The Times Paywall - Not such a bad idea?

The Times of London (owner Mr R. Murdoch) recently announced it would be introducing a paywall to its two sites, due to go live at the start of June, and has been receiving a lot of coverage about it. Previous experiments with paywalls have yielded poor results, and there has been a lot of discussion, especially on social networking sites about how setting up a walled garden and attemping to work against the principle of an open internet will ultimately hurt Mr Murdoch. Furthermore, keeping content behind a paywall would not only limit the availability of the site's news, but also its reporters. Users of Twitter would no longer be able to link to their work, and see it be shared across the internet - their brand as well as their paper's would be curtailed.

Looking at it in purely monetary terms, this is clearly a beneficial move. Mr Murdoch needs to ensure that

VaCaR + PVa > VbCbR

where a denotes after and b before the paywall is introduced, V is the number of visitors, C the display ad clickthrough rate, R the revenue per click, and P the subscription price.

Making some assumptions about the share of visits to visitors before and after the paywall change, taking the visitor values for The Times with the forecast 95% fall in traffic afterwards, and assuming that the clickthrough rate will improve following the introduction of a paywall suggests that unless revenue per click is more than approximately £26, this will generate more revenue for News Corp. This demonstrates that this move will clearly benefit them (unless anyone knows of an ad that regularly yields that sort of revenue per click!). Of course the cost to the brand in terms of damaged reputation, reduced visability and possible loss of staff is not so easy to calculate.

In terms of analytics, though, things get more interesting. Reducing the amount of traffic to the site in this way should tighten the audience profile - effectively removing the drifters, and bringing the online profile of visitors closer to the offline one. This then should enable more effective advertising, appealing to the more shared interests of the new profile. Also, the new traffic should be more engaged with the site, generating more page views per visit,  and thus more opportunity for clicking on the ads, as well as helping any behavioural advertising the company may be using. And of course in terms of the site itself rather than the advertising, the more engaged traffic should improve the conversion funnels the site has, such as engaging with their live chat facility.

I'll be interested to hear what News Corp has to say about the effects of its paywall from this perspective in a month or so!