Profit Not Attention

Milton Friedman said, “the business of business is business”. Assuming  every legal and ethical  i-s are dotted and t-s are crossed, a business’ goal is to make profit on the  investment. However this seem to be ignored increasingly in favor of gaining attention. The catchy phrase for this is “attention economics”. This is not different from the “eyeball economics” of the first Internet bubble.  The first bubble and its aftermath showed us one cannot take number of eyeballs to the bank.

Newspapers fell into this trap by making their online content available for free. The business justification was the Ad revenue generated from page views and non-business justification was, “to be part of the web conversation, to be linked and commented on”. After making the online versions free they rationalized their decision by looking at other newspapers that made their offering free and the big jump in the number of page views over the paid version.

But they failed to ask whether making the service free will deliver incremental profit over the current offering. They only looked at the new Ad revenue generated and ignored lost revenue from subscription, limits of Ad revenue growth and the effect of  a $0 price on their print media offering. For example, if WSJ were to make its online offering free its new Ad revenue must be more than $80 million. This number does not take into account lost revenue from loss in print subscription due to free online offering. Considering that most newspapers are suffering we can infer that the free model delivers net incremental loss and not profit.

The question is not whether or not a newspaper should be free or freemium or whatever fad name, rather the question is  what path they should take that will deliver the best return on their investment over the long term.