Return of the prodigal: Why advertising will make or break Wapping's paywall

There are reasons why business ventures that make an initial fist of it get three years to prove their long-term viability. In the first year, you make mistakes. In the second year, you correct them. In the third year, you get realistic year-on-year comparatives. These tell you whether the business is a keeper or not.

This is a gross simplication, of course. But it’s worth remembering this kind of timeline given the first paywall metrics from The Times. The numbers emerged yesterday, courtesy of a statement (thanks to Paid Content for publishing it; Wapping didn’t) and an interview with James Harding, the editor of The Times, on Radio 4’s Today programme.

The numbers, compiled after 4 months of charging, go like this:

  • 100,000 print subscribers have activated ‘free'(bundled) digital subscriptions.
    From News International’s statement: ‘In addition to the digital-only subscribers, there are 100,000 joint digital/print subscribers who have activated their digital accounts to the websites and/or iPad app since launch.'(NB: This equates to around 70% of print subscribers.)
  • 105,000 ‘digital products’have been sold.
    The statement again: ‘Around half of these [ie half of 105,000] are monthly subscribers. These include subscribers to the digital sites as well as subscribers to The Times iPad app and Kindle edition. Many of the rest are either single copy or pay-as-you-go customers.

One intriguing question here is how many of the c.50K pure-play digital subscribers are iPad/Kindle users. News doesn’t say, and the tittle-tattle is variable. Roy Greenslade says ‘close to’45,000 subscribe via iPad (although it’s not clear whether this includes freebie trials). At the Indy, Ian Burrell says ‘somewhere around’ 30,000. Beehive City hazards a guess at 20,000.

Another question: among those users who have signed up for 105,000 ‘digital products”, how many casual day-pass users exist? Again, the tittle-tattle is variable. The FT suggests 35,000 day passes have been sold. The Guardian’s Dan Sabbagh says the number of day pass users (not the same thing) is ‘roughly… 5,000-10,000″.

A few souls have been brave enough to try to make sense of these numbers from a revenue perspective. At Beehive City, Tim Glanfield projects annualised revenues for Year1 of £4.3m plus around £300,000 annualized from short-term day passes:

Well if for example the Times iPad app at a generous estimate has 20,000 paying subscribers it would be reaping a monthly return of £200,000. If we assumed (again generously) that the there were 20,000 further monthly web subscribers paying £8 a month (£2 a week) they would bringing in another £160,000 a month … so in total from ‘monthly subscribers’ the digital products would be making £360,000 a month.

At the Guardian, Dan Sabbagh adds in some leaked info that’s not part of the News International statement, and halves the guess of £12m in Year 1 revenues he offered up just 15 hours earlier. Here, then, is Sabbagh’s latest effort at triangulation:

iPad + ‘small number of’Kindle subscribers: 10,000-15,000, say 12,500 paying £120/year. After Apple’s 30% commission, this may = £1,050,000

People paying online #1 (Monthly digital-only subscribers): Sabbagh assumes 37,500 of these, paying £8.66 a month = £3.9m.

People paying online #2 (‘Slackers”: day payments): ‘Let’s assume that there are, in any one month, 5,000 slackers who pay £1 and sign off. Annualise this and you get a slacker base worth only £60,000 a year.”

Add it all up, and Sabbagh projects annualised Year 1 paywall revenue of £5.5m. By this morning, this figure had become the conventional wisdom.

Accordingly, a couple of questions now loom. Assuming industry-standard churn rates (Sky loses 11% of customers each year) can The Times and The Sunday Times continue to add £5m-worth of revenue to existing renewals for the next couple of years? And if the sites can do this, what will be the cost of acquiring those subscribers? (Notably, Adam Tinworth is very sceptical on both counts.)

The second question has been almost entirely absent from the discussion of Wapping’s numbers. It’s this: how effectively can News sell advertising against these subscribers? Greg Hadfield might be a former news editor of the Sunday Times, but he is surely correct to point out that News International now holds ‘an enviable amount of data’on 200K digital readers:

“For the first time the Times knows who its readers are – if those digital customers stick with the Times for 30 years, imagine how valuable they are over the lifetime of their relationship with the newspaper.”

Of course, these subscribers are only valuable in this sense if you can sell lots of high-priced advertising against them.

So if £12m-£15m in subscription revenues are a possibility during Year 3, the decisive factor in determining the future of Wapping’s paywalls might not be subscriptions at all.

It may turn out to be how successfully News International can emulate FT.com by selling at CPMs that blow free-to-air news sites out of the water.

You can run from the need to sell online display advertising, as several News International executives, including Les Hinton, have done. But Wapping’s paywall numbers suggest that none of us can ultimately hide from the need to fix what’s wrong with it.

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