Inflated traffic stats cloud pay-wall plans

Newspapers trying to assess the financial impact of potential paid-content schemes are starting with a wildly inflated sense of the size of their online audience that could come back to bite them in a big way.

In “nearly every market” included in a study of 118 newspapers of every size in every part of the country, Greg Harmon of Belden Interactive found that publishers on average report the number of unique visitors to their websites is 1.3 times larger than the population of their respective communities – and fully 10 times greater than their print circulation.

Those numbers are not just moderately overstated. “They are magnificently incorrect,” said Harmon, who presented his findings to an industry conference earlier this week sponsored by the American Press Institute.

Worse, no one knows what the true numbers are. And that’s a major problem, because:

Understanding the true size of news-site traffic is crucial to developing a model that will accurately predict the revenues – and the inevitable audience loss – that would result from any paper’s decision to charge for the content it now provides for free.

To illustrate the enormity of the miscalculation that could be produced by basing a paid-content model on the wrong audiene number, let’s consider the case of Newspaper X. The hypothetical paper serves a community of 1 million residents, has a circulation of 100,000 copies and claims 1.3 million unique monthly visitors at its website.

If the publisher of Newspaper X starts out with the belief that she has 1.3 million unique visitors to her site and generously assumes that 15% of them will pay $4.50 per month to read the news, then she will project that charging for content will produce $10.5 million in annual subscription revenue.

But what is the likelihood that NewspaperX.Com really has 1.3 times more readers than the number of people who live in its city? Common sense, as well as Greg Harmon, will tell you the chance is implausibly slim.

To develop a more conservative projection, the publisher of Newspaper X could trim the number of unique visitors to equal the 1 million people who live in the market. Based on the assumptions described for the first case, the paper’s annual online subscription revenue would fall to $8.1 million, or 23% less than would be produced by starting with 1.3 million unique visitors.

But let’s get serious. Could every man, woman and child in town really be logging on to the newspaper’s site at least once a month? Not likely.

What if the actual number of unique visitors to the newspaper site happened to equal the number of its print subscribers? If the true traffic to the site were only 100,000 unique visitors per month, then online subscription revenue would be just $810,000 per year, or 76% of the sum that would be produced by 1.3 million visitors.

Don’t like those outcomes? Pick any unique-visitor number you want. No one can argue with you, because publishers haven’t the slightest idea of what the right number might be.

The online traffic numbers cited by most newspapers today are generated by server -logging systems that are almost universally acknowledged to overstate the number of individual visitors.

But publishers to date haven’t worried about cleaning up their data, because the unrealistically high figures generated by their systems support the story they like to tell about the broad reach delivered by their combined print and online products.

Advertisers typically haven’t been fussed by the inaccuracy, because they buy print ads by the inches and online ads, for the most part, according to a certain number of page views. As long as the publisher states she delivered the promised number of inches and page views, the advertiser is happy.

Now that publishers are trying to decide whether and how to charge for access to their websites, however, it is absolutely essential for them to know true size of their audience.

This information matters not only for the purposes of projecting potential revenue but also – and perhaps more importantly – in guessing how many visitors would stick around if they suddenly were required to pay for the content they are accustomed to getting for free.

As Harmon has discovered in studying the website traffic at dozens of newspapers for several years, online news consumers are not created equal. The audience, he says, falls into three distinctly different categories:

:: 25% of the unique visitors consist of loyal readers who visit a newspaper site an average of 20 times per month and sometimes multiple times a day.

:: 21% of the audience comprises incidental readers who visit between one and three times a month.

:: 54% of the visitors are what Harmon calls “fly-bys” – people who may come once a month in response to a link on another website that steers them to the newspaper.

Given their low engagement with news sites, incidental and fly-by readers don’t appear to be prime candidates for paying for content. Further, it seems reasonable to surmise that most would spurn a site demanding payment, possibly never to return.

If you are a publisher trying to intelligently evaluate the business potential of charging for online content, you are left with a spreadsheet full of holes:

:: You don’t really know how many unique visitors you have.

:: You have to guess at the percentage of loyal visitors who will be amenable to paying for content.

:: You have to guess the price loyal visitors might pay.

:: You have to estimate not only how much web traffic you will lose but also how far your ad revenues will tumble in response to the almost certain decline in page views.

Put it all together and you can see why half of the publishers in the United States can’t decide what to do about paid content. Given the frightening uncertainty they face, it’s a wonder more of them aren’t straddling the fence.