Why WSJ.com Should Go Free

Sarah Ellison of the WSJ has more detail today on whether or not WSJ.com is likely to go free. Although Murdoch himself seems to see what a good idea it is, he is apparently getting pushback from Dow Jones CEO Richard Zannino:

Mr. Zannino and other Dow Jones executives, however, have made the case that there is value in keeping the Journal's Web site -- with its 983,000 subscribers -- at least partially a paid site...
Mr. Zannino and other executives have said that given the nature of the Journal's content, opening up the Web site to nonsubscribers might not attract enough new readers to make up for lost subscription revenue. Furthermore, according to an internal Dow Jones review of WSJ.com, nonsubscribers only stay on the site for an article or two, unlike subscribers, who stay on the site much longer.
The lofty ad rates the Journal can charge online would be eroded by a less loyal, nonsubcriber base. Lehman Brothers estimates that the average page view on WSJ.com commands four times the ad revenue of a page view the New York Times site.

Thankfully, all of this is offset by the much more bullish and sensible ideas of Rupert Murdoch, who realises how silly it sounds.

For one thing, the only value in keeping WSJ.com a paid site is the immediate subscription revenue that it generates. If you're owned by a Bancroft family which wants to maximize its dividends, then I can see why you might want to do that. But if you're a tiny part of the giant News Corp, your online subscription revenue is barely a rounding error when it comes to overall profits. Rupert doesn't want WSJ.com to contribute to News Corp's profits, he wants it to contribute to News Corp's share price. And the way to do that is to make it as popular and successful an internet property as he possibly can.

Besides, I reckon that ad revenues can make up for lost subcription revenues. According to Dow Jones, WSJ.com gets 8.3 million unique visitors a month, and would need to raise that number to something over 20 million uniques in order to keep total revenues constant. Never mind the accuracy of the numbers, the key thing here is the percentage increase: readership would have to go up by about 140%. Slate's readership went up by many multiples of that after it went free, and I reckon the WSJ's would as well. People looking for financial news right now don't visit WSJ.com because they know it's a pay site. If they know it's free, it could easily become the first best source for all financial news and analysis online.

As for the idea that subscribers are more valuable than nonsubscribers because they spend more time on the site – well, duh. Of course nonsubscribers don't spend much time on the site: they're barred from reading most of it! Let's see what happens when WSJ.com goes free: my guess is that it will find itself with an extremely loyal nonsubscriber base indeed – a nonsubscriber base, what's more, which will continue to be very attractive to advertisers. After all, financial professionals are very busy, and very hard to reach; I have a hunch that they spend much more time online than they do reading newspapers or watching TV. If advertisers want to reach these professionals, WSJ.com will be a must-buy platform.

And all of these considerations don't even take into account the value of the WSJ in emerging markets such as Brazil, India and China. The emerging business elite in those countries will probably never be particularly inclined to shell out for a WSJ.com subscription, but if they grow up reading WSJ.com regularly, that relationship could be worth a fortune to advertisers in the future. As Jeff Jarvis says, "it’s the relationship that is valuable. It’s the relationship that is profitable, not the control of the content or the distribution." Murdoch gets this; Zannino, it seems, doesn't. Which doesn't bode well for Zannino's tenure as CEO.