The NAA's New Media Federation online idea forum was hot this week with discussion of what makes a successful online newspaper, and whether sites should be paid or free.
Gordon Borrell, president of Borrell Associates Inc. and one of the truly wise folks in the business, offered his opinion.
Since I can't say it better, I'm going to quote Gordon in full.
"What a terrific debate about a very important issue - how we gauge 'success' of Internet operations. I can tell you that our discussions with corporate executives every week focus on one thing: 'the bottom line.' It is their gauge for success, and ultimately, probably yours too.
"We're seeing some incredibly strong revenue growth - 30 percent last year, on average, for newspaper websites, while the overall Internet ad growth was just 15 percent. Margins at some of the multi-million-dollar Internet operations are running above 50 percent.
"We know of at least one case where online operations will contribute more to the bottom line than the newspaper circulation department this year. That's very significant and a great measure of success.
"On the issue of paid web access, we took another look at it last fall and found it stagnant. Online subscriptions at newspaper sites that charged for access averaged 1.8 percent of print subscriptions. That means that, for a 100,000-circ. newspaper, a publisher could expect 1,800 online subs at roughly $100,000 in gross revenue. There has been little to no movement in this percentage since we began tracking subscription sites in 2001.
"These sites also required print subscribers to register for free access. On this point, we found that registrations averaged 34 percent of their print subscriber base, growing at a rapid clip but not exceeding 44 percent.
"Unfortunately, these sites are winding up with a registered-user base of what is essentially their same (print) customers and hardly any new customers.
"Our opinion on charging for access is that there is no significant financial or strategic benefit for doing so, except perhaps for small newspapers in isolated regions.
"I think … (another member of the online debate) is right on target when he says that he has a much easier time selling Internet advertising than he would selling an online subscription. I strongly agree that online advertising in local markets has begun to explode and has thus reached the tipping point …"
I added (to the online debate) that our experience sending in SWAT sales teams to sell online advertising on behalf of newspapers confirms that it is possible to sell online advertising.
Our TownNews.com SWAT teams sold more than $5 million in ads last year. The No. 1 thing we did: We asked for the order. We found that many local merchants are willing, even eager, to buy online advertising.