solutions and therefore generate higher revenue. Although this was free, it created a large barrier to entry for consumers because they stopped and considered whether or not they wanted to share personal information with the site in order to gain access. Once they began considering that, the natural tendency is to seek other sources that will be “good enough” to get the information they sought. Creating a pay wall, no matter how small the fee, is an even higher barrier to entry than registration, and sites as large as the Chicago Tribune and hundreds of others in the U.S.determined that that was not a price they were willing to pay and removed forced registration strategies.
• – Ask again what you have that is worth paying for: While high-quality journalism and broad coverage offered by your company is of tremendous value, the proven behavior of consumers is to circumvent barriers to entry and be satisfied with what is “good enough.” What do you offer that is unique so that you believe you can change this behavior? At the time that Boston and Dallas launched the paid Red Sox and Cowboys initiatives, both sites agreed internally and externally via audience surveys that they offered the most in-depth, powerful and useful coverage of the Red Sox and the Dallas Cowboys. However, after the most rabid fans were subscribed, others changed their habits to find ESPN or other sources to be “good enough.” Frustrating to the teams involved with the projects was the side effect that once they determined they should remove the pay wall, they did not get all of their users back who then became accustomed to seeking other sources of information. While many companies are considering paid content currently, it’s important to consider that news content is not the only option. Savvy markets are considering what they have that is worth paying for as being leads to advertisers.
• – When you limit your audience, you limit your value to advertisers: As many newspapers know that have been fighting declining circulation by offering deep discounts and/or expanded free subscriptions, your advertisers measure your value by the size of your audience. In the newspaper business, we have trained them to do so. Because your audience will not be growing as rapidly with a large barrier to entry of a pay wall, we are limiting our value. And, advertisers will not pay considerably more for a “subscriber” audience base than they would for an engaged one. If we created content and features that had a deeply engaged audience it is far more valuable and has a stronger potential for helping us grow revenue long-term.
• – When you limit your audience, you limit your ability to grow: A significant (and rapidly growing) percentage of consumers today find information through search engines. Any barrier to entry, whether it be registration or pay walls, means that your content will not be found via search, meaning you lose the ability to meet consumers’ – and potential customers’ – needs. Marketing will become an even greater challenge, because you will need to rely solely on your ability to sell – convincing people your content is worth paying for – to grow. The effort you put into selling subscriptions should be put into selling advertising instead. Would you suddenly expect the circulation department at your newspaper to generate more revenue than the advertising department? Of course not.
• – The Internet is the same, but the business model is different: When consumers pay for newspapers, they are not necessarily paying directly for the news. They are paying for the utility of a portable product that features news, local information, advertisements and amusements in it. As we all know, cost per copy of the print product does not pay for the entire cost structure of the newspaper; advertising pays the bills. Circulation has a goal to grow audience and cover costs; advertising is how the company pays for the newsroom, management, facilities, and generates profits. The Internet is the same. Advertising is what will cover the costs. However, the business model is very different in a number of ways. First, while many are quick to point out that revenue online is much smaller, the cost of doing business and overhead is also much smaller. Publishing companies can do much more with less online, particularly in terms of infrastructure and facilities. Second, the business model relies upon a larger, more diverse base of advertisers rather than several high paying ones. Given the prevalence of small businesses, this bodes very well for your company. A larger and more diverse base of advertisers allows for stronger profits. Rather than seeking to augment online revenue by charging for content, you first should be seeking ways to better serve your advertisers and successfully sell to more of them.