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Value of Information

When the NY Times announced it was installing a complex paywall plan in April 2011, most internet mavens predicted failure.  Conventional wisdom has long told us that information is supposed to be free on the internet – despite the fact that this argument leads to the logical conclusion that the internet is literally worthless.  Brushing that aside, the NY Times hoped to gain 300k subscribers in its first year and show that there is indeed a value to quality information, possibly making it distinct from information as a commodity.

It worked.  In the first three months the NY Times achieved 224k subscribers directly, plus decent income in other areas that were not part of the standard they were to be judged by.  People will indeed pay for news on the internet.

The implications of this are potentially vast if we can learn from this experiment.

The first question that we have to ask is why the NY Times felt this was a good way to go.  Implementation was apparently difficult, taking 15 months from announcement to launch.  That means they were pretty sure of themselves despite the predictions of doom.  What we do know is that they conducted their own research into users’ behavior and discovered something different than the opinions repeated freely on the ‘net itself.

“Conventional Wisdom”, always free, is apparently worth what you pay for.  Quality information, in this case research and business intelligence, costs money to produce – much like the NY Times itself.

The NY Times experiment had to be run in a very public environment, so some of the information is available to us for free.  The bar they set for themselves, 300k subscribers, was apparently quite low – which only makes sense.  What they achieved was more than the announced 224k direct subscribers – they have 57k kindle subscribers, 100k more sponsored by Ford, and a remarkable 756k print subscribers who have signed up.  There was even a noticeable bump in home delivery, which includes full on-line access in addition to the print version for around $35 a month (varies by location).

Why did this work so well, flying against conventional wisdom?  I believe there were two features of the internet that have been overlooked in the reigning opinion.  The first is that the volume of information has become so large that there is value in concise information, separating out quality from quantity.  The second is that the internet is changing constantly as more people start to rely on it, including people with far less time or infatuation with the medium itself.

Both of these are nothing more than symptoms of a medium which is maturing, a process that will only continue.

So what is the value of information?  Apparently quality has some value, meaning that the internet is not actually worthless.  Separating out quality is a process laden with values and difficult to judge without market (or at least market-like) forces.  It will take many more paywalls before we can assess what news is worth to people and what defines quality in a medium heavy with quantity.

For now, we can be sure of one thing – there is a place for quality of some kind.  The next phase of internet maturity will involve how the users themselves define what that means, and that will likely come in how they open up their wallets.  Many people will bemoan this process, much as we all become sentimental about our own childhood.  That’s just part of the process as well.

10 thoughts on “Value of Information

  1. I think that most people do not understand market forces and how they work to set up a price-quality tradeoff. Many things tend to evolve into commodities after a while as they become standardized but information is trying to evolve the other way. I think that it can do it but it will take a lot of guts. I really enjoyed the links at the top and I will read the longer article on running the Times as a business later.

  2. Anna: I think most people “get” the free market, but some are always scared of it. It isn’t always manipulated by large companies, although companies don’t get a whole lot bigger than the NY Times in the journalism biz. I agree on the commoditization of information – it is pretty backwards, but it’s also a mature industry undergoing a momentous change. It will take time for people to be used to paying for news, but there is at least one sign that given a good brand name people will. Interesting at least!

  3. I’ve never relied on the Times but a get a link in the mail once in a while from friends. If they came up with a formula for success more power to them. I’m not sure what I would pay for but quality information is so hard to come by that if I was used to a newspaper like the Times I could imagine paying something.

  4. Jim: It’s the value of the brand that matters, and that’s built over time. The model they have, which includes some free articles, is a good hybrid that has proven itself. What more can I say?

  5. I would pay a reasonable fee for an online newspaper subscription…at least then I’ll be assured of getting the news in a timely fashion, unlike my long-terminated PiPress subscription.

  6. I also think that more and more pocket devices means that people will want this kind of service more all the time. And that also makes transit a lot more appealing, which is good! 🙂

  7. I have had a subscription to a newspaper delivered to my home my whole life. I have also donated $ to MPR and to an online magazine that hosts one of my favorite bloggers, so I am someone willing to pay for information. I am also amazed at the volume of quality information available online for free. I don’t know how all these papers, magazines, and blogs manage to pay their very capable writers, but they seem to find a way.

    My son who is soon to head off to his freshman year in college briefly considered majoring in journalism, but decided the career prospects were just too uncertain at this time.

  8. Laurie: I think journalism as a career is at least on hold for the time being, but the skills taught are going to continue to be valuable. I think the world is figuring out the value of free content to drive traffic, which is to say that it has to be monetized somehow, and there is some understanding that quality matters. Actual paid content is still really up in the air, but I can see you agree with the NY Times that it is worth it when it’s good. It’s a matter of time to shake it all out. I’m just pleased that there is some recognition of quality – and thus maybe some pay for it.

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