Felix Salmon

I had a hard-to-follow Twitter debate yesterday about the FT’s paywall, where a couple of FT types — Alan Beattie and John Gapper — told me that the latest numbers for digital subscribers show that I was wrong when I criticized the FT’s strategy in October 2007. I’m often wrong, so that wouldn’t come as a surprise. But in this case I think I was right.

Because the FT is a subsidiary of a much larger corporation, it can confine itself to releasing only the numbers it wants to release. But a few things are clear at this point.

Firstly, the success of the website — if indeed it is a success — has not helped stop the bleeding in terms of print subscribers. Daily print circulation was 485,000 at the end of 2000, and dropped at a rate of about 5,000 a year to 440,000 at the end of 2008. The rate of decline has accelerated sharply since then: print circulation is now 390,000, which means the paper has been losing around 25,000 print subscribers per year over the past couple of years.

The good news is that digital subscribers have been arriving more quickly than print subscribers have been leaving. In the past year alone, the digital subscriber base has risen from 121,000 to 207,000 — an increase of 86,000 people, all of whom are paying print-like subscription rates.

Exactly what those rates are is not easy to determine. FT.com managing director Rob Grimshaw told me a couple of years ago that he loved the kind of airline pricing models where someone who paid $45 for their ticket can be sitting next to someone who paid $945 for the same service. So there’s a lot of opacity built in to the system. But I can tell you a few different rates.

Here in New York, if I lock myself in to an annual subscription, the FT will give me website access (including mobile and iPad) for $259 per year, or “premium” website access, including the Lex column and a couple of other bells and whistles, for $389 per year. If I want the physical newspaper delivered as well, that costs $440 per year. If I sign up monthly rather than annually, the minimum cost for the website is $312 per year, with premium access at $468 and the combined print-and-online subscription at $528. The newspaper-only subscription, with no website access, is annual only, at $348.

All of these numbers are significantly lower than they are in the UK, where a basic web subscription is $380 pear year, the premium subscription is $549, and the combined paper-and-online subscription is $845.

There are a few messages being sent here. Firstly, the FT is taking full advantage of its quasi-monopolistic status among UK consumers who are not particularly price-sensitive to charge very high subscription rates there. But it’s keeping its US rates lower because it’s still having difficulty breaking into this market. Secondly, the FT charges a significant premium if you subscribe monthly rather than annually — which says to me that monthly subscribers have tendencies to disloyalty and letting their subscriptions lapse. And finally, the FT is happy to sell a physical newspaper subscription for less than the price of accessing the same content (including the Lex column) online — indeed, the newspaper-only subscription cost is probably less than the cost to the FT of printing and distributing the physical newspaper six days a week.

While the FT loves to tout its combined subscriber base, then, it’s clearly following two different models at once. The newspaper business is the same as it ever was: lose money on printing and distributing the physical product, but make it all up with ad revenues. The online business, by contrast, is all about the subscription revenues, with ad sales being much less important. Gapper goes as far as to say that 207,000 digital subscribers could actually be worth more to the FT than 20 million unique visitors.

Conceptually, what the FT is doing here is holding onto the ad-supported model for as long as it can, while moving aggressively to a newsletter model for the online product. And the problem here is that while newsletters can be profitable, they’re never important*, and they never go viral: they cut themselves off from substantially the enormous world of opportunity afforded by being online. Successful websites get that way because people share them, with their friends and colleagues and Twitter followers — every reader is also a potential content distributor. Under the FT model, by contrast, the FT itself is at pains to be the only content distributor, and tells readers redistributing its content in incredibly natural ways that they are copyright infringers and in violation of the site’s terms and conditions.

Gapper reckons that the newsletter model means higher cashflow, higher CPMs, lower volatility, and higher p/e ratings. I’m pretty sure he’s wrong on the p/e front: there’s no way that the FT is worth anything like the multiples we’re seeing in the online-content space, whether you look at price-to-earnings, price-to-revenues, or any other ratio.

As for the other metrics, cashflow and low volatility are nice things to have, but massive growth is nicer. And for a news organization which aspires to grow from its UK base to become a genuinely global brand, it’s crucial. The FT’s paywall is structured very aggressively — you have to register after reading just one article per month, and then unless you subscribe you’re cut off after 10 articles per month. That’s good at maximizing short-term cashflow, but it clearly hurts growth: the FT doesn’t release numbers for unique visitors, but both Quantcast and Compete show FT uniques falling significantly over the past year, and actually being overtaken by Business Insider. What I said back in 2007 was that the FT was removing itself from the conversation; that’s exactly what seems to have happened.

I don’t doubt for a minute that the FT’s CPMs are very high. But they’re getting there the wrong way, by minimizing the Ms (the number of pageviews) rather than maximizing the Cs (total ad revenues). Eventually, the FT is going to be such a niche product, compared to other business and finance publications, that global B2B advertisers simply won’t see the point in buying it any more. What it should be doing is becoming so big and important outside the UK that major advertisers feel the need to buy it even if they have no desire at all to reach the UK audience. But it’s nowhere near that point yet, and it doesn’t seem to be getting there, either.

And if the FT isn’t serving advertisers well, it’s not doing so well for readers, either. Paywalls should always be completely invisible to subscribers, but the FT’s fails miserably on that front: subscribers keep on running into that wall on a regular basis, especially when they try to visit ft.com from their mobile device, or when they try to follow a link sent to them by a non-subscriber.

Meanwhile, it’s not just the cost of a subscription which is opaque — the broader FT franchise seems set up to make no readers at all happy with what they’re getting.

Let’s say, for instance, that you’re very interested in China. There’s China content in the FT, of course, which will cost you a few hundred dollars a year to read. If you want wonkier and more in-depth material, a great place to look is FT Alphaville, which regularly takes FT content and then adds very sophisticated analysis and data. Confusingly, Alphaville content is free. And then there’s the Long Room, an elite forum for financial professionals to discuss such matters: that’s free, too. Over to the side, there’s also FT Tilt. That has its own proprietary China content for which it charges thousands of dollars, alongside contributed content which is free with registration. And finally there’s China Confidential, a newsletter which comes out every couple of weeks or so, costs even more than FT Tilt, and which has recently launched a spin-off called China Confidential Funds which doubtless costs more still.

The whole structure feels a bit like Scientology: every time you reach one level, you realize there’s another, more expensive level awaiting you. The China story is of course absolutely central to the FT’s mission of explaining global business and economics — but instead of corralling its resources and creating the best coverage for its readers that it can possibly put together, it balkanizes those resources and has one group of people writing for the paper, another for Alphavile, a third for Tilt, a fourth for China Confidential, and a fifth for China Confidential Funds. From a sheer journalistic-quality perspective, this can’t possibly make sense. And it’s not like there’s a strong correlation between the price of the products and the quality of the journalists, either. It’s really just a mess, a desperate scrabble for revenues from a company which ought to be building the best unified global business coverage it can.

Overall, the FT strategy is exactly the strategy I would choose if I was faced with an industry in terminal decline, and wanted to extract as much money as possible from it before it died. And that’s sad, because the FT can and should be a major global player in perpetuity. Pearson should sell it now, to someone who can invest in it and make it relevant to a fast-growing business audience worldwide. If Pearson fails to do so, the annual decline in the value of the FT franchise will always exceed the dividend that Pearson manages to extract from it.

*Update: I’m getting pushback on this one bit in particular, where I said that newsletters are never important. They can be important within small, specialized groups or industries. But they’re never important to a general audience, or even a general business audience: they only become important when they start targeting very narrow groups like private-equity general partners or hedge fund prime brokers.

Update 2: Gapper responds. He talks about earnings growth at the FT Group as though it proves something — but it doesn’t, because that says nothing about earnings growth at the FT. (One would expect FT Group earnings to be increasing, if only because Pearson keeps on adding things like Medley Global Advisors to the group.)

More to the point, Gapper seems to have convinced himself that the FT’s high CPMs are entirely a function of its paywall, rather than a function of who its readers are. He compares revenues at the FT to those at the Guardian and at Gawker Media (!), and on that basis decides that the FT could never make an ad-supported model work. But of course the FT could still charge very high CPMs even if it was free, they would never come down to general-interest levels.

Gapper seems to think that I said that ad revenues from 20 million unique visitors would exceed subscription revenues from 207,000 subscribers. I never said that. But, pace Gapper, let’s do the math. He seems to think that Gawker Media is a good example of a site with 20 million uniques, so let’s use that as our example: it gets about 300m pageviews a month — 3.6 billion pageviews per year — from its 20m US visitors.

Gapper’s estimate for FT digital subscription revenues is $52 million per year. In order to get $52 million from 3.6 billion pageviews, you’d need revenue per 1,000 pages of about $14. Let’s say you have two ad units per page, and you can sell two-thirds of your inventory. Then in order for your ad revenues to exceed $52 million, you’d need CPMs of about $10 on average. I’m sure the FT can charge much more than that.

Meanwhile, the value of the FT itself is surely much greater with 20 million global readers than it is with 3 million — after all, the media business is all about building as large an audience as possible. Yes, it’s nice to have a diversified revenue stream, which is why Pearson owns lots of subscription-based products and is buying more. But that doesn’t mean the FT itself has to move aggressively away from advertising and towards subscriptions.

Megan Garber has a great column at Nieman Lab on the effect of paywalls on journalists:

For writers, both professional and non-, both compensated and not, exposure is generally a paramount goal — not for themselves, necessarily, but for their work and their words. That’s why they’re “writers” and not “diarists.” And when it comes to exposure, nothing beats the wide-open web…

Pay models, as walls or any other form, aren’t just business-side structures. They’re both medium and message, and affect all aspects of the news — from the reader to the writer to everyone in between.

There are three points I’d add to Megan’s thesis. The first is that not all writers are equally affected by paywalls. The more you want to take part in the conversation, the more allergic to paywalls you’re likely to be. And Frank Rich is omnivorous in that respect: he loves grabbing ideas from all over the web, linking to them generously, connecting them together, and remixing them in very smart ways.

By its nature, that kind of activity is much harder to do effectively when you’re behind a paywall, since it’s reliant on the people you’re linking to being able to respond to you in turn, and continue the conversation. By contrast, a shoe-leather Metro report about a shopkeeper in the Bronx, say, constitutes essentially a one-way flow of information from the writer to the reader. If fewer readers have access to it, that doesn’t directly affect the quality of the writing.

Secondly, it’s easy but very dangerous to conflate the readership of a website or print publication with the readership of any given writer on that website or in that publication. Jack Shafer does it, and so do sites like Mediaite, when they rank influence according to print circulation and online unique visitors. (Apparently Frank Rich lands somewhere between Rafat Ali and Sebastian Mallaby in the columnists ranking.) But as Nate Silver will happily explain, just because you appear on a high-readership site like the Huffington Post doesn’t mean you actually have any readers — he reckons that the average unpaid blogger on the site gets about 550 pageviews per post, and presumably a similar number of monthly unique visitors.

It seems that Rich is thinking of moving in a sensible direction, at New York: a faster and more vibrant online presence, which can interact with the rest of the web more as it happens rather than weekly, combined with a longer-from monthly column in the magazine, where he can move more in the meaty-and-timeless direction.

It’s entirely possible that Rich’s total online readership at nymag.com will exceed the post-paywall readership he’d have if he kept going with his weekly column at nytimes.com. And it will certainly be more loyal: weekly columns don’t work well on the web, especially not Sunday columns. Shafer talks about the “obvious cues—Sunday morning bagels and coffee, for example—that it’s Rich time”, but I doubt many people look at their sesame-seed bagel with lox and get reminded that they really ought to go find the latest Frank Rich column online. Shafer, of course, knows this better than anybody, working as he does for an online publication which found it necessary to move its publishing pace “from weekly to daily to several times a day” as it embraced the natural velocity of the web.

Finally, Rich is a columnist, and as such he’s a brand in his own right. The NYT has been great at helping Rich build that brand — it’s unrivaled in its ability to bestow traffic and influence on key individuals. But post-paywall, loyal Rich readers will have to pay to read his content, unless they carefully avoid all other NYT articles, or unless they search the web to find a direct link to Rich’s column from somewhere outside the NYT website. Rich’s natural audience is never going to overlap perfectly with that of the NYT; it makes sense that he’s embracing this opportunity to find his own base, rather than continue to piggy-back on that of the Times.

After all, while it’s true that writers care how many people read their stuff, they care even more about who reads their stuff. To take an extreme example, most opinion writers would surely happily sacrifice a million pageviews for the sake of being read by Barack Obama. Rich aspires to a broader audience than that of NYT subscribers: outside the NYT paywall he can reach anybody in the world, and build a web-based franchise where his readers don’t ever need to worry about using up their precious pageview quota. I wish him the best of luck, and I’m quite sure it’s going to be very exciting for him.

I enjoyed my chat with Nick Denton at PaidContent 2011 today. He wasn’t shy about ducking questions he didn’t want to answer — he wouldn’t put a number on Gawker’s revenues, for instance, and he wouldn’t say why Gawker refused to publish that Scientology story. And to nobody’s great surprise he was still very bullish about the Gawker redesign — even after admitting to having made big mistakes in rolling it out, and even with the site far from being fixed, three weeks after the launch. I asked him about his bet with Rex Sorgatz; Denton said he’d recently offered to double the stakes.

For me the most interesting part of the conversation was how aggressive Denton was when it came to AOL’s acquisition of the Huffington Post. Before we went up on stage, he leaned over to me and told me to be sure to ask him about the deal, which he has been very vocal about criticizing. As he was today: he claimed to be very disappointed in Arianna Huffington’s decision to sell. “They should have gone all the way and become the liberal Fox News,” he said. “They could have bought MSNBC.”

This comes as little surprise, coming from Denton: when Jason Calacanis sold Weblogs Inc to AOL in 2005, Denton said he’d sold “10 years too early”. And Denton himself made very clear, later on in our conversation, that Gawker is not for sale and will not be for sale. If you want to buy a stake in Gawker, he said, he might be open to that — but only on the explicit understanding that you’re buying a very long-term income stream, rather than a chance to get rich quick.

I don’t really understand Denton’s position here. At AOL, Arianna Huffington has much deeper pockets to be able to invest in growth, not least by trying to get some real value out of the hugely expensive Patch franchise. And I’m pretty sure she has more freedom now to build something great over the long term, than she did when her company was owned by venture capitalists looking for an exit. Denton is highly prejudiced against AOL for reasons which aren’t entirely clear: while admitting that some AOL franchises, like Engadget and Joystiq and Techcrunch, are excellent competitors, he still said that attacking AOL was like “kicking a blancmange”.

Denton’s reference, I think, is to a wonderful Clive James review of Judith Krantz from 1980, where he wrote that “to pour abuse on a book like this makes no more sense than to kick a powder-puff”. The review is required reading for anybody who thinks that snark didn’t exist before the Internet — but it’s worth noting that James’s review in a highbrow, low-circulation magazine, and its subject was a huge bestseller which tapped straight into the mass market which Denton so covets.

There’s a longstanding tension in the Gawker universe, between cultivating smart and important and witty readers, on the one hand, and building a mass audience, on the other. Denton was very complimentary about my post on the end of micropublishing — and it’s my feeling that if he wins his bet with Sorgatz, it will be by gaining more of a mass audience while further eroding the amount he’s read by the media elite. On the other hand, if you look at the people Denton hires, they tend to be funny in a very Clive James kind of way, as opposed to having the mass appeal of say Sugar, the network Denton reckons AOL should have bought. Denton likes to sacrifice the highbrow for a mass audience anyway he can, and boldly said he’d be bigger than HuffPo next year. (I’ll take that bet.) But sometimes he can’t help himself.

The statement of Denton’s which got the most pushback on the Twitter backchannel was when he said that Gawker was a technology company rather than a media company. I agree with the snark mob on this one: for all that Denton has invested a lot in technology and is very proud of what he’s built, he knows journalism in a way that he doesn’t know technology. (He could take over as editor of Gawker any time he likes; he could never take over as CTO.) Gawker has a long history of technological chaos, and the relaunch mess only serves to underline how difficult it is for Gawker to get its tech ducks in order. Denton wants to be a tech company. But he’s not.

Playboy has long mixed its girlie pics with serious journalism, but it’s not always obvious why. Take the December 2010 issue, for instance. It includes a fantastic investigative piece on vulture funds by Aram Roston, which isn’t advertised on the cover and which wasn’t placed online either until I found out about it a few days ago and started nudging them.

In any case, all’s well that ends well: the story’s up now. It suffers from the same problem that bedevils all investigative features on vulture funds: for all that such people will talk to trade journalists and vulture-fund apologists like myself (although even I have difficulty talking to them), they’ll very rarely talk to anyone doing this kind of piece. Roston talked to one vulture on the record — Hans Humes — and includes a number of anonymous quotes as well, although some of the anonymous quotes are certainly from Humes as well. The result is necessarily one-sided, although not remotely as bad as other articles I might mention, and the real fault here lies with the vultures, rather than with the reporter.

What Roston has done is look into the early history of vulture funds — Ken Dart vs Brazil, Jay Newman vs Panama — in a way I haven’t seen elsewhere. This history is hard to dig up: he clearly knows what he’s talking about. I have quibbles — I always thought that Elliott Associates successfully lobbied in Albany to change the law about calculating compound interest, rather than unsuccessfully lobbying to change the law about champerty. But these things are minor. What’s impressive is some of the color that Roston has dug up around the way that Elliott works:

Newman tried to freeze, attach or seize anything belonging to the government of the Congo. The government tried to keep a step ahead of him, allegedly resorting to fraud or straw owners to keep its oil revenue out of the vultures’ talons.

The vultures set up an intelligence operation to gather information and pursue allegations of corruption against the Congo. Newman supposedly set up an operation in London to conduct private investigations.

One vulture fund investor described the cloak-and-dagger operations. “Think Casablanca,” he said. He told me an “information bazaar” tried to dig up dirt on the leaders of Congo-Brazzaville, and former CIA station chiefs cooperated. “They’re all former spooks,” he told me. “Senior guys, station chiefs.”

Their operator was proud of what he’d accomplished in gathering information about Congolese corruption, but he marveled at the cost of digging up the dirt. “This piece of information, $50,000.” He held out one hand as he said it. “This piece of information, $100,000.” He held out the other hand…

The country settled with most of the aggressive vulture funds at 55 cents on the dollar, but Newman and his financier at Elliott scored better than the others. Apparently by agreeing to stop providing reporters with negative information about the ruling family, Newman is said to have collected about $90 million from the Congo. He had paid less than $20 million for the old debt. His biggest cost may have been for lawyers, private eyes and lobbyists.

You can see how Elliott’s investors love this: it’s the very definition of uncorrelated returns.

Roston quotes one anonymous vulture as defending his work on the grounds that vultures expose corruption. That’s pretty weak, as even Humes admits. The reasons to admire vultures are a bit more subtle than that: their existence reassures big institutional bond investors that their will always be a bid for their paper, and thereby reduces sovereigns’ borrowing costs. Or to put it more generally, someone has to be willing able to enforce a legally-binding contract in a court of law. Otherwise, no one will buy any bonds at all, given that they’re nothing but legal contracts. (For a much longer defense of vulture funds, check out my 2007 post here.)

Roston also fails to note that while the profits in vulture investing can be enormous when it works, the losses can be even bigger when it doesn’t work. What he describes as “the vultures’ biggest play of all” — Argentina — has been an unmitigated disaster for the vultures, who are happily racking up legal fees and court judgments in New York, none of which make them any money at all, even as the bondholders who accepted Argentina’s exchange offer have seen their new bonds soar in value. At this point, it’s pretty much unthinkable that the holdout vultures will ever end up making more money off Argentina than they would have done if they’d just accepted Argentina’s initial offer. And to date, of course, they’ve received nothing. More generally, the total profits of all vulture funds ever remain a rounding error in the history of sovereign debt flows — it’s important to keep these things in perspective, and to remember that profits in some countries have to be offset by losses in other countries which never paid out.

Roston’s conclusion — that vultures will be with us always — is less hopeful than my view that a consensus is forming between people who used to be very far apart, and that the vulture-fund debate is slowly fading into irrelevance and anachronism. Certainly the Argentine elephant is going to remain in the room for the foreseeable future — and now, of course, there’s a very real risk that we’ll see the whole thing kicked up a few orders of magnitude if eurozone sovereigns get into the sovereign-default game. But for the time being the European Central Bank is doing a great job of keeping distressed sovereign debt out of the hands of potential litigants.

One vulture investor recently moaned to me that there was nothing to invest in, these days, what with all asset prices going through the roof. Maybe the thing which really kills vultures isn’t legislation from the likes of Maxine Waters, but rather ultra-loose monetary policy and quantitative easing. Vultures profit from distress; they tend to drown, rather, in liquidity.

A couple of weeks ago, Robert Cottrell took issue with my post explaining why the NYT is lagging behind the Huffington Post in terms of reader engagement. Robert is one of the great curators on the internet; he seems to read everything as soon as it comes out. It’s therefore unsurprising that he’s single-minded in how he reads and loathes distractions:

In Felix’s own terms, if you want to do a bit of reading, chances are you’d rather do it in a library than in Times Square. If I have a complaint about the NYT layout, it’s that the page is still too noisy, even now.

I agree that if the purpose of a web page is to facilitate the best possible reading experience with respect to a certain piece of writing, then the NYT is better than HuffPo and there are sites which are even cleaner and better than the NYT. (Robert’s Reader being one of them.) On the other hand, plugins like Readability do a fantastic job of that kind of thing as well. And when you’re designing a sticky, interactive, compelling website, you have to do a lot more than just put up content and hope that people will magically come and read it.

In any case, this disagreement between Robert and me has now been upgraded to a full-scale bet — or rather, two bets. The stakes are, well, steaks: “Loser buys dinner for the winner’s nominated guest. In New York or London, whichever is closer for the buyer. And a decent dinner too. No ducking. No skimping.” And the bets come from this passage from Robert’s post:

Do you seriously think Arianna Huffington will be working diligently at AOL a year from now? Or that the Huffington Post will still be in business, except perhaps as a gibbering wreck, two years from now?

So here are the official terms of the two bets:

1. On February 9, 2012, will Arianna Huffington be working diligently at AOL? If so, Robert loses, if not, Felix loses.

2. On February 9, 2013, will the Huffington Post still be in business? If so, Robert loses, if not, Felix loses. With the proviso that if HuffPo is in business only as a gibbering wreck, Robert will have won the bet and Felix will have lost.

The winner of both bets will be determined by a third-party referee — in this case, John Gapper of the FT, whose column on the HuffPo sale to AOL is here.

I’m pretty confident that I’m going to win both bets. I can’t imagine that Arianna is going to exit her eponymous publication before the 2012 election campaign is over, especially now that she has more control over it than ever. And with all the resources of AOL at her disposal, HuffPo is surely going to be bigger in 2013 than it is now. Now I just need to start planning my trips to London — it’s been a while since I had a nice dinner at Bibendum.

Victoria Barret reports on the nice little deal that Dan Frommer has going on in Barcelona: “Samsung was generous enough to sponsor our trip”, in the words of Frommer himself.

Barret is reasonably sympathetic, and likes the fact that Frommer inserts a disclaimer about how he’s “feeling pretty warm and fuzzy about Samsung right now” into every post from Barcelona:

Let’s be clear, here. Samsung is buying influence. If they didn’t think they were, why would they bother buying journalists’ airplane tickets and putting them up in hotels? (Frommer, I’m told, is not the only one being “sponsored”.) …

SAI’s business model simply doesn’t pay for flights and hotel stays. Frommer will bring insight from Barcelona back to New York. That’s good for everyone…

Frommer’s earlier posts on Samsung don’t stand out as fawning… He deserves credit for disclosure, too.

I’m not nearly as sanguine as Barret about all this. For one thing, this is editorial, not advertising. It’s conceivable Frommer would have written exactly the same thing had he not been “sponsored” by Samsung, but we’ll never know. And since he is being sponsored by Samsung, this now looks highly dubious:

But it gets worse than that. For one thing, Frommer’s not just scrounging up whatever’s necessary to get him to the conference and report. He’s was flown over “in posh business class“, which almost certainly means posh hotels and expensive jamón iberico as well. Samsung is doing its utmost to buy his goodwill: why is he letting them get away with it?

On top of that, Samsung is loving the ubiquitous disclaimer — it provides fantastic free marketing for them in every post. Frommer might think he’s somehow neutralizing the junket by disclosing it; in fact he’s giving Samsung vast amounts of exactly what they want most.

Most tellingly of all, Samsung isn’t really “sponsoring” Frommer at all — especially not if, as seems logical and as Barret reports, other bloggers at the conference are getting the same deal and not disclosing it. Sponsorship involves a trade of some description: we give you money, you give us some kind of ad space or exposure. If Samsung is getting nothing explicit in return, then it must be getting something implicit instead.

Failure to disclose freebies like this is very bad; disclosing them, however, isn’t much better. So the best solution is to simply refuse to take them. But that’s hard for someone like Henry Blodget, the chap in charge of Business Insider, who writes:

Our policy is to take these opportunities case-by-case. If we think travel or an event partially paid for by a company will help us produce content that our readers love, we’ll be happy to consider it. If we think it will lead to us producing crap or fluff or be a waste of time, we won’t do it.

In this case, the Barcelona event is an excellent mobile conference, and I was confident Dan would produce great stuff while he was there. So we were happy to take Samsung up on its generous offer to airmail him over.

I think the honest conversation would go something like this:

Samsung: Henry, are you sending anybody to Barcelona this year?

Henry: No, we don’t have budget for that.

Samsung: Well, if you send someone, we’ll happily buy adspace alongside their content. Here’s a commitment for $10,000 if you do.

Henry: Thanks! We now have the money to send Dan to Barcelona on our own dime, and we’re more than happy for him to go over and generate the pageviews you’re buying ads against.

Samsung: You’re welcome.

That kind of thing is entirely kosher, and yet Samsung doesn’t seem to like to operate that way. The fact that they don’t — and TBI doesn’t — implies a certain sleaziness. It’s not a huge deal, but it does mark TBI as being a little more ethically flexible than most reputable media outlets.

(Cross-posted at CJR)

I spent a large chunk of Saturday looking at The Clock. Christian Marclay’s video masterpiece is currently on show at the Paula Cooper gallery in New York, and is also part of the British Art Show, which is touring the UK and will open in London on Wednesday.

Still, like a lot of excellent video, it’s very hard to find. Wayne Rooney’s bicycle-kick winner on Saturday is out there, although the copyright holders were being very aggressive in taking it down from YouTube for most of the weekend. And the Grammy performances from last night are still pretty much nowhere to be found.

In the case of expensive entertainment media, I kindasorta understand what’s going on — or at least I would understand, if they had any strategy for profiting from the viral nature of these videos themselves. But in the case of the artwork, I’m just depressed.

Marclay’s work is truly magnificent — but it’s 24 hours long. It’s basically the world’s most expensive clock, laboriously pieced together from thousands of film and TV clips, each of which tell the time in some way. It’s synced to the actual time where the film is showing, so that if a clock shows 3:45pm on screen, that means it’s 3:45pm where you’re watching.

It’s an amazing work, beautifully edited. Like much high-end contemporary art, it marries a striking conceptual purity with a no-expense-spared perfectionism when it comes to technique — the film quality is first-rate, the edits are carefully put together so that you get whole sequences which echo each other and create mini-narratives within the narrative-free whole. And while it certainly works extremely well in a gallery context, one can’t help but think that its ideal presentation would be as a permanent clock, on the wall in one’s house, where you’d look over to tell the time and then get completely distracted and be late for whatever it was you were trying not to be late for.

After all, the main reasons that the piece is so hypnotic has nothing to do with the gallery setting. Instead, it’s just the nature of what’s known as “tick-tocks” in financial journalism: the deep-seated human desire to know what happens next, and which explains why so many people got all the way through Too Big To Fail. The film is comprised mostly of high-end Hollywood product, made by people who know how to keep you watching. Which creates a kind of surfing sensation: you never find out what happened after any given clip, but you’re already engrossed by the next one. According to one of the gallery assistants, people tend to spend a huge amount of time between getting up to leave and actually leaving: they can’t quite bring themselves to tear themselves away.

I would dearly love to be able to have a copy of this piece at home, getting to know its nuances — look, it’s the sequence with a whole series of dropped-in bits from Sam Raimi’s Spider-Man! — and looking out for the more subtle or hidden clocks and watches in scenes where they’re not immediately apparent. It wouldn’t be too hard, I don’t think, to set up a website where the film was constantly streaming in various timezones, and which you could just play, full-screen, in any web-connected home. And the amount of pleasure and wonder that website would generate would be enormous.

But I doubt that’s going to happen. The Clock is being sold in an edition of six, to museums around the world who will sometimes have it on show but who normally won’t. And museums, for all that they nominally serve the public, still like to jealously guard their work. Noah Horowitz, in Art of the Deal, tells the story of Anri Sala’s Intervista, a 26-minute video projection which was sold to the Musée d’Art Moderne de la Ville de Paris in 2001. When the museum found out that Sala intended to release a single-channel edition for private use, in the form of 220 VHS tapes, the museum worried about its own version’s “diminished singularity, reinforced by the disparity in price the museum would be paying for the installation versus that spent by owners of the single-channel VHS edition. In the end, the museum won out, with a final contract annulling the proposed edition.”

Marclay and his gallerists want to cement his position in the institutional art world, and as it’s going to be unnecessarily difficult for the world to enjoy The Clock – just as it’s unnecessarily difficult for people to see Lady Gaga’s Grammy performance from last night. At some point, we’re going to break through these barriers. But it’s not going to happen any time soon.

Tom McGeveran asks an important question, in his analysis of the AOL-HuffPo deal:

What is it about the environment of traditional journalism that makes it so that readers are more likely to interact with the Huffington Post reblog of a New York Times article than they are with the article itself?

The answer to this question, I think, is also a key part of the reason why the NYT paywall is a bad idea.

It’s worth using a specific example here, so let’s take Dave Pell’s suggestion and look at the NYT’s Olbermann scoop last night, and HuffPo’s reblog of it. When Pell first tweeted the comparison, the NYT blog had no comments, while the HuffPo blog had “hundreds of comments/likes.” Now, the NYT post is up to 93 comments, but the HuffPo post is still miles ahead: 2,088 comments, 1,392 likes on Facebook, 340 Facebook shares, 89 tweets, and 52 emails. All of which figures are easily visible in a colorful box at the top of the story.

The NYT, by contrast, keeps such numbers to itself: you can see the number of posted comments, but you can’t see the number of comments which have been submitted and have yet to make it through moderation. (Which is why Pell saw zero comments when he tweeted last night.)

Both the NYT and HufPo stories are blog posts, but there the similarities end. It’s worth just looking at the two, side by side:

McGeveran says the NYT doesn’t look more like HuffPo because “their very existence is justified by their obligation to readers to vouch for the content they produce,” including widgets from Twitter and Facebook and the like, if the content from those widgets appears on the NYT website. And I daresay that the NYT sells that Killington ad at a much higher rate, per thousand pageviews, than HuffPo is getting for its ProFlowers and Lufthansa ads and its Bing tie-in. But the HuffPo page is clearly generating lots of pageviews, and has more ads on the page. (The second ad unit on the NYT page is a house ad for its own iPad app; HuffPo also has a house ad, for its Blackberry app, but runs it separately in a blue bar along the top of the page.) And of course HuffPo doesn’t need to pay for the expensive original reporting of Bill Carter and Brian Stelter.

Still, the difference between the two pages is much starker than it needs to be: the NYT page is like walking into a library, while the HuffPo page is like walking through Times Square. The HuffPo page is full of links to interesting stories elsewhere on the site — about Egypt, or the kid in the Superbowl Darth Vader ad, or the stories my Facebook friends are reading. And there are lot of links to media stories, too; each one has a photo attached.

The NYT page, by contrast, feels like it’s at a site-map dead end. It’s part of the Media Decoder blog, and almost every NYT story linked to on the page is also part of that blog. There are almost no photos; there is almost no color.

Most importantly, the HuffPo page is genuinely, compellingly, interactive — it’s almost impossible to visit it without finding something you want to click on. Like! Comment! Tweet! Go here! Try this! Visit that! There’s site navigation, yes, but that’s just one layer of a very rich and complex page architecture. At the NYT page, by contrast, to get out of the Media Decoder blog you either have to click on a generic navigation button like “Sports,” or else you’ll just leave the page and the site completely.

At this point, it’s worth remembering that the NYT paywall is really, at heart, a navigation fee. The side door is always open: if you get to the NYT website from, say, the HuffPo story, then you’ll be able to read that story no matter how many other stories you’ve read that month. The NYT has said that 80% of its visitors don’t read enough pages per month that they’d have any need to subscribe at all. But it’s pretty obvious why that is: the NYT is making precious little effort to encourage people to want to click around the site and view more pages.

The fact is that readers come to the NYT — or any website — because they want to read its stories. They don’t much care about branded sections, or deciphering the difference between a news story and a blog entry. (The Olbermann story is a blog post, for reasons which even I don’t fully understand.) But the NYT site architecture seems built around the peculiar way that the news is produced inside 620 8th Avenue, rather than around showing the NYT’s readers the exact stories they’re most likely to want to read.

One the paywall goes up, it’s certain that non-subscribers — the vast majority of the NYT readership — will read fewer pages per month than they did before. The NYT’s navigation was never very sticky, as we’ve seen, but from here on in there will actually be a substantial economic incentive not to explore the site, and to save up your precious quota of pageviews for when you need them most.

One of the paradoxes of news media is that most of the time, the more you’re paying to use it, the harder it is to navigate. Sites like HuffPo make navigation effortless, while it can take weeks or months to learn how to properly use a Bloomberg or Westlaw terminal. Once the NYT implements its paywall, it’s locking itself into that broken system: it will be providing an expensive service to a self-selecting rich elite who are willing to put in the time to learn how to use it. Meanwhile, most Americans will happily get their news from friendlier and much more approachable free services like HuffPo.

Rather than learning from or trying to emulate HuffPo’s hugely valuable editorial technology, then, the NYT is sticking its head in the sand and retreating to a defensive stance of trying to make as much money as possible from its core loyal readers. There’s no growth in such a strategy. Indeed, the opposite is true: the NYT is making it both hard and expensive to become a core loyal reader. Meanwhile, the open web will become ever more accessible and social, with friends pointing friends to news in a site-agnostic manner. The NYT is distancing itself from that conversation, standing proud and aloof. It’s a strategy which is doomed to fail.

A brash and charismatic household name is brought in to apply magical fairy dust to a struggling media franchise with declining relevance and revenues. Tina Brown has done it successfully three times — with Tatler, Vanity Fair, and The New Yorker – and is now trying again with Newsweek. Arianna Huffington is newer to this game, but Tim Armstrong is surely willing to throw even more money at Arianna than Si Newhouse threw at Tina. Armstrong needs this bet to succeed — he’s placed Arianna in charge of all his media properties, while telling everybody that AOL is a media company first and foremost. And that’s why Arianna is so happy today.

Zach Seward made a very smart point this morning: Arianna, with this deal, is not only massively expanding the reach of her eponymous baby — the Huffington Post is now just one part of the massive Huffington Post Media Group — but is also regaining control of it. The Huffington Post, like any company funded by venture capitalists, always had to be moving towards a hefty exit for its shareholders: Dan Lyons reports today that one of the key backers, Softbank, was “impatient for a return” as long ago as June 2009.

Arianna never had free rein at her company: a large part of the CEO’s job was to manage her flights of fancy (free buses to the Stewart/Colbert rally in Washington!) and to make the tensions between her and co-founder Kenny Lerer as productive as possible.

Now, by contrast, the constraints on Huffington are much fewer. Lyons frets that “all those bright young things with the glamorous job of writing for the Huffington Post are being sent down into the belly of the AOL galleyship and assigned to an oar” — but the fact is that Armstrong bought HuffPo, and TechCrunch before it, precisely because his galleyship model of managing writers was a signal failure. Arianna gets much more bang for her buck — and has happier and more loyal employees.

From the point of view of editorial-side employees at HuffPo and AOL, there’s no doubt that this merger is going to be wrenching — all mergers are. But I don’t think it’s going to be as bad as many think, certainly when it comes to layoffs. Both Armstrong and Huffington have a vision for Huffington Post Media Group that is much bigger than what currently exists, so it should be possible to take any redundancies/synergies/overlaps between HuffPo and existing AOL properties and refocus that extra talent on growth. Arianna’s a den mother when it comes to her own employees: she won’t stand for any harm befalling them. And the AOL employees will finally get to work for someone whose nose for what works editorially has been far more lucrative than the numbers-based management at AOL.

Best of all, from Arianna’s point of view, is that all the extra investment she wants to make in editorial, starting with HuffPost Brazil, is going to be paid for not by rapacious venture capitalists looking for monster returns on their investment, but rather by befuddled and elderly AOL subscribers with broadband connections who don’t understand that they can cancel their $20-a-month subscriptions and still keep their AOL email address. That stream of cash won’t last forever, but it’s never going to interfere with Arianna’s editorial decision-making.

Meanwhile, Kenny Lerer has now achieved his exit, albeit at the low end of the $300 million to $450 million range being mooted back in December. As far as his media properties are concerned, his next big order of business is to manage another profitable exit from The Business Insider, where’s he’s a significant investor. This post is instructive: when one of TBI’s employees said something rude about AOL, getting more than 50,000 pageviews in the process, he was rewarded with a very public smackdown and told that he “did not go through the proper editing process”; Henry Blodget then served up a grovelling public apology of the type I’ve never seen on TBI stories written about companies which aren’t potential acquirers.

As Huffington and Lerer go their separate ways, then, both of them will surely be very happy at how it all worked out — with lots of money for both of them, and no more fights over money or strategy. Lerer might have wanted a bit of a higher sale price, but once Arianna decided she wanted to sell, it was all over: it is her name on the door, after all. And now she has more control of her empire than ever — not to mention a substantially bigger empire than she had yesterday.

The $315 million that AOL is paying for the Huffington Post is roughly 3X the valuation seen at its last capital raise two years ago, is 10X its 2010 revenues and is roughly 5X estimated forward 2011 revenues. Those are all big numbers, but not insanely so, for what is clearly a big strategic move on the part of AOL. After all, AOL has a market cap of $2.3 billion: right now it still dwarfs HuffPo. That might not be true in a few years’ time, if HuffPo continues growing at its current rate and AOL continues to lose subscribers and revenues.

My feeling, then, is that this deal is a good one for both sides. AOL gets something it desperately needs: a voice and a clear editorial vision. It’s smart, and bold, to put Arianna in charge of all AOL’s editorial content, since she is one of the precious few people who has managed to create a mass-market general-interest online publication which isn’t bland and which has an instantly identifiable personality. That’s a rare skill and one which AOL desperately needs to apply to its broad yet inchoate suite of websites.

As for HuffPo, it gets lots of money, great tech content from Engadget and TechCrunch, hugely valuable video-production abilities, a local infrastructure in Patch, lots of money, a public stock-market listing with which to make fill-in acquisitions and incentivize employees with options, a massive leg up in terms of reaching the older and more conservative Web 1.0 audience and did I mention the lots of money? Last year at SXSW I was talking about how ambitious New York entrepreneurs in the dot-com space have often done very well for themselves in the tech space, but have signally failed to engineer massive exits in the content space. With this sale, Jonah Peretti changes all that; his minority stake in HuffPo is probably worth more than the amount of money Jason Calacanis got when he sold Weblogs Inc to AOL.

And then, of course, there’s Arianna, who is now officially the Empress of the Internet with both power and her own self-made dynastic wealth. She’s already started raiding big names from mainstream media, like Howard Fineman and Tim O’Brien; expect that trend to accelerate now that she’s on a much firmer financial footing.

Most interestingly of all, however, is the way that AOL is creating a new entity, the Huffington Post Media Group, to run all of its content business. Given that AOL CEO Tim Armstrong has repeatedly talked about how he wants to be a content company, one has to wonder what that means for the rest of AOL — a group of businesses which still throw off the vast majority of the company’s revenues but are strategically non-core. The question now has to be asked: is AOL really the right parent for the unique and very valuable HPMG? My guess is that as AOL continues to divest itself of non-core assets, HPMG will make it increasingly attractive as a takeover target itself. HuffPo was definitively sold off today. But it might wind up getting sold again in the none too distant future.

Nick Denton uses Facebook as his news delivery mechanism of choice:

I consume most of my news in email and (more recently) Facebook. I think Zuckerberg has created the personalized news engine we always dreamed of. My friends are a pretty good proxy for my tastes. And it’s a lot easier to enter and prune a friend list than it is to define one’s tastes by keyword.

I find this fascinating, and surprising. I share news items on Twitter, but not on Facebook, and very few of my Facebook friends seem remotely inclined to post news links — the news to non-news ratio on Facebook is much higher lower, at least for me, than it is on Twitter. Then again, I don’t have Nick’s friends, and I don’t have nearly as many friends as Nick, who’s up to 1,319 at last count, and rising.

Facebook does an OK job at filtering: stories are more likely to show up in your Top News feed if they’ve been liked or commented on a lot. But when I turn to Flipboard for my personalized news, I’ll find much more interesting and relevant material in the Twitter section than in the Facebook section. And the counts aren’t that far apart: I follow 775 people on Twitter, and have 498 Facebook friends. It’s just that Facebook is much better at providing conversations, and photos from my friends’ lives, while Twitter seems better at pointing me to news. Which makes it all the more interesting to me how Denton’s mileage varies — it’s an important lesson in the limits of extrapolation. What works for me, online, might well not work for you.

Denton continues with a great smackdown on much of the news industry:

Q: What irritates you in the print and online media world?

Denton: Fake news. I don’t mean fake news in the Fox News sense. I mean the fake news that clogs up most newspapers and most news websites, for that matter. The new initiative will go nowhere. The new policy isn’t new at all. The state won’t go bankrupt. The product isn’t revolutionary. And journalists pretend that these official statements and company press releases actually constitute news…

To follow the daily or hourly news cycle is the media equivalent of day-trading: it’s frenzied, pointless and usually unprofitable. I’d much rather read an item which just showed me the photos or documents. And if you’re going to write some text, take a position or explain something to me. Give me opinion or reference; just don’t pretend you’re providing news. That’s not news.

This is one of the reasons why personal blogs still feel so fresh and useful in the face of professional operations which update dozens of times per day. And I suspect it’s also one of the factors behind the Gawker redesign — Denton knows full well that much of what appears in the Gawker Media network falls broadly under his category of “fake news”, which is why he spends his morning firing off “irritable emails about headlines, photos, lame press releases masquerading as stories”. He doesn’t want that stuff to be the first material that a visitor to one of his websites sees, and so he’s redesigned things to be able to always feature a genuinely strong story rather than what happens to be the most recent thing posted.

The one thing you can say about both Twitter and Facebook as news-filtering mechanisms is that they do a very good job of filtering out the fake news. But I still think there can and will be better solutions. A friend of mine told me a few months ago that filtering could be the new search, and I think he might be right; I personally have plans to try to do something fun and powerful with filtering, which with any luck you’ll be able to see quite soon. Facebook’s good, in the fight against fake news. But we can definitely do better.

I love the NYT’s coverage, by Diana Henriques, of Irving Picard’s lawsuit against JP Morgan Chase. Not only has the NYT put the lawsuit online in full, but it also regularly links to the exact page of the lawsuit that it’s talking about, using the nifty NYT document viewer. As you’d expect from the NYT, the story is clear and accurate, with handy interactive sidebars and audio extras.

Alongside the official NYT coverage, Floyd Norris wrote a blog on the case. He picks up on something quite astonishing: JP Morgan had created products which paid out the return on Madoff’s funds. In order to hedge that exposure, JPM was naturally invested in those funds. But even as it retained its exposure to its investors, JPM took its money out of the funds. “JPMC was still required to pay its investors based on the returns generated by the BLMIS feeder funds, which were generating positive returns when the market was down,” says the complaint drily. “But for JPMC’s suspicions about fraud at BLMIS, this move would have been counterintuitive.”

Norris is evenhanded about what all this means:

Two things stand out. First, JPMorgan Chase no longer had a riskless strategy. If it turned out Madoff’s returns were genuine, it stood to lose a lot of money since it would have to pay the investors in the structured products. Second, the suit refers to the bank’s “suspicions.” That is a very different word from “complicit.”

It seems to me that JPM was making a massive proprietary bet on Madoff being uncovered as a fraud — there’s no other explanation for its actions that I can see. Norris is right that JPM wasn’t necessarily complicit with Madoff in the fraud, but there’s something extremely fishy going on here.

For a much less evenhanded look at the case, one needs only turn to the Huffington Post, where Peter Goodman has recently taken over as business editor after leaving the NYT. His headline is stark — “Bernie Madoff’s Relationship With JPMorgan Should Shock No One” — and, freed from the institutional constraints of the NYT, he lets loose:

Far from shocking, this is really just an appropriate plotline in a story that is finally becoming clear beyond argument: Those lines between criminal fraud and legitimate banking have been blurry for a long time. One can reasonably argue that they pretty much got erased during the Internet bubble and into the real-estate boom.

Goodman goes on to compare JPM unfavorably to Madoff, noting that in Madoff’s fraud, “the amount of money left missing, some $65 billion, amounts to chump change compared to the banking-led larceny committed at the expense of national prosperity.”

Clearly, Goodman is enjoying his newfound freedom at HuffPo — the fact that he can write the kind of material which would be unthankable in the blogs or pages of the NYT. But at the same time, as journalists move back and forth with increasing regularity between mainstream outlets and newer, more vivacious sites, it’s going to be harder for the MSM to hold on to its ability to stay above the fray. Goodman was writing Henriques-style reports only a few months ago, and now that he’s left, it’s pretty clear what he was thinking all along. The same can be said for other NYT departures, like say David Cay Johnston.

The more that this kind of thing happens, the more obvious it becomes that NYT reporters are uncomfortably hiding their opinions, inevitably letting them seep out the edges of their reporting, and at the same time desperately trying to maintain a veneer of impartiality and objectivity. It’s a tough act to maintain, and it shatters completely if and when the NYT’s bylines regularly appear elsewhere expressing strongly-held and even extreme opinions.

The world of journalism is becoming increasingly personality-based, with copper-bottomed institutions being replaced by a multitude of individual voices. The NYT in general is doing a good job of showcasing a wide range of voices on its blogs and in its non-news pages more generally. But it remains to be seen whether and for how long it will try to enforce the wall between news and commentary. That wall has, after all, already been breached by having reporters like Gretchen Morgenson also write columns. And in coming years I expect we’ll see much more voice and opinion in news articles, if only because that’s the best way of getting the best content out of the NYT’s smartest reporters.

This is getting to be a habit: today’s WSJ article claiming that Wall Street pay has hit a new record high in 2010 is seriously flawed. “In 2010, total compensation and benefits at publicly traded Wall Street banks and securities firms hit a record of $135 billion”, the paper says — but you have to really hunt to find the small print. First click on the “Interactive Graphics” tab at the top of the story, then click on “About our methodology” at the bottom of that tab. A window pops up in Flash, with uncopyable text saying this:

The analysis includes important caveats. Figures don’t reflect results of acquired companies before they were purchased. For example, BlackRock Inc. bought Barclays Global Investors in 2009, while Bank of America Corp. acquired Merrill Lynch & Co.

It’s not that the WSJ couldn’t have done a proper analysis. Certainly Bear Stearns and Merrill Lynch and Lehman Brothers were an important part of Wall Street compensation in 2006 and 2007, and they made their compensation numbers public. If you want to run the total amount of money paid to employees by public Wall Street firms over time, you have to include the firms which no longer exist.

The WSJ doesn’t do so, however — and, what’s worse, hides the fact that its analysis is woefully incomplete. The problem, I think, is with data providers, who are really bad at providing any kind of historical data for public companies which used to exist but don’t any more. Companies tend to be identified by their ticker symbol, and so when the ticker symbol disappears, so does the data — especially when the ticker is then taken over by someone completely different.

But it reveals little to say that Bank of America or JP Morgan are paying their employees more than they did in 2007, when the real comparison should be with how much Bank of America and Merrill Lynch combined were paying, or JP Morgan and Bear Stearns. (And WaMu, for that matter.) The WSJ has the resources to find SEC filings for old public companies and add them in to its calculations. Not to do so is just laziness, plus a natural gravitation towards the most sensational possible headline.

(Cross-posted at CJR)

Erin Arvedlund — yes, that Erin Arvedlund — has a pretty crazy column in the Philadelphia Inquirer, under the headline “Why buying gold may be better financially than buying a house.” It says pretty much what you’d expect: house prices are falling, gold prices are rising, and therefore before you go ahead and buy a house, you should probably consider whether you’d be better off buying gold instead.

Arvedlund talked to a bunch of people for this column, mostly rent-a-quote types like Barry Ritholtz and Peter Schiff, but the central conceit is all hers: none of the people she quotes is literally saying that people should make a speculative punt on gold rather than buy a home to live in. Indeed, Schiff comes out quite explicitly and says that homes are not an investment, they’re more of a consumption good. (He’s right.)

Arvedlund, here, has committed the journalistic equivalent of mixing toothpaste and orange juice. Either tastes fine on its own: it’s perfectly OK to pen a column pointing out that house prices might well continue to fall, or another one looking at gold as an investment and saying that it has a fair amount of possible upside. The really nasty taste comes when you combine the two.

To see just how crazy Arvedlund’s thesis is, look at how she presents it:

Maybe you’ve saved enough for a down payment. But should you bet your money on home prices, even with a tempting low-interest, fixed-rate mortgage? Or is it financially smarter to continue renting and invest the money in an asset that could appreciate for at least another few years?

By definition, money that has been painstakingly saved up for a down-payment on a house is not risk capital which can or should ever be applied to a highly speculative investment like gold. It might well be smart to continue to rent rather than buy a home. And indeed it might even be true that gold will rise in value over the next few years. But that doesn’t mean that anybody in their right mind should seriously consider taking their down-payment nest egg and investing it in gold.

Being “financially smart” is not the same as investing in whichever asset gives you the highest return over some given time horizon. If that were the case, then everybody should just go out and start selling lottery tickets without any downside protection. The fact is that nothing is a good or a bad investment in and of itself: you always have to look at it in the context of the specific risk profile of the investor in question. And if the investor is someone scraping together a down-payment on a house, then it’s trivially true that using some or all of the down-payment money to buy gold at $1,350 per ounce is downright bonkers.

Essentially, Arvedlund is proposing an exotic relative-value trade here: she’s saying that houses will underperform gold, or that the price of a house in gold is going to go down rather than up. Which brings us to this graph, which is the price of houses in gold:

Arvedlund’s trade has been a good one for a long time — pretty much since 2002. Over those nine years, whether house prices have been rising or falling, the price of a house in gold has gone down, and you would have been financially better off buying gold than taking that money and using it as a down-payment for a house. On the other hand, from 1980 to 2002, Arvedlund’s trade was an utterly atrocious one, which would probably have lost you money on both legs.

One look at this volatile time series tells you all you need to know about Arvedlund’s advice: it’s way too risky for her audience, and in fact, over the long term, it’s pretty likely that the price of a house in gold is going to revert to its long-term mean and go up rather than down.

Arvedlund is writing for the Philadelphia Inquirer here, not for Barron’s or for people with huge amounts of risk capital and disposable income. The last thing this audience needs is speculative advice about buying gold now and trying to time the market so that you sell it before the bubble bursts. But if I were a hedge fund manager, I would wonder whether this column marked some kind of a turning point. It’s entirely possible that  Arvedlund has hit the very moment at which gold starts to underperform house prices. Which isn’t to say, of course, that either of them are going up.

I’m surprised, but pleased, to see this coming from FT editor Lionel Barber, in his Hugh Cudlipp lecture today:

For those publications adopting pay walls, the strategy represents a big leap into uncharted territory. Those which remain free or substantially free, have another kind of hope: that the very large audiences they are able to garner through freely available content will boost sales – or at least slow the decline of the print edition.

This is the first time that I’ve seen an advocate of online paywalls admit that they don’t boost offline subscriptions, and that newspapers which give their content away for free online have every hope that doing so will result in increased print sales.

This makes conceptual sense, of course: the paper you choose to buy at the newsstand is likely to be the same one you read every day online, so boosting the latter audience by making or keeping your content free is likely to boost the former audience as well.

Most publishers, however, have not historically thought this way. Turning their solipsism up to 11, they have reasoned that people buy newspaper X because they want newspaper X’s content in particular, and that if readers can find that content online for free, then they won’t subscribe to the paper or buy it on newsstands.

The truth, of course, is that people want news, not newspapers, and they will find a preferred venue for that news both online and in print. Newspapers aren’t competing with their own websites: they’re competing with everybody else’s news websites, not to mention all the other types of media and entertainment out there. That’s why Barber says that he “was pleased to see that the BBC has at last begun to recognize the economic threat that BBC online poses to newspapers” — there’s little point in getting rid of your own free website if there are lots of other free websites out there which can cause your paper just as much harm.

Barber’s speech comes just as fiwords.com launches — a website of financial definitions attached to a book with the same content, co-written by Chris Roush of Talking Biz News. Roush asked me to be on the advisory board of the site, but I started pushing back when it launched with a high and impenetrable paywall.

The site’s content is useful, and the site itself is very well designed, so one would think that the most natural thing in the world would be to make it free. It would rapidly rise to the top of many Google searches, it would become a loved and much-used resource, it would be able to crowdsource help with tricky definitions, and it would be a sought-after advertising venue for many financial-services companies. Instead, Roush and his publisher have put up this paywall, on the grounds, he told me, that “we’ve put all of the content from the book, and more, onto the site, so if we gave it away for free, no one would buy the book“.

That’s silly — and just as solipsistic as those newspaper publishers who fear cannibalizing themselves. If people want to look up financial terms online, they’re going to do so whether or not fiwords.com is free. If it is free, they’ll use it; if it isn’t, they won’t. They’re not going to buy a fiwords.com subscription on the off chance that the definitions there turn out to be substantially better than the definitions elsewhere.

More to the point, they’ll be more likely to buy the book if they regularly get a lot of value out of its content online. The experience of publishers who have put works up for free online is very consistent: print sales go up, not down.

Barber’s point is an interesting one: that putting up a paywall can make sense even in the knowledge that staying free would probably mean a higher print subscription base. Essentially, he says, the FT has made the strategic decision to maximize total subscribers — the loyal readers who come back many times per week or even per day, and who are highly valuable to advertisers. By putting up a paywall, the FT manages to corral, count, and sell such subscribers online, just as it does in print.

But I’d bet that even Barber, the paywall advocate, would be puzzled by the fiwords.com strategy. Both the book and the website are pretty obscure, right now; what they need more than anything else is visibility and a widespread reputation. And they’re not going to get that by putting up a paywall at launch.