Q&A with Times' Martin Nisenholtz: The Monetization Cliff Notes

For the past week or so, The New York Times' featured executive for its online Q&A has been Martin Nisenholtz, long-time head of the Times' digital operations and currently senior vp/digital operations. As a public service to BNET Media readers (and to save you from sifting through endless queries from frustrated wannabe journalists and an occasional tendency on Martin's part to use this platform to teach Internet history), here is a short version of the interview, focusing on how the Times is going to make money off this Internet thingie:

Q. Have the newspapers considered getting together and forming a cooperative newspaper site (for example, newsline) where people would have to pay a monthly subscription fee (similar to cable)? A. The kind of cooperative you suggest is certainly a possibility, particularly as more and more publishers question the advertising-only model. I can easily imagine such a venture taking shape among many newspapers.

Q. Do you see online newspaper and magazine content becoming pay-per-view (or pay-per-month, etc.) in the future? A. Today, we continue to carefully analyze the question of how paid content (subscriptions, micro-payments, membership tiers) can augment our core advertising business. The trick, of course, is to garner incremental revenue from the user without significantly cannibalizing the high rate ad pages that now account for a very significant amount of money.

Q. ... for years, I have been a regular reader of NYTimes.com. I'm wondering if there is any way that you can leverage such customer loyalty into increased ad sales, and hence revenues. A. When we started the Web site in early 1996, we decided to ask our users to 'register' by providing demographic and other information (job type) so we could segment users for advertisers. ... Registration remains a part of our model even today and we regularly debate the kinds of data we should be collecting. The tradeoff, of course, is that the longer the questionnaire, the fewer people who respond. The trick is to collect the most essential information, while garnering the most registrants, all the while conforming to a strict privacy policy.

Q. I've heard quite a few relatively smart people say matter-of-factly that it's just a matter of time till physical newspapers disappear. ... I'm curious to know whether you think in the next two years we'll see top-tier DMAs (top 20, let's say) lose their only daily papers? A. ... not all newspapers are in the same situation. And I certainly believe that The Times is different. We have a loyal cadre of readers who would scream to the high heavens if we didn't provide them with the print version of the paper. Bless them.

I can't speak for other papers. There are many factors at work, including the depth and length of the recession. But I happen to be more optimistic than most that local journalism, in whatever form, will survive.

Q. Assuming an end some time to the current financial crisis, and assuming that The Times will probably be the last newspaper printing, what do you foresee as the financial mechanism whereby the digital, online, newspaper will maintain anything near the staff of the current national papers? A. I think we'll see a continued shift of brand advertising spending to online media -- including our Web sites. We are now experimenting heavily with digital readers, like Kindle ... We have terrific new products for mobile devices such as the iPhone. We are also looking very hard at extracting fees from the users of our products. We charge today for the Kindle and some other alternate devices.

... Our commitment to the highest quality journalism remains, and that's how we're approaching all of our planning.

Q. Why hasn't The Times been able to create a single blog as popular as the Drudge Report, Engadget, TechCrunch, Daily Kos or TMZ? A. We've taken the approach that NYTimes.com is the brand, not individual blogs.

... Having said this, several of our blogs are larger than the ones you cite. According to Nielsen, Daily Kos had a peak audience of 2.5 million users in September 2008. Our Caucus blog, according to Google Analytics, peaked at 5.6 million in October. In February 2009, Kos was down to about 1 million; Caucus had 2.6 million. The Engadget sample size is too small to be measured by Nielsen, so it is almost certainly smaller than our Bits blog, which had peak usage of 1.5 million users in September.

Having said that, sheer size matters, but audience characteristics matter as much (or more) to many advertisers. From a composition perspective, DealBook now has one of the best audiences on the Web, with a peak audience of 1.8 million users in September 2008. ... So I must take issue with your assumptions on the success of our blogs.

Q. How come I don't see ads on the NYTimes.com mobile version? A. We do expect mobile ads to grow over the next three years, even through the recession. And we expect to gain more than our share of that growth. So look for more mobile advertising over the coming months and years.

Q. ... if there is no viable fee-for-subscription model for on-line content, and the price of on-line advertising is much lower than cost of print advertising, how are great newspapers (and magazines) going to generate enough revenue to continue providing the vital news, reporting and editorial services they now provide in our democracy? A. The recession has slowed the robust growth we were achieving through the third quarter of last year, and it's caused deeper declines in print advertising. My view is that we need to be very careful to parse the short-term effects of a terrible economic downturn from the longer-term trends in the business. While some smart people will disagree with me, I remain very bullish regarding the long-term potential of large, high-quality sites like NYTimes.com. I believe they will extract huge value -- both rate and volume -- as brand advertising inevitably moves over from broadcast and cable television and magazines. That's why the Online Publishers Association recently announced better ad positions, with improved share-of-voice (reduced clutter) and the intention to integrate brand measures and better interactivity into the advertising. Twenty-seven of the highest quality publishing brands have now signed on to this initiative. Leadership is about innovation and grounded optimism. I believe strongly that we will emerge from this recession with great opportunity in the online advertising business.