Turning WSJ.com into a free site would require a 12x increase in traffic growth to offset the lost revenue, according to a new report from Bear Stearns analyst Spencer Wang. WSJ.com revenue is currently pegged at $78 million annually, based on an estimated 989,000 subscribers paying $79/year. Including non-subscriber traffic, the company claims 122.4 million monthly page views. Based on an estimated CPM of $6 and a few other assumptions about sell-through rate and ad impressions per page, Wang arrives at the 12x conclusion.
So that’s the math, but is it achievable? That’s where things get dicier. More after the jump….
If WSJ.com only grew to the average of its peers (nytimes.com, CNN Money, usatoday.com MarketWatch and Yahoo (NSDQ: YHOO) Finance), the site would only be about halfway to the 12x goal. To really see direct revenue growth from going free, it would require the site grow as big as Yahoo Finance itself. That would obviously be a huge challenge, since Yahoo Finance is a portal aggregating content from multiple third party sources. Note that in August, an analyst at Lehman estimated it would only take a 2x-3x rise in traffic to offset the revenue loss. That analysis didn’t spell out the expected CPMs though — it only referred to them as “high” — so that could explain some of the difference.
But even this doesn’t tell everything. As Wang notes, $78 million in revenue only accounts for an estimated 4 percent of Dow Jones (NYSE: NWS) revenue, so from a strictly financial stance, it doesn’t much matter either way to News Corp. If Murdoch does set WSJ.com free, as is widely presumed, there will likely be a broader strategic rationale than simply wanting more ad revenue in the short term.
Meanwhile, for News Corp.’s fiscal year ending June ’08, the Dow Jones buy will likely shave a penny from earnings, according to Wang. This is based on higher interest payments and an expanded share count. (Click on the chart below for a larger version.)
Excellent and important analysis from Bear Stearns. While free content makes sense for the vast majority of web publishers, it's not a be-all end-all for those who have content 'worth' selling. Ad sales, especially if you're an independent publisher without other interests (as FOX does), can be fickle, while paid-content limits growth but also provides far steadier revenues.
$6 CPM is all WSJ can get? That doesn't sound right …
I agree with the comment that $6 CPM seems way too low for WSJ. I understand WSJ has video ads and they are charging upwards of $90 per CPM for 15 second pre-roll ads. That information is from their video sales sheet. Now, that Murdoch owns WSJ there are all sorts of opportunities to leverage existing video news assets, and as online video usage increases I suspect those revenues will increase as well
Anyone know where I can find a copy of the full report — free or paid? I would love to compare it to the Lehman numbers. thanks
interesting that with all the hype around CPMs going the way of the titanic, top analysts are still valuating based on it. There are so many more creative ways to integrate Brands into the community of WSJ that can draw millions in new revenue per month. Focus on adding value to the advertiser in ways that add value to the readers and you have win-win all the way around. Goes to show that if you're a hammer everything else still looks like a nail.
I think the broader strategic rationale mentioned is probably Murdoch's desire to move the WSJ to a more mainstream position where it can take on the New York Times. Otherwise, it seems to me that two revenue streams are better than one – though this isn't something that's open to most newspapers. When you say it doesn't make much difference either way, I think you may not be factoring in the possible loss of print subscribers if WSJ.com goes free.
Not mentioned here (as Sue Sparks correctly points out) is the impact that going free would have on the base print product. If the net effect of such a move was to depress offline circulation (and how could it not be such) then the overall impact to the company would be much, much bigger.
That said, on their current course (paid) the WSJ as a brand is quickly becoming less relevent. Rupurt understands this and as such he knows he has to make the move of going free…which could cost the company many more millions then these numbers suggest. But to compete in the new marketplace for on demand business news and insights…well their really is no other choice.
Haven't seen the analysis — but $6 cpm is definitely way too low.
WSJ can probably command a $15-20 effective cpm (net of sell-through) — although it would take 12-18 months to ramp up if they go free.
So I'd say they'd only have to 3-5x their traffic to make going free pay off in terms of interactive revs.
Print cannibalization is another matter entirely, however, and might be a deal-killer — unless Murdoch is looking at this w/ a very long term view (5-10 yrs) — which of course he well might be.
Interesting.
The WSJ is already free here :
http://mediastech.com/index.php/2007/11/read-wsjcom-for-free/
:)
I don't think the lost subscriber revenue figure is correct. More than half of the WSJ.com subscribers are bundled with newspaper subscriptions and are either free or highly discounted. Therefore, the $79 per sub figure seems way too high, maybe twice what DJ is currently getting. Combine that with a higher ad CPM assumption and trade off of going free doesn't look as daunting.