Back in April, I was very skeptical that The New York Times would achieve its leaked goal of getting 300,000 paying digital subscribers, and I put my money where my mouth was, entering into a bet with John Gapper. John wouldn’t bet me that the NYT would get to 300,000 within a year, so we pushed it out to two years instead. But he needn’t have worried, as Seth Mnookin explains:

It will take years for the ultimate wisdom of the Times’ strategy to be apparent, but the company’s second-quarter-earnings report proves that its digital-subscription plan has thus far been an enormous success. The internal projections have been closely held, but several people have confirmed that the goal was to amass 300,000 online subscribers within a year of launch. On Thursday, the company announced that after just four months, 224,000 users were paying for access to the paper’s website. Combined with the 57,000 Kindle and Nook readers who were paying for subscriptions and the roughly 100,000 users whose digital access was sponsored by Ford’s Lincoln division, that meant the paper had monetized close to 400,000 online users. (Another 756,000 print subscribers have registered their accounts on the Times’ website.)

There seems little doubt that, barring something enormous and unexpected, I’m going to lose my bet; the only question is by how much. Total digital subscription revenues are still going to be a drop in the bucket—if the NYT gets 500,000 digital subscribers at say $200 a year each, that’s $100 million a year, which is a lot of money in absolute terms but still just a fraction of the more than $2 billion that The New York Times Company sees in total annual revenues. Digital advertising revenues alone are running at about $350 million a year. The subscription revenue is nice, but it’s not in and of itself going to allow the Sulzbergers to start paying themselves a dividend again.

Those paying digital subscribers, however, are much more valuable than their subscription streams alone would suggest. They’re hugely loyal, they read loads of stories, they’re well-heeled, and advertisers will pay a premium to reach them. Judging by the second-quarter results, which is admittedly early days, it seems as though total digital ad revenues are going up, not down, as subscriptions get introduced: the holy grail of paywalls.

Mnookin concludes:

As a profession, journalism of the kind the Times practices can be dangerous. And as a business, in a metaphorical sense, more so. You’re depending for your living on the seriousness and high purpose of a substantial segment of the American public. In that sense, the Sulzbergers have always been involved in a fool’s game. The current Sulzberger’s bets have at times seemed the most outlandish, as if he’s willfully refused to read the writing on the wall. But for the Sulzbergers, whatever their faults, even when the paper was making money, it has always been a calling rather than a business. Insisting that people would pay for their content when a consensus of media savants said that they would hemorrhage readership was the work of an eccentric family. Which the Sulzbergers are and always have been. And for now, cross your fingers, it seems to be working.

My fingers are crossed: I was very much a skeptic with regard to the paywall experiment, but I’m extremely happy that it’s working, I’m a big fan of the NYT, and I sincerely hope it has found a predictable and dependable new revenue stream in the volatile and treacherous media business.

I’m particularly glad that the NYT has proven that a very porous paywall can work—one in which just about anybody online can read just about any NYT article for free very easily. The media business has never been about denying access to people who want to read your publication, but the paywalls at News Corp., as well as the one at the FT, are based around that model. The NYT, by contrast, has proven that people will pay even if the paywall is extremely porous.

And in today’s fractured online media environment, the tougher your paywall, the more annoying it is. The NYT paywall is done pretty well, and I still find myself being asked for a username and password on a distressingly regular basis when I’m reading it on the iPad, often when articles come up in an app like Twitter or Flipboard, and I try to use the embedded sharing tools. More distressingly still, entering the password doesn’t always work.

Felix Salmon is an Audit contributor. He's also the finance blogger for Reuters; this post can also be found at Reuters.com.