The New York Times ran a story over the weekend called “Zagat Survey Aims to Regain Its Online Balance,” about how the iconic maroon-colored print brand has yet to successfully gain traction online.
The crux of the Times article is an implicit criticism of Zagat for putting its restaurant reviews behind a paywall—on Zagat.com, only restaurant listings and a food-news blog are available for free viewing. Obviously, the paywall cuts down on clicks, and puts Zagat well behind its free competitors in traffic numbers. Yelp, for instance, which itself borrows the collated-survey (“crowdsourced”) review format that Zagat first developed decades ago, will win that game every time:
While online traffic comparisons are never exact, Zagat.com had 570,000 unique domestic Web visitors in September, according to the Nielsen Company, versus 9.4 million for Yelp. The Zagats say they actually have more than 1.2 million unique users worldwide.
But wait:
None of this means Zagat is in any immediate financial danger. While the Zagats refused to provide much specific financial information for this article, they did say their company is still profitable.
They are also quick to point out that it’s not at all clear that Yelp’s strategy of having dozens of salespeople selling local ads is superior to their approach of asking Web and mobile users to pay for listings.
Still profitable, behind a paywall? A strategy superior to local ads? Good heavens. What is Zagat, anyway, The Wall Street Journal for foodies? Actually, yes. While Yelp is a free-for-all, Zagat is a curated experience. Snobby? Sure. But some people are clearly still willing to pay for the informative and pithy one-liners and standardized rating system that Zagat provides, rather than having to scroll through thousands of customer reviews of varying quality and reliability that Yelp offers.
The Times piece quotes an analyst who disapproves of Zagat’s refusal to make their content available for free:
But while the company maintained its margins on the paper books, it was missing the opportunity to snare new customers who were trawling Google for information on specific restaurants.
“There is a huge degradation of your brand if you are not showing up on that first page of search results,” says Greg Sterling, an independent analyst who specializes in local content and advertising. “If you’re not there, you have to have a powerful, multifaceted alternative strategy, with public relations, advertising, a reality show or something.”
Or “something.” Like, have a brand that has immediate recognition and cachet in the real world, and have a business model that emphasizes people paying you money for things, rather than gaming search results and attempting to turn that recognition into profitability? Mr. Sterling goes on, later:
“Yelp is a local advertising vehicle for lots of small businesses, and there are billions of dollars out there, a big pie waiting to be fully eaten,” says Mr. Sterling, the analyst. “Zagat feels more tied to the past, so there isn’t the same perception of momentum or revenue opportunities.”
Emphasis on “waiting to be fully eaten.” Of course Yelp is going to get more CPMs, because of the nature of its format, and the fact that it’s made SEO a big priority. But surely the advertisements behind Zagat’s $24.95 a year paywall are much more valuable? That’s a big pie that is already being eaten.
How profitable is Yelp now, anyway? The Times piece does not say. It does note that “Google reportedly wanted to pay at least $500 million to acquire Yelp” in 2009, while another proposed sale of Zagat involved a figure somewhere under $200 million. (But there’s no confirmation of those figures, and neither sale went through.)
Point being, even if Yelp’s business model does happen to work for Yelp, that doesn’t mean that Zagat’s business model is bunk. The companies offer different products and have very different corporate histories. But as we often see in discussions of online brands, there is an awful lot of weight put on Yelp’s potential revenue here, while Zagat’s actual, current profitability is dismissed.
I'm not sure that I understand this comment. Zagat was not able to find a buyer a couple of years ago, is losing ground on competitors online, and is certainly not growing on the print side. And the group has historically been plagued by personnel turnover at all levels, as mentioned by the NYT, The printed guides still sell well, but for how long? Will Zagat eventually catch up with competitors online or is it too late? The viability of the print product only is questioned at this point even by the Zagat themselves...
Frankly I found the NYT even too cautious on its assessment....
The originality of the Zagat guides and their success, huge as it has been, is no guarantee for the future..
#1 Posted by tony perkins, CJR on Tue 16 Nov 2010 at 03:42 PM
"Fine, but why would all the book revenue “go away,” when those books are consistently on best-seller lists?"
Well, gosh, that is a puzzler. Why might anyone think that reference works on paper might not have such a bright future?
Oh, wait, I forgot. THE INTERNET.
The point of the Times article is that Zagat's is doubling down on a wasting asset. You may think that this is not a bad strategy, compared to chasing Yelp after it got its head start, or you may think that Zagat's will be able to go the Cook's Illustrated route of small circ for-fee content, growing online as print shrinks. Those would have been interesting counter-arguments.
However, even if you believe those things, merely dismissing the Times article without addressing its key point about revenue -- all sorts of print reference works, from the Yellow Pages to Encyclopedia Britannica, have seen their sales collapse -- either suggests that you haven't understood the core of their analysis, or that you dislike their conclusion enough to ignore it. Either way, however, your mis-reading of the argument does both you and the Times a disservice.
#2 Posted by Clay Shirky, CJR on Tue 16 Nov 2010 at 03:43 PM
Hi Tony and Clay,
Good point, Tony, about the personnel problems. I agree that we don't know what will happen in the future.
But, Clay, I work here, but how is Zagat's "doubling down" on print? Do we know this? Not from the Times story. Isn't more that they're just muddling along in print and haven't put their stuff online for free? You could just as well argue that they're holding on while they wait for something more profitable to develop online, like, the App, which they seem to be developing with some dispatch. When you think about how mobility is important to that particular publication, it might just work out, even if was by default.
And Lauren didn't ignore the Times's point about revenue. The fact is we don't know which way revenue is trending. The Times implies it has gone down but doesn't say so. It says revenue was $40 million in '08, 75% from books. At the end of the story, it says the company currently "gets just 30% of its revenue from books." What's changed in the last two years? We don't know. As for Yelp's revenue, that's even more of a mystery.
Sure, if, and even when, book revenue goes away, then, yes, something would need to happen. But the point is, it's 2010, and the book is still on best-seller lists. That's cash money. What would you have Zagat do right now?
Also, is Lauren's piece really a "disservice"? You disagree with her take. Why not leave it at that?
#3 Posted by Dean Starkman, CJR on Tue 16 Nov 2010 at 05:50 PM
Dear Lauren and Dean Starkman,
I am curious if there might be a bias on the part of traditional journalists to secretly, maybe even unconsciously, be rooting for paywalls to succeed.
This might be an interesting topic for an article in the CJR.
Thanks.
#4 Posted by Cynthia Typaldos, CJR on Wed 17 Nov 2010 at 10:30 PM
Hi Cynthia,
I would like professional journalists to be paid. Whatever the model, it has to preserve editorial independence, and it has to work. That's my bias. The secret is out.
#5 Posted by Dean Starkman, CJR on Thu 18 Nov 2010 at 09:48 AM
Hi Dean Starkman,
Right, but my question is does the desire for journalists to want to be paid interfere with a realistic analysis of online news business models, and perhaps a leaning toward positive reporting about paywalls?
Obviously if paywalls worked well, and every site could have an effective paywall that monetized 50% of online traffic then journalists would get paid. But wishing this were true doesn't make it true. Just in the last few weeks there has been a lot of chatter about paywalls, e.g. The London and Sunday Times, perhaps not being successful.
And perhaps this yearning for paywalls to be successful is keeping some journalists and most news industry management from experimenting with other business models.
I'm sure you follow this subject closely, but if not try a Twitter search on paywall. Nearly all of the tweets are negative about paywalls. Now of course it could be that people that love paywalls aren't on Twitter, or don't tweet about paywalls, or whatever. And these people tweeting are generally not journalists.
Anyway, just a suggestion for a topic of an article.
#6 Posted by Cynthia Typaldos, CJR on Thu 18 Nov 2010 at 10:07 AM
Thanks for all the thoughtful comments, guys. I don't think that there's a one-size-fits-all business model for content, I really don't. I try not to be biased for or against any one model; everyone's experimenting now to see what shakes out, so let's take it all on a case-by-case basis. There are so many factors at play: audience, competition, timing, marketing, staff/resources, etc. Paywalls might work, but only for brands that are niche (or long-established) enough that people will be willing to pay for content they don't think they can get anywhere else. Newer, less-established brands will most likely have to offer enough content for free to get the traffic that (might) later lead to advertising.
Zagat, for one, seems to be able to hold on to print sales, and also be making money through their paywall-ed site. To take a look at this one example is not to say that "books are the future, and paywalls are always the answer." Nothing is that simple. Likewise, I don't think that "The Internet is the answer" ends the discussion, either. I just thought it was a little biased of the NYT writer to assume that, because they're not putting *all* of their resources into their website, or because they're not offering *all* of their content for free online, that they're somehow these old dinosaurs who don't understand the Internet. If their current strategy is working for them (again, the caveat that Dean noted, is that we don't really have enough raw #s to know whether it's working for them), more power to them.
#7 Posted by Lauren Kirchner, CJR on Thu 18 Nov 2010 at 10:29 AM
Salient points, all.
Though, I just wanted to point out, that I don't think twitter is necessarily the best resource for properly gauging how people truly feel about pay-walls, as Cynthia suggests.
First, and foremost, I would say it is safe to assume that there are more consumers of news, than those making news, so of course people aren't going to be immediately fond of pay-walls.
Secondly, while twitter is useful in many, many ways, it is also often a repository for complaints. I think you could do a twitter search on just about any topic and find a heap of negativity. People tend to like saying things like "Boo, gmail is down," or "Why won't Facebook let me upload a video, grr," more so than "Damn! Pay-walls are amazing. #thefutureofmediaisNOW."
Overall, I'll have to side with CJR on this one -- as much as we'd like to think it, capitalism isn't necessarily a democracy, so just because we want everything to be free, doesn't mean it should be.
Zagat may find themselves reeling in a few years, but for now, what's working for them is, you know, working. Just like Lauren said in her above comment, saying something like "books are the future, pay-walls are always the answer," or "the internet is the answer," is futile and a conversation ender. It lacks any sort of analysis or critical thought. Or, basic understanding.
That's where it stops being a discussion and charges, full steam ahead into an argument, when it never needed to be.
#8 Posted by Jeff, CJR on Thu 18 Nov 2010 at 12:43 PM
Dean,
I don't have much advice for Zagat's "right now", because I think will be painfully restructured in the same way and for the same reason Britannica will be -- they don't have a model that fits the current age well.
That disagreement with Kirchner, however, is not why I said the piece was a disservice. That reaction was prompted by her use of a rhetorical question to avoid addressing the core question of the Times' piece -- why does the Times think that print revenue is going away, and why does she think it isn't? Being rhetorically flip about bestseller lists doesn't address that question at all.
It may be that she has powerful reasons for thinking, unlike you, that when print revenue at Zagats collapses it won't be a big deal, either because she thinks print won't go away or because paid online content will replace it. If she has those reasons, however, she might have shared them with us, instead of dismissing the argument out of hand by asking us to assume, in the face of more than a decade's evidence to the contrary, that strong print sales are likely to persist.
#9 Posted by Clay Shirky, CJR on Thu 18 Nov 2010 at 06:11 PM
Good points in the original article about how Zagat has a proven model and Yelp's finances are a joke. The two things Zagat needs to watch out for: are they getting enough online users providing reviews and are they giving enough data away for free online, say 30% like the WSJ, to allow new users to sample their site. I have looked for reviews online and I have never come across Zagat reviews on Google Maps, that could be a problem for them if they don't at least use the internet as a way to funnel new users towards paying.
As for book monetization, that's actually a great point by Lauren as books are where it's at. :) This is why every blogger, podcaster, and comedian is currently writing a book: there's no business model online so they resort to print to actually make money. It's all a sick joke based on the fact that the techies are too dumb to deploy micropayments, but it'll happen eventually and when it does, the book will die.
#10 Posted by Ajay, CJR on Thu 18 Nov 2010 at 09:34 PM
Thanks for a good discussion, everyone.
Clay, I think we're reading both the Times and Lauren differently. I don't see the revenue question as being central to the Times piece at all. Its main focus was traffic, which is the problem Lauren (who can speak quite well for herself, and just did a couple of comments up) was zeroing in on. It really only tackled the revenue question, strictly speaking, at the end, and with a hypothetical: If "all" print revenue disappears, then the company would need to sell a "couple of million" $24.95 website subscriptions or $9.95 apps with updates. I'm not sure how much deference that treatment deserves, especially since we don't know what the Times is using for a revenue figure. To me, Lauren's questions were commonsensical.
To me, it's the Times that elides the revenue question, particularly when it comes to Yelp. I don't think at this point it's enough to put traffic figures at the center of your story without some discussion of how traffic translates to dollars.
Cynthia, I agree that paywalls aren't well-loved, and, as a reader, I can't say I love them either.
And Jeff, I agree with you, too, that this is mostly a pragmatic question, how to keep (make?) journalism good and readily available. No one, I think, is arguing for an all-in print strategy.
#11 Posted by Dean Starkman, CJR on Fri 19 Nov 2010 at 02:50 PM