We commented a few months ago that Gannett might be on to something with the paid-content models on the websites of three of its local newspaper websites because they applied economic basics: high demand, low supply. Say your local daily has the most comprehensive (or perhaps the only) coverage of a university’s athletic department –diehard fans (alumni, parents) are likely willing to pay a fee.

A new study from the Missouri School of Journalism’s Center for Advanced Social Research comprising 300 interviews with local dailies found that 46% of the newspapers surveyed with circulations of less than 25,000 charge for some online content, while 24% of newspapers with circulations above 25,000 do the same.

Of those that don’t charge, 35% are drawing up paid-content plans and 50% are mulling online subscription options. Just 15% aren’t considering charging for online content at all.

However, a third of the dailies with paid-content models believe the revenue from that source will contribute at most 20% of total digital revenue, with 10% expecting the subscription revenue to account for more. About 50% see only “a negligible contribution to the bottom line,” the report says.

It gets worse: 85% of these local dailies said digital revenue accounts for less than 15% of their revenue; in the next three years, 60% expect it to be more than 15%.

So it seems paid-content models for regional publications can bring in revenue, but it’s marginal at best — and probably not enough to offset the massive decline in local print advertising.

Though there’s no new information featured in this graphic from OnlineMBA.com (attached at the bottom), the design layout really emphasizes the assembly line nature of Demand’s content farming business. It’s nauseating to me, but I imagine Henry Ford would nod his head in approval. Who would have guessed that online content was mass production’s last great frontier?

It’s very interesting that OnlineMBA decided to compare Demand’s outlets so much with The New York Times, which has been the benchmark for high-quality journalistic content for as long as anyone can remember (though I think its content value has suffered greatly in the last 10 years in particular). This is kind of an unfair comparison considering that most of Demand Media’s output doesn’t have a shred of journalistic value, though it’s definitely not as evergreen as the company would like to sell it.

But the juxtaposition of the two, especially with the imminent arrival of NYTimes’ paywall, made me contemplate an Internet ecosystem with two tiers of online content — mass-produced, SEO-flavored junk food of the Demand Media variety that was free, and actual quality content that you’d have to subscribe to consume.

Arguably, this system already exists — though the paid content tends to be in-depth research and similarly valuable components. But what if the free side was so gummed up with low-cost trash — and no search engine could sort it out — that users were forced to subscribe to certain resources to acquire a shred of quality? (Quite the subjective notion in itself — one person’s quality is another one’s crap.) Then sites with subscription models could charge higher CPMs for display and rich media ads because their audience would be deemed more valuable.

It’s a system that would favor larger publishers and somehow magnify the struggle for the small and midsized guys, already squeezed by the buddy-buddy relationship between Google and content farms.

[Source: OnlineMBA.com]

On the plus side, it’s possibly the most innovative digital subscription plan out there. While the home page and section fronts of the NYTimes will remain free to peruse, but after you view 20 articles (which also includes slideshows, videos and other features) in a month, you’re going to have to pay… Possibly. You’ll be asked to sign up for a all-access digital subscription, at least.

The Top News content on smartphone and tablet apps will remain free, and people that receive the actual physical newspaper (wait a second — they’re still printing the old gray lady?) will get complementary digital access. Also, you can read content for free if you’re referred by a search engine or social network.

Thus Nicholas Carlson and Henry Blodgett at Business Insider explain how to read NYTimes for free:

“See a headline you want, highlight it, copy it, and then dump it into your Google search window.  The headline should be returned as the first search result. Then just click it and read.”

The same trick works for other subscription dailies — notably The Wall Street Journal and The Financial Times. However, NYTimes is limiting these free referrals per resource — only five clicks allowed daily. Carlson and Blodgett note that once you exhaust your Google five, and for some reason you want to read more NYTimes, you could just switch over to Bing…

It seems like NYTimes has covered all its bases — now we all have to wait to see what kind of revenue comes trickling in. Then we’ll know whether the pay meter is one last attempt at a paid-content news model for the news industry, or the way of the future…

For one thing, Gannet isn’t messing with blanket paywalls like Newsday — a regional news source for Long Island, NY — erected in October 2009. Newsday’s online site witnessed a stunning drop in unique visitors over the paywall’s first three months in action while digital-only subscriptions numbered a total of 35. In December, Newsday parent Cablevision dropped the paywall for a month, but now it’s back up.

News Corp. witnessed similar failings with its paywall experiments in the U.K., while The New York Times keeps pushing back the launch date of its pay meter.

However, Bloomberg reports: “Gannett’s newspaper in Greenville, South Carolina, has started charging readers $7.95 a year to access content devoted to Clemson University sports. Those subscribers view 40 to 70 pages per visit, compared with 6 to 8 pages on Gannett’s free websites….”

Mah goodness, it appears Gannett did its homework… As I have some relatives in Greenville, SC, I know from experience that Clemson fans are crazy — similar to the locals around many big sports universities. The demand is there, which was not the case for Newsday and isn’t the case for most regional newspapers.

Also, this isn’t the whole paper — it’s just Clemson sports.

I’m sure there are tons of blogs and upstart online pubs about Clemson University sports teams, but diehard fans — and many of them — will pay for a local newspaper’s coverage if it has credential. Remember when we were talking about credential last week? Not only is it important for online content, readers definitely won’t pay for content unless it has a high level of credential.

Despite credential, most local content does not have the demand to warrant a subscription, a truth that has existed for a long time. Growing up outside DC, our family received tons of free community newspapers, and their production was paid for solely by advertising (at least until the well went dry as the web filled up). I recall reading them when I was desperate for something to fill the boredom of my teen years, but I’m just a bad community member.

The logic behind regional regional paywalls and pay meters is that these outlets have content no one else does — the old limited supply game. But what if no one cares? Or rather, not enough people care — what if there’s no readership? If there’s no demand, it doesn’t matter how much supply there is.

Then there is AOL’s local news service Patch, which just added Outside.in to its assets and is now under the provision of digital content svengali Arianna Huffington. This will only increase the supply… Of stuff a limited audience care about. A friend was telling me last night he did a few assignments for Patch but had trouble writing them because they were boring. They weren’t newsworthy – “Write about this bar!” “Well, it has alcohol… There are stools too.”

If they were to dull to write, can you imagine how boring the content would be for most people to read?

So you’ve got an oversupply of resources for content in low demand. How the hell is a subscription model going to be an effective revenue stream?

Local online subscription models need a specific set of circumstances to work — specification, credential and demand – and very few content outlets fit the description while even fewer have the ability to work a subscription model at scale. With 81 regional papers under its belt, Gannett is likely to find a few more content outlets (or divisions of content outlets) that it can charge consumers to read.

But tradition is not dead — for at least the last hundred years, media sources have been primarily supported by advertising. Subscriptions will only be a stream that a minority of publishers will able to use. They are not the answer to the journalism industry’s woes.

Targeted digital advertising is.

It’s bad enough consumers don’t want to pay for such golden fluff, but now digital content distributors want a piece of the little subscription action publishers can get. At least it seems like Google is trying to play nice guy to Apple’s hardliner.

Opening the “innovative” digital subscription billing service used for News Corp’.s just launched iPad-only journalism outlet, The Daily, subscriptions for magazines, newspapers, video and music can be bought at Apple’s App Store or within apps. Only thing is, Apple takes a 30% cut of any subscription, the same as with all other in-app purchases such as virtual goods and extended levels for games.

Apple, which isn’t fond of sharing sign-up data with app developers, acquiesced to publisher demands regarding handing over names, email addresses and zip codes (it’s optional for the user to hand these over). But pubs must provide the same in-app subscription price as outside the app and cannot include links within the app to purchase subscriptions on a pub’s website.

As Matthew Ingram explains on GigaOm, “In effect, Apple has put up a roadblock for publishers that makes it difficult to route around the in-app purchase, increasing the likelihood that users will opt for the simplest choice, which is to buy the item through the app itself.”

Apple CEO Steve Jobs retorts, “Our philosophy is simple—when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing.”

On the other hand, The Wall Street Journal says will take a modest 10% of subscription revenue through its One Pass subscription management platform, which will allow site and app publishers set their own prices and terms for their digital content, as well as manage subscriptions and all data included. Publishers can also manage paid content offerings such as subscriptions, metered access and freemium.

Via a Google Checkout payment system, subscribers will be able to access content on all devices — PCs, tablets and smartphones, oh my — through a single sign-on with an email and password.

As Ryan Grim from GigaOm notes, this could be a boon for content distribution: “While many [publishers] have looked at distribution through native mobile apps, having a system like One Pass might convince them to look at creating their own web readers and investing more in web apps.”

And only 10% goes to Google — aren’t the G-boys so much nicer with their racket than those Apple goons?

As a second revenue stream to complement its ad-supported free site, Hulu Plus offers subscribers access to a larger library of content (including complete runs of off-air shows) and the ability to stream on Apple mobile devices, Microsoft’s Xbox 360 game console and Internet-connected TVs.

But that limitless library of content? Pretty limited. Subscribers complained on Hulu’s blog the current episodes of still-running shows are available, but older episodes are not — studios are afraid of cannibalizing DVD sales and want to push up the price for syndication, something overexposure on Hulu could effect. In addition, the old shows only come from broadcast stations ABC, NBC and Fox. AllThingsD’s Peter Kafka noted that Netflix potentially offers more streaming TV content for a lower price.

Even at $4.95, I have my doubts about Hulu Plus’ viability. But in general, are video services just like editorial content — if users can get it for free, they won’t bother paying for convenience?

Pontiflex found that 48% of leads were used to push social media and community sites in the fourth quarter, an increase from 43% in the third. E-newsletters also saw a greater percentage of leads, rising to 26% in the fourth quarter from 23% in the third.

Free trials and subscriber acquisition both lost share in the fourth quarter, with 11% of leads going to the former (compared to 14% the previous quarter) and 6% headed to the latter (a 9 point drop from 15% in the third).

The overall cost of basic marketing leads increased by 31%, which Pontiflex attributed to an increased number of publishers with CPL offerings. Average CPL in premium fields dropped quarter over quarter, from $3.36 to in the third to $2.72 in the fourth. CPL actually increased between third and fourth quarter for basic fields, from $0.62 to $0.81.

The highest CPL in premium could be found in the entertainment vertical at $3.00, followed by health leads at $2.70. The lowest CPL was in market research at $0.52.

All Things Digital’s Peter Kafka reported the MySpace-Imeem deal is less acquire and more “acqhire” — a source told Kafka that MySpace would like to absorb Imeem’s sales team as well as its engineering and its Snocap service.

Imeem has hobbled along with funding this year, raising $6 million at the end of September, but crushing debt and the inability to capitalize on free music streaming threw them back into the financial morass — and no investors were willing to offer a lifeline this time. Cue MySpace takeover — probably for a song, just like the iLike acquisition this past summer.

In a twist, iLike remains the top music application on Facebook, but the company recently restricted the app from alerting users to upcoming local concerts and displaying user music data in their profiles. This development flows with Facebook’s developer roadmap and was not a slight against iLike in particular, a spokesperson commented to TechCrunch, but it certainly throws a wrench in one of the app’s prominent features.

While Facebook is unlikely to kick iLike to the curb and alienate its users, management will likely quietly diminish its prominence on Facebook — it seems rather counterintuitive to plug a service of one of your biggest rivals.

MySpace is also one of the powers behind Google’s OneBox, which lets searches sample songs by artists and offers links to purchase. The other site is LaLa.com, which charges less than a dollar for unlimited streams of an album — something that Imeem used to offer for free.

In addition, a source told TechCrunch last week that MySpace is spending $20 million per month on streaming royalties — something the site can’t afford much longer. Recently installed CEO Owen Van Natta, a former Facebook exec brought in to renew the slumping social giant, has professed his desire to turn the site into an entertainment forum, but the rumors circulating are that a subscription model looms in the future.

Imeem is likely to go the way of the dinosaur, its guts sewed into the MySpace machine. Combined with MySpace’s acquisition of iLike and the likelihood of new subscription services, the days of unlimited, free streaming music may be numbered. However, MySpace seems to be positioning itself as the new baron of the online music streaming landscape.

– The plague of click fraud seems to be rescinding according to Anchor Intelligence’s “Traffic Quality Report” for third-quarter 2009. The rate of fraud among its customers fell to 18.6% from 22.9% during the previous quarter. Anchor Intelligence cited increased vigilance and enforcement of traffic quality standards as well as decreased fraud attempts in general.

– Let’s all jump into a chorus of the birthday song — back in 1994, HotWired.com gave birth to the banner ad. The newborn came in at 468 by 60 pixels and was picked up by Volvo, AT&T and… Zima. Wow, a lot has changed in 15 years — does the banner have 15 more in it?

Subscription products have been the latest rallying cry of publishers, with News Corp.’s Rupert Murdoch leading the hollering. Fittingly, The Wall Street Journal online is the most notable publisher to make paid content work. At the same time, Brian Quinn, vice president/general manager of digital add sales for the Journal Digital noted that its BlackBerry application is free while the site is opening up more content to nonsubscribers.

“We’re not in the business of making content to give it away,” added Walker Jacobs, senior vice president of new media ad sales for Turner, “but the question is ho do you make money on it online?” Turner has found success with subscription services for special features related to sports coverage.

However, Peter Naylor, senior vice president of digital media at NBC/Universal suggested, “This past year we’ve been too focused on price instead of audience and the audience has leaped ahead of us.” Hence why the media all stars need to investigate employing content on as many platforms as possible. “Audience should matter far more than price.”

But content owners are anxious about the numerous platforms available and different distribution channels, commented Jeanniey Mullen, executive vice president and global CMO for Zinio and VIVmag. How many times will a user pay for their content? she pondered.

Ubiquity is the goal, the panel agreed, but information overload is a problem for everyone on all sides of the fence — publishers, advertisers and readers alike.

The moguls see value on the advertising front in contextually relevant content in advertising. Jacobs noted that Turner sees a great return from relevant ads in sports programs, such as Armor All banners on the NASCAR page. Quinn noted that WSJ.com is planning to run an educational series on options trading from an advertising partner. The editors at the site have given it two thumbs up.

Alisa Bowen, senior vice president and global head of consumer publishing for Reuters, noted that advertising partners can be handy when trying to build content that increases engagement.

“Many people think of advertising as an annoyance, but we see it as a complement,” she said. “Consumers are smart — as long as sources are labeled and they get something out of it, they’re fine with advertising.”

On the other hand, there was little love for selling “underbelly” inventory to ad networks.

“Ad networks don’t really make a material difference and poorly placed ads can subtract from a brand,” Bowen said. “It doesn’t make sense for the big names to play ball.”