Not So Free: Readers may not pay, but there's clearly a price for admission

Free or Pay? It has been a hot topic on the Internet from the beginning. But now, some 10 years after newspapers began arriving on the World Wide Web, I would suggest that it is an old discussion and that we must move beyond it. In our view, a business formula that fosters editorial leadership, can only be one that ensures profitability and steady growth.

One thing we all agree on is that our Web sites must not rely on a single source of income. We must seek a number of ways to find revenue to grow our Web operations, improve our news reports and extend our reach.

I look forward today to a broad discussion not merely about whether to charge subscribers but how editors can create a new medium for our journalism without relying solely on subscriptions. In no way is this a call for news Web sites cluttered with advertisements which blink, wink or speak. I reject all of those ads, believing that the best advertisers expect an elegant, innovative environment both for our journalism and their message. We at NYTimes.com have not completely attained this goal, but as the editor I believe that a strong editorial environment and a first class landscape for advertisers go hand in hand.

In this endeavor Internet publishers must lead the way. When advertising creativity is weak, we all suffer and readers turn away from our journalism. In a new medium, editors must share responsibility for raising all the standards on our site.

Adolph Ochs, the founder of the modern New York Times, said in the early part of the last century — and I'm paraphrasing — that you can tell as much about the quality of a newspaper from its advertising as from its editorial.

This is not to say that editorial takes a back seat to the advertising environment. Without top-notch editorial work, there simply is no advertising environment. Ads that are offensive, misleading or unethical say something profound about our journalism. As editors, we ignore this side of the business at great peril to our news reports and our newsroom staffs.

As much as I enjoy editing our Web site and planning coverage, I play a major role in determining the strategic direction of our Web site, our product development and our policy on advertising acceptability. Every editor, I believe, should take part in such discussions.

I also have objected to certain proposed ads and have convinced my business side counterparts that they are not in our best interests. I have won some of these questions and I have lost some. In leading the editorial elements of the redesign of our new movies section, I was very familiar with the business and redesign concepts but drew a bright line to separate the business and sales considerations from our film critics, arts and culture editors at the paper and producers at the Web site.

We move by consensus at The Times with all the appropriate representatives around the table each week — editorial, sales, finance, technology and, of course, our C.E.O. at New York Times Digital.

Our Web site does not cost anything to read but it is by no means free. Not by a long shot. We charge our advertisers dearly for the privilege of taking their message to our readers. These forms of advertising can range from half-page display ads to classified listings for apartments, automobiles and jobs.

They can be carefully targeted ads or e-mails to women only, or to men and women. Or, they can be messages aimed solely at readers of our business and technology pages.

Almost 75 percent of our revenue comes from advertisers but we are constantly looking for ways to grow alternative sources of income. Anything less would be risky and unwise.

This month we launched Times News Tracker, a personalized way to collect articles on topics you choose. We are charging a $19.95 annual subscription for that service. In the first month we had more than 17,000 paying customers.

We sell crossword puzzles in an electronic format for an annual subscription of $34.95. We find crossword fanatics will pay almost anything for a puzzle and our prices have risen aggressively.

We sell access to our archive of Times articles or commentary, which are a week old. This alone is about a $1 million source of revenue and we have learned that some things work better than others. Past articles are popular but a package of dessert recipes from The Times fell flat for us — like a bad soufflé.

Ads, of course, encroach on the presentation of our report to our readers. Readers may not pay to read the site but they certainly know that there is a price for entry.

The price for entry to our site in a sense is registration. We ask everyone who comes to our site for more than a page or two to register. In 1996, when we began, it was a risky strategy. Other registration attempts on the Web had failed.

But our chief executive, Martin Nisenholtz, convinced our top management that charging a subscription for The New York Times on the Web was a tempting source of income but ultimately a bad idea.

On a medium as new as the Internet, he argued that there was little loyalty among readers. If a subscription roadblock popped up while readers were trying to read NYTimes.com, he was pretty certain that readers would simply click to another site where no such obstacle existed.

The result would be a very small base of readers. Loyal readers, yes, willing to pay for the privilege, but ultimately too small a base to generate the revenues and profits demanded by the marketplace and shareholders at a public company like ours.

Our bet back then was that the greatest number of readers could eventually create a lucrative, national advertising medium as well as a medium for news.

As editors that must be our goal. Our journalism is limited if our reach is limited. Our ability to produce a news site of the highest quality depends on the revenue and resources we need to attract talented producers, designers and editors who can use the Internet to produce a special kind of news report.

Today, we have 11 million registered users who have come to NYTimes.com at least once in the last year. More than 2 million of those registered users are outside the United States. Many of the major newspaper sites in the United States have since jumped on the registration bandwagon including the Los Angeles times and the Chicago Tribune.

It seems like such a fundamental idea today but it was a difficult decision for many of our newspaper executives. With registration, we have an abundance of information about our readers which our sales force uses when it calls on advertisers. We have age and income information. We also have the most vital link of all — e-mail addresses.

With that information, we have built 15 e-mail products that target parts of our audience. We have a Ticketwatch e-mail for the theatre that allows Broadway productions to sell discounted tickets.

We have DealBook, a daily e-mail that targets business executives and investment bankers who want to know about multinational business activity, especially mergers and acquisitions

We have DriveTimes, a weekly e-mail about cars promoting our redesigned automobiles coverage. This e-mail is new but it has been our fastest growing newsletter. It showcases automotive journalism in The Times and around the world. It also is a not-so-subtle way to create page views in a section of our site which had too few of them to attract major advertisers.

We even have e-mails about shopping and travel, which allow retailers to target bargains to readers who have told us they would like to know about them.

We have e-mails about personal finance. We even have an e-mail about advertising written by our advertising columnist at The Times.

In short, registration allows us to identify our audience, create communities of interest and market to them both advertisements and our journalism.

Allow me to focus on the DriveTimes e-mail because it highlights how we set different editorial and advertising goals for an important part of our site.

Automotive advertising is a major source of revenue on the Web. There are major Web sites like eBay Motors in the United States that earn substantial profits. Early on, automotive buying services popped up with information about prices and dealers and some of them have done very well.

But we wanted to offer independent reviews of cars and trucks — not buying services with fawning product reviews.

To complement our own car review archive we formed a partnership with Edmunds.com, a prominent American automotive information resource. The combination of Times car reviews and Edmunds reviews and data we hoped would create a strong offering to readers, whether they were automotive enthusiasts or readers shopping for a new vehicle.

We also believed that this richer section could be an attractive landscape for advertisers whether they were car manufacturers, dealers or people who merely wanted to sell their used cars.

But the editorial range of our site was limited and we knew we needed a greater number of page views to make it attractive to advertisers. Of course, with increased views we would generate increased advertising inventory.

So we created the DriveTimes e-mail featuring automotive coverage not just in The Times but also other sites around the Web. We wanted to create a single source for news about cars.

We asked the automobiles editor of The Times to assign a different auto writer to write an introduction to the newsletter each week.

This newsletter also resides on the automotive section of our site all week. By being both a newsletter and an article on the Web site, we hoped to attain the largest possible number of readers.

It is still early — DriveTimes launched in mid-April — but we think DriveTimes, is a hit both with readers and with advertisers.

Besides electronic newsletters, we target readers in a number of other ways. One of our advertising innovations was what we call a surround session, which began last year. We can literally surround a reader's visit to the site by tailoring an advertising campaign to readers who come to the business section, and then maybe read an article, then move on to the international section front, read an article or two before leaving our site.

A surround session can begin on the homepage, an articles page or a section front. It gives the advertiser major display ads on every page a reader views allowing an advertiser to become the single marketing message during a reader's visit.

We also have used our technology to pinpoint patterns of reader activity.

For example, if someone came to our Fashion section last month for at least five page views, we would record that bit of data and whenever they returned to the site — in any section — an apparel advertiser or a retailer like Neiman-Marcus or Tiffany might position an advertising campaign.

In other words, a reader of the Fashion & Style section might come back to look at the Science & Health section and encounter an ad for Tiffany, an advertiser who might not purchase an ad in the Health section but would otherwise want to reach this fashion-conscious reader.

We called this "Wide Angle Targeting."

This spring we launched a half-page ad format that offers advertisers a substantially larger canvass on which to work. We want to move away from banner and button-sized ads to create an attractive and engaging environment for the reader and the advertiser.

As the editor, I very much wanted to eliminate large advertisements that we had placed in the middle of the text of an article. These were popular with advertisers but not popular with readers or staffers in our newsroom at the Web or at the newspaper.

Our solution was a half-page ad similar to what newspaper readers have known. It is very large but we believe it allows us to present the article without any interruption from an advertiser. It also opens up the possibility that advertisers will create a more attractive ad.

This is a brief tour of our editorial and advertising approach. I said at the beginning that each of us has found our own way for generating revenue from the Internet. I titled my presentation today "There Is No Such Thing As a Free Web Site," because while we do not charge a subscription we have found other ways to generate income from our readers.

We certainly do not have all the answers. Compared to the 300-year-old newspaper industry, we have been working with the Internet a very short time. Myself, I have been at this for only a year. I have learned a lot and I have a lot more to learn.

Not yet anyway. But world events of the past 18 months have shown us that people are receiving their news in different ways. Newspapers have been around for an awfully long time and they will be here for a long time still.

The Internet did not die after its boom, it is not an inherently unprofitable medium nor is it unworkable for newspapers. At The Times, our online business has had operating profits for seven consecutive quarters.

The Web presents one of the biggest editorial and advertising challenges we are likely to face in our careers. We can lead by trying to build the news Web site that is elegant in its simplicity, striking in its use of photos, sound and graphics, and authoritative in its journalism.

We must find ways to use the medium to showcase our journalism in ways the paper cannot.

I know this verges on more bubble talk and harkens back to the heady — or headless — days of the Internet bubble four years ago. The difference today is that we have our feet on the ground and we are making real progress in measurable ways.

One of the nicest compliments I heard during the Iraq war was that our site was fresh, appealing, competitive and, "better edited," than the newspaper.

What they meant, I think, was that it was easier to find information. It was helpful to read about a complicated war in layers of coverage. First a summary, than an overview, followed by more detailed articles or sidebars. Or possibly a few minutes of our Times War Briefing, a classy, daily multimedia wrap-up of developments with audio, photos and maps.

It was heartening to hear those compliments because it tells me we are making progress. I am confident that together we can find that new journalistic presentation.