Felix Salmon

The NYT’s declared war on the Huffington Post shows no sign of dissipating, and as ever the new-look NYT Magazine is at the front lines of the attack. Andrew Goldman’s interview with Arianna Huffington is quite astonishing, but first it’s worth looking at other news of the week.

On Monday evening, HuffPo’s Shahien Nasiripour got his hands on a photocopied internal document from within the Consumer Financial Protection Bureau. Marked “confidential for AG Miller”, it shows that the CFPB is deeply involved in putting together the AGs’ settlement with mortgage servicers. Nasiripour wrote:

Perhaps most important to some lawmakers in Washington, the mere existence of the report suggests a much deeper link between the Bureau of Consumer Financial Protection, led by Harvard professor Elizabeth Warren, and the 50 state attorneys general who are leading the nationwide probe into the five firms’ improper foreclosure practices, a development sure to anger Republicans in Congress and a banking industry intent on diminishing the fledgling CFPB’s legitimacy by questioning its authority to act before it’s officially launched in July.

Earlier this month, Warren told the House Financial Services Committee, under intense questioning, that her agency has provided limited assistance to the various state and federal agencies involved in the industry probes. At one point, she was asked whether she made any recommendations regarding proposed penalties. She replied that her agency has only provided “advice.”

The Republicans in Congress reacted exactly as Nasiripour said they would. Spencer Bachus immediately posted Nasiripour’s document on his website (the exact same photocopy, not any other version), and came out fighting:

Financial Services Committee Chairman Spencer Bachus and Financial Institutions and Consumer Credit Subcommittee Chairman Shelley Moore Capito are asking Elizabeth Warren, the Obama Administration official charged with setting up the Consumer Financial Protection Bureau, if she wants to clarify or correct her recent testimony regarding the Bureau’s role in the ongoing mortgage servicing settlement negotiations. Recent reports indicate that the CFPB’s role in these negotiations has been more extensive than Professor Warren suggested during her testimony before the Subcommittee earlier this month.

The Huffington Post’s document caused so much of a stir in Washington that even the NYT felt compelled to report on the developments:

Last week, Ms. Warren told the committee that she provided “advice” to the Treasury secretary and others about a possible settlement but was not involved in the negotiations. State attorneys general and federal officials are discussing a settlement with mortgage service companies in response to questionable foreclosure practices.

On Wednesday afternoon, Mr. Bachus released a seven-page document titled “Perspectives on Settlement Alternatives in Mortgage Servicing,” which, in a letter to Ms. Warren, he said demonstrated that she had a larger role than she had indicated to the committee.

Nowhere in the NYT story, which was written by Edward Wyatt, was there any indication that the document had been ferreted out by an assiduous reporter at the Huffington Post. And of course his link to the document was to house.gov rather than anything with HuffPo branding. In hindsight, Nasiripour would probably have been smart to put some kind of HuffPo watermark on the front page of the document, because both Wyatt and Bachus (with his vague reference to “recent reports”) seemed determined to ensure that Nasiripour got no credit for finding it at all.

And so to Goldman’s interview, which includes this jaw-dropping exchange:

I think that hiring a slew of traditional journalists seems counter to the model that made buying you appealing to AOL.

We already had 148 journalists on payroll at The Huffington Post. I don’t know how you can say that.

I look at your writers much less than I find myself clicking on stuff that’s been aggregated or the more salacious, boob-related posts.

Nasiripour’s scoop was hugely popular on the HuffPo site: wonky news and grainy photocopies can still generate 1,173 Facebook shares, 1,627 comments, and 2,760 Facebook likes. Total pageviews were surely much higher than on the NYT piece in which Wyatt aggregated Nasiripour’s information without crediting him. But Andrew Goldman doesn’t seem to be drawn to that stuff: instead he “finds himself” clicking on boobs. Which surely says more about Andrew Goldman than it does about the Huffington Post.

What’s certain is that Goldman is taking his cues from his boss. Here’s Keller:

The queen of aggregation is, of course, Arianna Huffington, who has discovered that if you take celebrity gossip, adorable kitten videos, posts from unpaid bloggers and news reports from other publications, array them on your Web site and add a left-wing soundtrack, millions of people will come.

Goldman, before he starts talking about aggregation and boobs, asks the same question — “aren’t you left-wing” — four different times before finally letting it drop. Which of course was the whole subject of Keller’s second attack on Huffington.

The big picture here is that the NYT is obviously feeling very threatened by the Huffington Post, and is reacting by lashing out blindly in a fit of name-calling, rather than actually trying to learn from what the HuffPo does well.

So long as the NYT continues to consider the Huffington Post to be boobs and kittens set to a left-wing soundtrack, Huffington has nothing to fear. If the NYT instead treated HuffPo with respect, and linked to it when it deserved such credit, the NYT’s staffers might begin to learn a bit more about what HuffPo is doing right. And that has to be more valuable, over the long term, than criticizing it for what they think it’s doing wrong.

Update: Auros notes in the comments that the leak is not, actually, particularly damaging to Warren, calling it “a total non-event”. Which again redounds to HuffPo’s favor. The NYT covered the leak only in the context of political horse-race news — as a stick which one party was using to bash the other party. HuffPo, on the other hand, concentrated on the substance of the report. The headline was “Big Banks Save Billions As Homeowners Suffer, Internal Federal Report By CFPB Finds”; the stuff about angering Republicans came reasonably far down in the 1,300-word story.

Staci Kramer is absolutely right that the NYT has a tough battle ahead with the public perception of its paywall, which is going live today.

The public simply is not going to understand how the paywall works; I’m sure about this because over the past week I’ve come across a number of different NYT staffers — all of whom are involved in the NYT’s blogs, and therefore would you think be pretty attuned to such things — who don’t understand the paywall and believe untrue things about it. If the NYT can’t explain the paywall to its own staff, there’s no way it’s going to be able to explain it to its readers.

Part of the problem is that this paywall is not exactly the same as the paywall which was announced in January 2010. Back then, for instance, we were told this, in a Q&A with CEO Janet Robinson and digital chief Martin Nisenholtz:

If you are coming to NYTimes.com from another Web site and it brings you to our site to view an article, you will have access to that article and it will not count toward your allotment of free ones.

That’s no longer true, as the official FAQ explains:

We encourage links from Facebook, Twitter, search engines, blogs and social media. When you visit NYTimes.com through a link from one of these channels, that article (or video, slide show, etc.) will count toward your monthly limit of 20 free articles, but you will still be able to view it even if you’ve already read your 20 free articles.

If you spend over a year developing a paywall, then some of your original ideas are likely to evolve and change. But the new system, which I liken to the foul-ball rule in baseball, is certainly harder to understand than the original vision. “Twitter links don’t count” is easy; “Twitter links do count, but you’ll be able to follow them anyway” is much harder. (Twitter links, and links from blogs and Facebook and even the NYT email, all work like foul balls in baseball: if you’re below the strike-out limit, then they count towards your strikes. But you can’t strike out on one and end up hitting the wall.)

There’s confusion about the blogs, too: they are basically behind the paywall, although they do show a bit of leg outside it: the “blog fronts”, like this one, are free and do not count towards your monthly quota. But the minute you click on a “read more” link or otherwise find yourself at a blog entry, like this one, your quota gets increased by one.

This is all pretty confusing, especially to people who have better things to do than spend a lot of time worrying about the mechanics of the NYT paywall. Can you read that blog post? If you’re following my link, then yes, you can always read it. If you’re trying to get there by clicking on the “read more” link at nytimes.com, on the other hand, then at that point you may or may not be able to read it, depending on whether you’re a subscriber, and how many other paywalled items you’ve read that month.

There’s no doubt that this will change blogging at the NYT. Freakonomics has already left the building and is enjoying its new-found freedom by publishing short posts like this one. There’s all manner of reasons why that post wouldn’t ever make it onto nytimes.com, but one of the more invidious is that there’s now a good reason for blog posts to be long. Here’s the end of that post by Nate Silver:

I will work to ensure that any clicks you make to a FiveThirtyEight article will be “worth it.” I’ve always had a pretty high word count, but in recent months, I’ve been gravitating toward even longer and more substantive posts, as opposed to shorter but more frequent ones.

It goes against Blogging 101 principles, but I’ve had a lot of success in life in betting against the conventional wisdom.

This is not a welcome move, from the point of view of the vibrancy of the NYT’s blogs as a whole. My posts tend to the verbose too (although the NYT probably has the world champion in that department), but the fact is that mixing things up and having short posts along with the longer ones is always good form in blogging. The unit of quality for a blog is the blog itself, a living thing, rather than any individual blog entry or even series of entries. But when the NYT’s blogs get put behind a paywall, that changes: suddenly there’s pressure to make each individual post “worth it”. As a result, the blog becomes less bloggy and more like an irregularly-updated online column. This is unlikely to be an improvement.

It’s entirely possible that individuals like Nate — or even myself — can be successful with a combination of long-form blogging and short-form tweeting. But even long-form blogs are likely to be updated more than 20 times a month, which means that any regular reader of Nate’s posts, if they’re not a NYT subscriber, is essentially denying themselves the ability to navigate any of the NYT site at all. (Remember that even if you get to Nate’s posts via his Twitter feed, you’re still eating up your monthly quota of NYT articles every time you read one.) And more generally, it’s not a good idea for the NYT to put in place incentives to blog long rather than short. In fact, it rather undermines the purpose of having blogs in the first place.

Meanwhile, the NYT’s publisher, Arthur Sulzberger, is going out of his way to insult the people who want to read his website so much that they’re willing to put in place elaborate workarounds to do so.

“Can people go around the system?” Sulzberger, the Times’s publisher, asked at a roundtable discussion hosted by the Paley Center for Media this morning. “The answer is yes, just as if you run down Sixth Avenue right now and you pass a newsstand and you grab a newspaper and keep running, you can read the Times for free.”

“Is it going to be done by the kind of people who value the quality of the New York Times reporting and opinion and analysis? No,” he continued. “I don’t think so. It’ll be mostly high-school kids and people who are out of work.”

Sulzberger should be flattered by these people; instead, he’s likening them to common criminals who steal newspapers on Sixth Avenue. In doing so, he’s taking a leaf out of the music industry’s attitude to people who look for free content online: criminalize them, and set yourself up in an adversarial relationship to them. It didn’t work for the music industry, and it’s an equally bad idea for the NYT.

As the first US readers start hitting the NYT paywall this week, it will be met by varying degrees of confusion and anger. The NYT should be trying its hardest to minimize the ill will it’s likely to generate as people get blocked from reading stories they’re used to getting for free. The @NYTdigitalsubs Twitter account is a start, but it’s clearly not enough.

Meanwhile, here’s a question I’m not sure I want to see answered: if you get a Sunday-only subscription and then suspend delivery of the physical newspaper while you “go on vacation” for a month or two at a time, how long can you drag out your free access to the website before the NYT gets wise to what you’re doing?

Bill Keller has now written two three columns for Hugo Lindgren’s NYT Magazine, and both of them the last two have taken aim at the Huffington Post.

The first one didn’t go so well: not only did it have an opening paragraph of astonishing braggadocio, but it also elicited a blistering response from Arianna which made him look decidedly petty. He then replied to Arianna on the magazine’s blog — except he violated the first rule of blogging, and failed to link to the argument he was engaging. So when he talked about “the reaction” to his column, or “clueless commentary”, the lack of any link was a CYA move, giving him the opportunity to say “oh no, I didn’t mean you“.

Keller did however say a couple of nice things about Arianna:

I think she’s a shrewd entrepreneur and a charming woman. Also, we seem to share a belief in hiring professional journalists; she’s hired some good ones from The Times.

This, too, was presented without a hyperlink. But it was clearly a reference to the way in which Arianna poached first Peter Goodman and then Tim O’Brien to help beef up HuffPo’s news coverage. Both were NYT stars, and Keller was quite right to call them good journalists.

Which brings me to Keller’s second column, where we he tries to talk about “the essentials that set us apart from agenda-driven journalists of the right and the left”, and explains that NYT journalists “are expected to set aside their own politics in the performance of their duties”:

This does not mean — as one writer recently scoffed — that we “poll people at both extremes of any issue, then paint a line down the middle and point to it as reality.” It does not mean according equal weight to every point of view, no matter how far-fetched. (Sorry, birthers, but President Obama is an American citizen.) Impartiality is, for us, not just a matter of pretending to be neutral; it is a healthful, intellectual discipline. Once you proclaim an opinion, you may feel an urge to defend it, and that creates a temptation to overlook inconvenient facts when you should be searching them out.

Wow, who is this dreadful scoffer — this person who just pretends to be neutral — who dares to imply that the NYT gives credence to birthers? Again, Keller provides no link. But he does provide a direct quote, which makes it very easy to identify his unnamed critic as none other than… Peter Goodman, who was talking in general, and not about the NYT in particular, in a 2,000-word HuffPo essay titled “Beyond Left And Right: It’s About Reality”.

Keller’s failure to link to or otherwise identify Goodman is simple intellectual dishonesty — it’s a way of giving the truth but not the whole truth, a way of hiding his agenda and making the meaning of his column opaque to most readers while still transparent to the insidery few. (Chris Anderson has a less polite way of putting it.)

And that’s not the only piece of intellectual dishonesty in the passage. If he were being honest, Keller would admit that some of the NYT’s most highly-paid journalists run directly into the issue he’s talking about — that “once you proclaim an opinion, you may feel an urge to defend it, and that creates a temptation to overlook inconvenient facts when you should be searching them out”. This happens with sports columnists (yawn); it also, however, happens on the business pages, where Andrew Ross Sorkin and Gretchen Morgenson are both charged with pulling off the double act of being reporters and columnists at the same time.

On top of that, dozens more NYT reporters proclaim their opinions in other venues — in radio interviews, in books, in their Twitter feeds. It’s hard to see why those proclaimed opinions should have any less of a deleterious effect on the reporting of facts.

In his urge to place himself in opposition to everything that HuffPo stands for, it seems, Bill Keller has dug himself into a nasty hole. The NYT is urging its reporters onto Twitter, has set up its own imprint to publish their books, and is even publishing magazine editors’ email addresses along with those of the writers. (Although for some reason that rule doesn’t apply to Keller’s column.) The NYT needs to make its mind up: is it going to stand up for openness and transparency and human reporters who dare to have opinions, or is its beef with HuffPo going to force a retreat to some unobtainable halcyon past where reporters handed down the news from Mount Olympus to a grateful public which had no means to effectively respond? Keller might talk the talk when it comes to social openness and transparency. But his heart clearly isn’t in it.

There’s one aspect of the NYT paywall which hasn’t got as much attention as it deserves — and that’s the idea that the NYT will be able to charge higher CPMs for ads behind the paywall than it currently gets for ads on a free site. Gordon Crovitz, the former publisher of the WSJ who now has a paywall product of his own, points out that if people pay for a subscription, that’s an excellent indicator of the “engagement” that advertisers and agencies are looking for. As a result, he says, publishers can charge a CPM premium of about 30% for behind-the-paywall pageviews.

Of course, it’s hard to know whether the NYT can get that kind of premium. At the NYT, after all, most behind-the-paywall pageviews will come from people who aren’t paying for a digital subscription: either they’re print subscribers who get access to the website thrown in for free, or else they’re online-only readers who have taken advantage of the Lincoln offer. Do people who get free access behind the paywall count as “engaged” from an advertiser’s perspective? I’m sure the NYT sales team will do its best to persuade media buyers that they are.

What’s more, if those people are told clearly that they’re getting something worth hundreds of dollars for free, then they might end up using it more. So even if CPMs behind the paywall don’t go up a lot, it’s reasonable to assume that readers with a get-past-the-paywall pass will end up reading more NYT stories than they have done up till now.

Against that, of course, is a certain drop-off in traffic from readers who don’t want to pay for access, who haven’t taken advantage of the Lincoln offer for whatever reason, and who have no desire to engage in clever tricks any time they want to read a NYT story.

It’s all a lot of swings and roundabouts, but think about it this way: let’s say that 2 million web denizens have access behind the paywall, by the time that the NYT is done with its introductory offers, multiple accounts for home-delivery family members, and the like. I’m running about 150 articles a month, but I’m a heavy user; let’s assume that on average those 2 million people read 75 articles per month. That’s 150 million articles per month, and with some articles containing multiple pages, let’s call it 200 million pageviews per month, or 2.5 billion pageviews per year.

How much extra money could the NYT get from those 2.5 billion behind-the-paywall pageviews? If it manages to raise its revenue per thousand pages (RPM) by $10 for pages behind the paywall, then we’re talking about an extra $25 million in ad revenue — which compares to total digital ad revenues running north of $300 million per year.

It’s a big if, of course — the digital account for the family 9-year-old is a nice perk to keep the print subscription coming, but it’s not going to attract a lot of advertisers. But if the NYT can make the sale, then that $25 million could go a long way to helping to make up for any reduction in total pageviews which comes from introducing the paywall. At that point, the subscription revenues don’t need to offset a decline in ad revenues: they just need to pay for the cost of building the paywall in the first place, help to diversify the NYT’s income streams, and encourage readers to buy the NYT in its highly-profitable print form.

The point here is that the paywall is responsible for multiple revenue streams, not just its own narrow subscription revenues. It will drive marginal readers to the print product, especially at weekends — and thereby shore up or even increase print-ad revenues from the weekend paper. It will dissuade current print subscribers from dropping the paper on the grounds that they can get all the same content for free online. It will allow the digital ad-sales team to charge a premium for readers who have access behind the paywall. And, as we’ve already seen, it will allow deals where advertisers like Lincoln pay good money to sponsor that access.

Add them all up, and I’m beginning to come around to the idea that the paywall can make good financial sense — if everything goes according to plan. This is a complex system, and therefore prone to misunderstandings and mistakes: there have been predictable glitches in Canada already, and I was talking to one NYT staffer on Monday who was convinced that all of the blogs were free, rather than just the “blog fronts“. But over time I suspect that the NYT will manage to simplify both the system and the messaging, which Ken Doctor points out has proven rather tough and unfriendly at launch.

The NYT will surely proclaim the paywall to be a success no matter what happens. But if total pageviews don’t fall and digital advertising revenues increase, then it’s going to be pretty hard to make the case that the paywall was a bad idea.

If the paywall does succeed, I’ll be very happy indeed to have been proven wrong — the NYT is a great newspaper, and it deserves some financial good fortune. It’s a real possibility; let’s hope it becomes a reality.

Jeremy Peters reports on the NYT’s internal paywall math:

The Times will not say publicly how many online subscribers it hopes to get. But company executives have said privately that the goal for the first year is 300,000. And Mr. Sulzberger and Ms. Robinson insist that the plan is not intended for short-term gain.

“This is not a bet on this year,” Mr. Sulzberger said. The question that remains to be answered is whether that bet pays off in 2015, 2020 or ever.

300,000 subscribers paying on average $200 per year (some will pay more; others will not renew every four weeks for a whole year) works out at $60 million — or less than 20% of the NYT’s digital advertising revenues. It’s a big enough number that I can certainly see why the NYT spent a long time considering this move. But it’s not so big as to be a no-brainer.

That said, if the NYT can get 300,000 paying subscribers — not including people from the Lincoln deal — and it can do so while maintaining online ad revenues, then I think the paywall will have worked. One huge unanswered question here is whether advertisers will be willing to pay a premium for reaching readers behind the paywall — if they are, then it’s conceivable that ad revenues might even go up. (And that would also explain why Dealbook is free: it already gets premium ad rates.)

Still, that’s a lot of ifs. Which is where I take issue with David Carr:

The Web was built on collaboration, open networks, and a friction-free flow of information. And the Times attempt – however considered, however nuanced – is an offense against that theology.

And that’s what it is: a theology. One need only read many of the bloggers and commentators in the wake of the announcement to see that what the Times is being accused of is not greed, but heresy.

In reality, the theology comes in statements like this:

“I believe that our journalism is very worth paying for,” said Jill Abramson, The Times’s managing editor for news. “In terms of ensuring our future success, it was important to put that to the test.”

There are two theological statements here, which I hear a lot from NYT journalists. The first is the idea that if you can charge for certain content, then obviously you should. And the second is the idea that charging for content will automatically “ensure future success.” Neither is exactly self-evident. Nor, for that matter, is Arthur Sulzberger’s idea that if the NYT suddenly turns the meter to zero in the wake of a big event like 9/11, then the readers will come flocking back the minute they’re able to. They won’t: once you become habituated to avoiding the NYT, and learn to get your news elsewhere, you’ll continue to do that no matter where the meter is set.

But for the record: I’m skeptical that the NYT will be able to get to 300,000 paying digital subscribers this year. If it does, then the paywall will definitely be more successful than I anticipated, and I’ll happily eat a little bit of crow. Here’s hoping!

This time last week, I was asked if I would go on Piers Morgan’s CNN show to talk about donations to Japan. I said yes, and reckoned that if I was going to go on national TV talking about such things, I ought at least to have a blog entry up on the subject. So I wrote this.

It’s the job of an opinion writer to stake out clearly-defined and controversial opinions, and anybody in this business has to have a reasonably thick skin. And I knew, more or less, what I was getting myself into: the very reason that I was asked onto the Piers Morgan show to begin with was that I’d written something very similar about Haiti, and a lot of people didn’t like that.

In the end, the Piers Morgan appearance was canceled. But my blog post went viral, and not in a particularly good way. One week, 248 comments, and 7,269 Facebook recommendations later, I’m wondering what happened.

I’m used to criticism — I even got an honest-to-goodness death threat once, after I warned (erroneously) that Morgan Stanley was toast and likely to get nationalized. But the degree of anger and hatred leveled at me over the past week is nothing I’ve ever experienced.

It’s worth making very clear, in case anybody was wondering, that this is one of those situations where my opinion is most emphatically not that of my employer, which is putting a lot of effort and money into raising earmarked funds for Japan.

The debate is clearly an important and meaningful one. My advice was entirely in line with the detailed analysis from GiveWell, which concludes that “the relief/recovery effort does not have room for more funding” and that “you as a donor do not have the power to improve the relief and recovery effort in Japan.” It’s also in line with Stephanie Strom’s reporting for the NYT. And so far, I haven’t seen any real pushback to the substance of what they’re saying.

The media reaction to my post was generally somewhere between respectful and positive — see Weekend Edition’s coverage, for instance, or Slate’s. And in general it’s hard to find independent commentators who think that donating earmarked funds to Japan is a particularly good idea. Tyler Cowen probably comes closest: he says that there are no corruption worries in Japan; that sending money is an important signaling mechanism showing US solidarity with Japan; and that even though you could give unrestricted funds instead, you probably won’t, and that therefore something is better than nothing.

But substantive debate was something sorely missing in the comments to my post, which rapidly generated into a startling series of ad hominem attacks on myself personally — I’m evil, I’m racist, I deserve to die, I should be fired, that kind of thing — interspersed with other comments pointing out that the attackers didn’t seem to have read and understood what I’d written.

Where did all those comments come from? I suspect that a lot of them came from people following a link from Facebook, where my story showed up like this:

There’s no nuance there, just a stern-looking headshot, a stark headline, and what looks very much like gratuitous provocation. People who have donated money to Japan, or who have friends or family in the affected area, are naturally going to respond aggressively if they see something like this. By the time they click through to the actual article, it’s too late for my argument to carry the day: they’re angry, and they’re going to express that anger in my comments.

Those comments were particularly effective because they were read, by myself and by many other people inside and outside Reuters. That’s not always the case, online: if you’re a writer or editor for HuffPo or Yahoo, the volume of comments is simply too great to even think about reading them all. So if a comment thread degenerates into a flame war, people tend not to notice as much. Even in my own case, I get thousands of comments on posts which are republished on Seeking Alpha, and generally read none of them.

But I’m very proud of my commenters here at Reuters, I respect them a lot, and know full well that on any given subject I have many readers who are much smarter and more knowledgeable than I am. And it turns out that when I get a large number of commenters who aren’t regular readers of my blog, it’s hard to snap out of the habit of reading them with a certain degree of respect.

My blog is a place for pretty high-level debate and discussion surrounding issues in the news. It assumes, for instance, that people implicitly understand the orders of magnitude between the amount of donations being targeted at Japan and the amount of money that it’s going to cost to rebuild the country and aid the victims of the earthquake and tsunami. Or that Japan, with its overvalued currency and too-low inflation, would actually welcome any short-term inflation and depreciation which came from printing money to pay for reconstruction.

But while these are familiar concepts to my blog’s regular readers, they’re not necessarily familiar to people on the internet more generally. “There’s nothing you can do to help” is never a pleasant message to convey, and people tend to react strongly against it. On top of that, decades of fundraisers sending the message that “every penny helps” have clearly done their job — which is to conflate, in the public’s mind, the act of helping with the act of donating money, to the point at which a message of “don’t donate to Japan” is read as saying, in substance, “don’t help Japan.”

Would it have been better, then, for me to make the same point less forcefully? A large contingent of the commenters on the post think so: they’re the ones saying that the message is fine, but the headline is insensitive and needlessly provocative in a time of great emotional turmoil and strain. I’m torn on this one, but I think that in general sugar-coating and euphemism are invidious: if you’ve got something you want to say, you should just come out and say it. And given that it’s impossible to know in advance when a post is going to break out from my normal readership, the result of such a policy would surely be a lot of unnecessary and harmful self-censorship.

On top of that, as Nick Denton never fails to remind me, commenters are by no means representative of readers as a whole. If a tiny fraction of 1% of the readers of the post have a strong negative reaction to it and leave angry comments it, that’s entirely consistent with 99% of my readers understanding exactly what I was trying to say, and maybe even learning something and viewing the world of aid and philanthropy in a way they hadn’t thought of before.

In hindsight, I do wish that I’d spent a bit more time on the post instead of rushing it out between panels at SXSW. But I doubt that would have made a huge amount of difference. In future, though, I think I will be more conscious of how the headline and first two sentences of my posts are likely to come across on Facebook. When I’m aggregated by humans, they make sure to get the message across quite clearly. But Facebook’s bots aren’t that smart, and the message can easily be lost completely.

Here’s a way of monetizing the NYT’s paywall which I have to admit I hadn’t thought of: get advertisers to foot the bill!

I like this model a lot. I don’t know how much Lincoln is paying for this promotion: apparently the interstitial is being shown to about 200,000 regular nytimes.com readers without print subscriptions, with the intention that it will be adopted by roughly half of them. (Which goes to show how quickly people click past interstitials without reading them: this is basically free money that the other half are passing up.)

The subscription is the same one that you get for $15 a month: unlimited access to the NYT on the web and on smartphones, but not on the iPad app. If people taking Lincoln up on its offer want iPad access too, they’re going to need to pay an extra $20 per month — which I’m sure very few if any of them will do. So at the margin, this promotion is sure to further marginalize the iPad app as a source of NYT news.

If Lincoln were to pay the full $15 every four weeks from March 28 through the end of 2011, that would work out to $146 per subscriber, or $14.6 million. I’m sure that Lincoln isn’t paying that much. But even at a heavily discounted rate, the NYT is getting some healthy revenue here.

There are lots of unanswered questions here, though. Mainly: how does total revenue from Lincoln compare to the amount of revenue that the paywall would otherwise have extracted from the people shown the Lincoln ad? This promotion bespeaks a certain amount of insecurity on the part of the NYT: it’s willing to lock in Lincoln’s money now, rather than take its chances on trying to persuade a good proportion of those 200,000 people to sign up for the paywall.

The people who sign up for the Lincoln promotion aren’t handing over their credit-card numbers: they won’t automatically start getting billed when the promotion expires in 2012. And they’ll also learn that if you’re not a subscriber, you get shown offers for a free subscription. (Because I’m already a print subscriber, I’ll never see the ad.) In that sense, promotions such as these serve as an incentive not to subscribe individually.

The bigger picture here is that Lincoln is spending a large chunk of change from its advertising and promotions budget and giving it to the NYT. What’s the NYT going to do with the money? Will it consider it ad revenue, just like all the other money it gets from Lincoln? Or will it throw the money into the subscriptions bucket to make the paywall look more successful? If and when the NYT starts releasing numbers for digital subscription revenues, will they include this kind of promotion, even if brands like Lincoln would have found some kind of way of spending that money at the NYT regardless? I can imagine that debates over the success or otherwise of the NYT paywall are going to get pretty heated.

And while I’m on the subject, I have one other question about the paywall which I haven’t seen answered. The quota resets to zero at the first of every calendar month. So what happens if, say, my subscription expires in mid-July, after I’ve already used my subscription to read more than 20 articles that month? Does the paywall go flying up immediately, as soon as the subscription expires? Or do I still get 20 free articles that month — and then another 20 free articles in August? I can see why it makes sense for the NYT to tell me that I’ve read more than 20 articles and so I’m not entitled to read any more. But if I paid for those articles, why can’t I get any free articles, like non-subscribers can?

Caleb Newquist has a great post up at Going Concern showing how important it is for news organizations to publish primary documents, rather than just report what’s in them. He’s reacting to Boris Groendahl’s story at Bloomberg, headlined “HSBC Was Told About Madoff ‘Fraud Risks’ in Two KPMG Reports.” The story is pretty clear: KPMG warned HSBC twice — once in 2006 and once in 2008 — that there might be fraud going on chez Madoff.

But Groendahl and Bloomberg have posted neither the 56-page 2006 report nor the 66-page 2008 report: they’re telling, rather than showing. And they’re raising all manner of questions by doing so. Here’s Newquist:

What if the “risk factors” listed are just standard boilerplate risks that are included in every single one of these reports? If that’s the case, then KPMG was slapping in the applicable information as it related to BLM, handed it over and collected a nice fee. Maybe KPMG was all over this but there’s no way to know because A) Bloomberg didn’t republish the reports in full; B) Other KPMG teams close to Madoff are getting their asses sued which means they either ignored the risks or couldn’t get a hold of these two reports…

Did KPMG warn HSBC or not? This Bloomberg story seems to think so but there are is a lot of evidence that KPMG was just as clueless as as everyone else.

All these questions could be settled very easily by simply publishing the reports alongside the story.

There are three main reasons why news organizations don’t do this. The first is that they promised their source they wouldn’t; the second is that they’re worried about being sued for copyright violation; and the third is that they don’t want to give away to their competitors information which they worked very hard to obtain.

But the fact is that if you’re going to publish a story saying that KPMG warned HSBC about Madoff, and you have the proof, and you don’t supply your readers with that proof, you’re doing them a disservice. Groendahl and Bloomberg should try as hard as they can to get those reports up online. And if any of my readers have them, feel free to send them over: I promise to post them immediately.

The NYT paywall has arrived: it’s going up in Canada today, and then worldwide on March 28. The most comprehensive source for the gritty details is this FAQ, which does things like explain the difference between an item and a pageview. (A slideshow or a multi-page article is one “item,” no matter how many slides it contains.)

The NYT has decided not to make the paywall very cheap and porous in the first instance as people get used to it. $15 for four weeks might be cheap compared to the cost of a print subscription, but $195 per year is still enough money to give readers pause and to drive them elsewhere. And similarly, 20 articles per month is lower than I would have expected at launch.

Rather than take full advantage of their ability to change the numbers over time, the NYT seems to have decided they’re going to launch at the kind of levels they want to see over the long term. Which is a bit weird. Instead, the NYT has sent out an email to its “loyal readers” that they’ll get “a special offer to save on our new digital subscriptions” come March 28. This seems upside-down to me: it’s the loyal readers who are most likely to pay premium rates for digital subscriptions, while everybody else is going to need a special offer to chivvy them along.

This paywall is anything but simple, with dozens of different variables for consumers to try to understand. Start with the price: the website is free, so long as you read fewer than 20 items per month, and so are the apps, so long as you confine yourself to the “Top News” section. You can also read articles for free by going in through a side door. Following links from Twitter or Facebook or Reuters.com should never be a problem, unless and until you try to navigate away from the item that was linked to.

Beyond that, $15 per four-week period gives you access to the website and also its smartphone app, while $20 gives you access to the website also its iPad app. But if you want to read the NYT on both your smartphone and your iPad, you’ll need to buy both digital subscriptions separately, and pay an eye-popping $35 every four weeks. That’s $455 a year.

The message being sent here is weird: that access to the website is worth nothing. Mathematically, if A+B=$15, A+C=$20, and A+B+C=$35, then A=$0.

Meanwhile, at least where I live in New York, a print subscription which gets you the newspaper only on Sundays costs $19.60 every four weeks — and it comes with free access to the web and tablet versions of the newspaper. Which creates the slightly odd proposition that if you want to use the NYT’s iPad app, you’re marginally better off subscribing to the print newspaper on Sundays and throwing it away unread than you are just subscribing to the app on its own.

The pricing structure is also a strong disincentive to use the iPad app at all, of course. If you’re already paying $15 every four weeks to have full access to the website, why on earth would you pay extra just to be able to read the paper on its own dedicated app rather than in Safari? I, for one, prefer the experience of reading nytimes.com on the web on my iPad, rather than reading an iPad app which has no search, no links, no archives, no social recommendations, etc etc. If the NYT wanted to kill any incentive to read and develop its iPad app, it’s going about it the right way.

What does all this mean for the New York Times Company? I can’t see how it’s good. The paywall is certainly being set high enough that a lot of regular readers will not subscribe. These are readers who would normally link to the NYT from their blogs, who would tweet NYT articles, who would post those articles on Facebook, and so on. As a result, not only will traffic from these readers decline, but so will all their referral traffic, too. The NYT makes more than $300 million a year in digital ad revenue, so even a modest decline in pageviews, relative to what the site could have generated sans paywall, can mean many millions of dollars foregone. On top of that, the paywall itself cost somewhere over $40 million to develop.

Against all that, how much revenue will the paywall bring in? A very large number of the paper’s most loyal readers are already print subscribers, and get access to the website at no extra cost. So the new revenues from the paywall will only come from people who read the website a lot but who don’t subscribe in print.

How many of those people are there? Emily Bell reckons that the number of people who’ll even hit the paywall in the first place is only about 5% of the NYT’s 33 million or so unique visitors. That’s 1.6 million people — compare the 1.3 million people who already subscribe to the paper on Sundays. The former is not a perfect superset of the latter, of course, but there’s a big overlap; let’s say that realistically the NYT is going after a universe of no more than 800,000 people that it’s going to ask to subscribe. And let’s be generous and say that 15% of them do so, paying an average of $200 per year apiece. That’s extra revenues of $24 million per year.

$24 million is a minuscule amount for the New York Times company as a whole; it’s dwarfed not only by total revenues but even by those total digital advertising revenues of more than $300 million a year. This is what counts as a major strategic move within the NYT?

As Ken Doctor notes, the Times Select fiasco, which was unceremoniously killed in 2007 to no one’s regret, was bringing in a good $10 million per year. This new paywall is much more elaborate and expensive, and it’s being introduced into a website which is currently something of a cash cow as regards ad revenues.

So by my back-of-the-envelope math, the paywall won’t even cover its own development costs for a good two years, and beyond that will never generate enough money to really make a difference to NYTCo revenues. Maybe that might change if the NYT breaks its promise to offer full website access for free to all print subscribers. But that decision would be fraught in all manner of other ways.

For the time being, though, I just can’t see how this move makes any kind of financial sense for the NYT. The upside is limited; the downside is that it ceases to be the paper of record for the world. Who would take that bet?

Update: Turning upside-down the conventional wisdom that consumers will only pay for financial information and porn, the NYT has decided that Dealbook will remain completely free, outside the paywall, at least for the time being. Which I guess explains why the Business and Dealbook sections are so clearly separated from each other online.

Benzinga’s Laura Hlebasko sent me some questions about blogs and online media for a feature she’s writing. Here they are, along with my answers:

1) As an established journalist, what is the difference between you writing an article for traditional media and you writing an article for a blog? What do you like and dislike, or see as the benefits and limitations, of those mediums when you are reporting on a topic?

I find pretty big differences in how I write, depending on whether it’s for a traditional media outlet or for the blog. I have a more conversational voice on the blog — I think of any given post as being part of a much broader conversation between bloggers and between me and my readers. Nearly all of my posts are reactions to something elsewhere online, and I try to be as generous as I can with links. I’m also not one of those bloggers who likes breaking news: often I’ll actually wait for the news to be broken elsewhere before weighing in with my view, since it can be dangerous to mix subjective opinions into the reporting of hard facts.

Traditional media outlets, by contrast, generally have an incomprehensible love affair with Microsoft Word — a piece of software I loathe and try to use as little as possible. It’s generally more difficult to insert links, especially when I’m dealing with people who edit for print first and who then just put that edited copy up online. The pieces have to be much more self-contained, and you have to be much more careful about assuming any kind of expertise on the part of your readers: if they’re reading your stuff on paper, then it’s much harder for them to Google anything they don’t understand.

The upside of traditional media is that you generally put a lot more time and effort into reporting, editing, and illustrating stories. They go through many iterations before being published, and nearly every iteration makes them better. What you lose in quantity, you often make up in quality.

2) Most of the talk about blogging and its impact on traditional journalism has centered around declining readership and revenues for traditional print media, questionable credibility of blogs, etc., etc.,– what are some of the unseen, underreported, or not-yet-fully-realized impact of blog reporting vs. traditional journalism?

The main impact I think is the way that blog reporting can iterate. In traditional media, you report the story and then you publish it; with blogs, you can start with something much less fully formed and then come back at it over time in many ways and from many angles. Every print journalist knows the feeling of publishing a story which is read by great sources who then provide lots of really good information which would have been great in the original piece. Bloggers don’t worry about that: they just put up a new post, or an update.

Blogs can also geek out in a way that traditional journalists can’t. There’s no space constraint online, and so if I want to spend 5,000 words writing about vulture funds, or a reporter at HuffPo wants to spend 4,000 words getting into the weeds of regulatory reform, they can. Or look at the Ars Technica reviews of every new Macintosh operating system. That kind of material can be incredibly popular, but it just doesn’t work in print. Blogs have a reputation for being superficial, but they can also be much more detailed and accurate than traditional journalism. Not to mention the fact that they’re often written by genuine experts in their fields, rather than by journalists.

3) How do you think blogging has changed the nature of the news and information people consume? Since blogging allows for more reader-driven content than traditional newspapers, what do you see readers choosing to focus on in terms of news?

Blogging has clearly given readers a much wider range of news sources to choose from, and it’s great that readers are no longer confined to getting their news from a handful of outlets. Everybody’s different, though: some people become loyal to certain sites, others get their news from Twitter or Facebook or Google Reader, others still just follow links from the AOL home page because they haven’t updated their browser settings since 1996. In aggregate, it’s easy to see what people are reading: just look at the ubiquitous “most-read” lists which are on pretty much every news site these days. But the aggregate figures hide a wonderfully diverse range of unique individual reading patterns. And the more you generalize, the less useful the information you’re getting becomes. The web is much better at narrowcasting than it is at broadcasting.

4) How has Twitter impacted journalism?

It’s made news reporting much more distributed: no photojournalist produced anything like this, for example. It’s massively increased the velocity of news: people now know what’s going on before it’s formally reported. It’s made it easier to find things you didn’t know you were interested in. It’s given journalists a much more human voice, an outlet where they can be themselves. It’s helped build a culture of linking to wonderful stuff. It’s made the world smaller, and it’s made news travel faster than ever. Overall, it’s been great.

5) Are there any aspects of journalism that are “untouchable”, that won’t (or shouldn’t) change no matter what new technology comes along?

I think that depends on what you mean by journalism. Professional journalists should always be beholden to high standards of professionalism, ethics, and accuracy. Random people with a Twitter account, not so much. And of course there’s a spectrum between the two, there isn’t a bright line.

6) What is/are the main way(s) blogging has evolved since you began, and how do you see it evolving both on its own, and in its effects on journalism, in the future?

Old-school blogging, where an individual puts their own work up on a dedicated website in reverse chronological order, is clearly on the decline. It’s been replaced by Twitter and Facebook, on the micropublishing end of things, and by big professional sites like Business Insider or Huffington Post, at the other end of the spectrum. Mainstream news organizations have all embraced blogging to a greater or lesser extent, although a lot of them use the existence of blogs as an excuse not to do much in the way of external linking elsewhere on their websites. In general, news sites are becoming bloggier, with more assiduous editorial standards, while big blog sites are becoming newsier; that trend is likely to continue. But it’s still possible to make a name for yourself by starting a blog! And it’s also a great way of improving your writing and general communication skills. More people should do it!

Alan Mutter has a great example of how to put up a paywall the right way. The Augusta Chronicle put a paywall in place in December — and since then traffic is up by 5%. (One proviso here: that seems to be a year-on-year comparison, and so traffic might have fallen from its levels immediately before the paywall was implemented, the numbers are unclear.)

The Chronicle’s paywall is both cheap and porous. It’s on a meter system, with readers allowed to read 25 “premium articles” per month before they’re asked to pay. Taking a leaf from the Economist’s book, the Chronicle defines premium content as anything which appears in print. Online, however, it’s very unclear what counts as a premium article, and in reality most readers will never come close to that limit.

Once you’ve reached the limit — something only the most loyal readers do — you’re asked to pay the low price of $6.95 a month for full digital access. If you’re a print subscriber, which is likely, the price is even lower — just $2.95 per month.

As a result, the number of people buying digital subscriptions is low. But there’s no reason why paywalls should be hugely remunerative right out the gate.

Executive editor Alan English understands very clearly that the value of paywall need not reside in its revenues: “The act of placing a value on our journalism may be more important than any penny we ever collect,” he told Mutter. “It’s a powerful statement from the publisher and positions us distinctly in the market.”

In other words, the idea here is that people who read the Chronicle’s website are now being told quite explicitly that they’re reading valuable journalism. That, in turn, means that they will value and respect it more than they would some free sheet.

And once the paywall is securely in place, the Chronicle can tighten it up slowly, over time, with subscription prices rising and the monthly quota falling. (As indeed it has already fallen: at launch the meter was placed at 100 premium articles per month.)

I said back in November, just before the Chronicle paywall was launched, that if I was charged with maximizing paywall revenue, I’d start at just a buck or two a month, to attract as many subscribers as possible and to get them used to the idea of paying for content online. Once the subscriber base hit a critical mass, then I’d start raising the rate, as quietly as possible. It would take a few years, but the end result would be many more people paying for their online subcription than if you started off with a rate remotely comparable to the price of the print subscription.

The Chronicle team seems to understand this; it remains to be seen whether the executives at the NYT will work it out as well. I’m not a fan of the NYT paywall, partly because its readers already value its journalism very highly and so it’s less in need of signaling mechanisms than the Chronicle is. On top of that, nytimes.com is an important part of international web-based conversations in the way that chronicle.augusta.com can never be, and so the downside to the NYT if it gets this wrong is much larger.

Now that the decision to launch an NYT paywall has been made, however, and tens of millions of dollars have been spent developing it, I do hope that they will be smart enough to roll it out slowly, with a low price and high quota for the first few months. If they do that and traffic doesn’t fall, they’ll be much better positioned over the long term than if they come out of the gate annoying a lot of readers who are currently not willing to pay for news online.

The NYT’s paywall isn’t live yet, but the meter’s already ticking. Go to the site’s new recommendations page, and you’ll see a sidebar which looks a bit like this:

I’m clearly a heavy user of nytimes.com: I’ve read 155 articles over the past month, according to the system they’ve built at a reported cost of more than $40 million. I’m not at all sure that’s money well spent: my suspicion is that the paywall’s total revenues from the paywall won’t reach that level.

And even at this late date, it seems, the system is doing silly things like make a distinction between “Business,” on the one hand, and “Business Day,” on the other. No, me neither.

As for the Topics, like the wonderfully-named “Blogs and Blogging (Internet),” they take you to barren and unhelpful pages like this one. If the paywall is really a navigation fee, then you’d hope that the NYT would spend a bit more effort making its website in general, and its topic pages in particular, a lot more navigable, with lots of attractive exit points. Instead, there’s nothing — not even a navbar at the top.

It seems to me that the redesigned paywall-focused site — which is feeling decidedly delayed at this point — is still decidedly on the glitchy side. If you’re going to be sending out press releases about your recommendations engine, shouldn’t those recommendations be “Presented by” Thomson Reuters, the launch sponsor, rather than a blank green box?

Still, I’m impressed that my silhouette actually looks a little bit like me. Albeit me on a bad hair day.

Edward Wyatt has a big piece in the NYT on the banks’ last-ditch attempts to weaken the rules reducing debit-card fees — attempts which might be working, especially given Barney Frank’s long-standing opposition to the rule.

I’m not a fan, though, of the way that Wyatt presents the banks’ side of the argument without trying to work out whether it makes sense. For instance:

Banks contend the proposed cut in fees — to 12 cents per transaction from an average of 44 cents — will leave many of them unable to afford to issue debit cards to customers or will force them to raise other consumer banking charges to cover the costs. They also claim retailers will reap unfair profits.

This is ludicrous on its face: there’s no chance that banks will be “unable to afford to issue debit cards to customers”. In most cases, your debit card is your ATM card, are they really suggesting they can’t afford to give out ATM cards?

As for the costs of debit cards, they’re largely the banks’ own fault, for constantly exhorting people to use the insane abomination that is signature debit, and even implying that signature debit is safer than using a PIN. If you tell your customers to use an unsafe method of payment, it’s a bit rich to then turn around and complain of high fraud costs.

It seems to me that Wyatt should have stopped and asked what the people he was quoting were talking about:

“I am appalled that our members will shoulder tremendous financial burden and still be on the hook for fraud loss while large retailers receive a giant windfall at the hands of the government,” John P. Buckley Jr., the president of Gerber Federal Credit Union of Fremont, Mich., told a House of Representatives subcommittee last week.

In what possible sense will credit union members “shoulder tremendous financial burden” if this rule is enacted? I’m having difficulty thinking of one. The cost they pay for goods bought — the amount of money that leaves their account — will be unchanged. The only question is how much of that money goes to the merchant, and how much gets kicked back to the credit union. Technically, it’s true, credit unions are owned by their members. But I’m not seeing any tremendous financial burden here.

And that’s not the only part of the story which doesn’t make sense:

Lawmakers tried to soften the blow by exempting smaller banks from the fee cap. But now even those institutions with less than $10 billion in assets oppose the law. They say that if they continue to levy the current, higher fees, their debit cards will not be able to compete against the big banks, which will charge lower fees because they have no choice.

This just stumps me: I’m open to any conceivable interpretation, if you want to help out here. Compete on what front? For customers? Why on earth would consumers care how much the debit interchange fee is? A lower interchange fee doesn’t save them any money. For merchants? No: the cards are all going to be either Visa or Mastercard, and merchants have to accept them. They can’t accept low-fee cards and reject high-fee cards.

In general, it seems to me, banks compete on how high their debit interchange fees are, not how low. The higher the fee, the more perks they can kick back to their depositors, in the form of reward points or cash back or the like. I simply can’t for the life of me work out how banks with high debit interchange fees “will not be able to compete against” big banks with low fees.

And Wyatt’s article as a whole is greatly tilted towards the bank lobby. By my count, he gives the banks’ side of the story eight different times, by quoting bankers directly or just recounting what “banks contend”. By contrast, the merchants get cited only twice, and their argument doesn’t really get parsed at all. And Wyatt makes no attempt at all to reach any consumer representatives to see what might be best for us.

Debit interchange is a complicated subject: it should be treated analytically, instead of as a political horse-race issue where lobbyists get to say anything they like without being fact-checked. I hope that the Fed’s rule stays in place. But if the banking lobby wins this one, stories like this will be part of the reason why.

What exactly happened at the Ten Ones blog? I asked NYT spokesperson Kristin Mason, and she replied with this:

It was a copyright issue. The Tumblr blog was positioned as a NYTimes.com account, and it contained many images from NYTimes.com for which The Times did not own or control the necessary rights.

I’m not entirely sure what this means, but I can guess. Newspapers often rent rather than own illustrations: the illustrator owns the copyright, and gives the paper rights to use it in certain cases (like this newspaper or that website). What I’m suspecting happened here is that the Ten Ones blog, run by a former NYT staffer and filled with NYT content, looked as though it was a semi-official NYT property. And if the NYT were publishing certain illustrations on Tumblr as opposed to nytimes.com, that might violate the terms of their license with the various illustrators.

I can understand that much. But then things go a bit weird — it seems that the NYT’s Senior Counsel, on learning of this possibility, went nuclear and effectively destroyed the entire blog. Which is a massive overreaction to what was only ever a theoretical risk based on a possible misunderstanding. After all, Ten Ones was not a NYT property, so the NYT would not have been liable for anything appearing there.

More generally, with the NYT paywall coming Real Soon Now, the paper should be bending over backwards to encourage exactly the kind of inbound links that Ten Ones had very many of. One of the big unanswered questions about the paywall is how much it will reduce the amount of inbound links to nytimes.com — a huge number, and one which is extremely valuable to the NYT. We bloggers have been assured that our readers will be able to read anything we link to on the NYT site, even if they’ve already exceeded their monthly quota — but it still might feel a bit weird, sending someone to a site where they’re boxed in and can only read that one article, banned from navigating anywhere unless and until they cough up a subscription fee.

There’s another possibility here, though. Maybe the NYT nuked Ten Ones because of the paywall: they’re actively trying to shut down sites which do nothing but link to NYT stories, since such sites are effective ways around the paywall. That would be extremely short-sighted, if true. One of the NYT’s hardest tasks, post-paywall, will be remaining a central part of the conversation. It needs loyal readers like Ten Ones just as much as Ten Ones needed the NYT.

Henry Blodget has a great post about the Business Insider business model, in which he reveals that his mini-empire basically broke even in 2010 on $4.8 million in revenue. There was a pretty impressive profit in the fourth quarter of the year — breaking out the Photoshop measure tool and applying it to this chart makes me think that TBI made about $210,000 in those three months, on about $1.9 million in revenue.

Payroll for the quarter was 45 full-timers, plus a bunch of paid interns and freelancers. That makes sense: if TBI’s all-in cost of employing someone, including finding office space for them, averages out to say $10,000 a month, that works out to about $1.35 million in the fourth quarter, plus interns and freelancers, plus other expenses like hosting fees and travel. All in all it’s easy to see how expenses could be about $1.7 million in the quarter.

But there’s something else quite interesting going on in the chart. Look at the difference between revenue and operating income to get quarterly expenses, and it ends up looking something like this:

Compare that to the readership chart:

What you wind up with is something like this. It’s necessarily a bit fuzzy: I’m using quarter-end uniques as a proxy for uniques over the quarter as a whole, and the numbers are volatile. But the big trend is pretty clear:

What’s happening here is that since TBI really started getting going at the beginning of 2008, its expenses have been rising at pretty much exactly the same pace as its audience — it’s been spending between 23 and 36 cents per unique visitor the whole time, with the trend decidedly flat.

This is probably just as it should be: a startup should ramp up its expenses as it grows. Still, I’m not seeing any economies of scale, not even in that huge fourth quarter, where expenses managed to rise just as fast as the visitor count. Maybe there were year-end bonuses or something in there, skewing the figures. But the overall impression is that when Blodget wants growth, he has to pay for it, leaving little money left over for high-prestige luxuries like, say, John Carney. (See that drop in expenses in the third quarter of 2010? A chunk of it is Carney’s departure.)

Blodget writes:

Our newsroom salaries for full-time employees, for example (which include bonuses and benefits) are now higher than at many companies in the traditional news industry. Because the digital news business is quite different from the traditional news business, we often promote from within, and we’ve had the huge pleasure of watching folks who joined us as interns grow up to take leadership positions. True, we can’t yet toss around the $300,000-$500,000 a year per brand-name columnist that Huffington Post and Daily Beast are now reportedly tossing around. But, in future years, if we keep doing what we think we can do, we should be able to pay our top people a lot more than we do today.

(We also give our folks stock options, which helps make them feel and act like they own some of the place. Which they in fact do.)

TBI doesn’t really go in for brand-name writers: there’s talent on the masthead, but nothing that Tina Brown would want to poach for $500,000 or even $200,000 per year. The firing of Carney sent a clear message that insofar as there’s a star culture at TBI, it’s internal, based on pageviews: external fame and visibility is not something Blodget is particularly interested in seeing in his staff.

TBI got some decidedly backhanded respect from Time magazine today, when it placed 25th out of 25 on Time’s list of top financial blogs. Most of the write-ups on the list came from other people on the list, but the magazine doesn’t seem to have been able to find anybody willling to write about TBI, with the result that Time’s Stephen Gandel had to do it himself. “The thinking man’s finance blog it is not,” he wrote, adding that “the site has a reliable market commentator in Joe Weisenthal, though the length of his articles, like those on the rest of the site, seems to have dramatically shrunk”.

It’s pretty clear, at this point, that Blodget has given up on the idea of producing premium content for an elite Wall Street audience. Just like Nick Denton before him, he’s decided that there’s no money in micropublishing, and that if he wants to be very profitable, he’s going to have to go mass-market. Already he claims 8 million unique visitors, and he clearly looks forward to seeing that number rise substantially; there’s nothing elite about an audience that size, and when blogs grow that big they invariably leave their more elite readers behind.

So when Blodget promises that TBI is “going to get bigger and better”, I believe him on the first count. But I’m not so sure about the second.