What is the business model for the New York Times online?

”The answer is somewhat complicated,” Vivian Schiller, senior vice president and general manager at NYTimes.com, replies to the reader’s question.

The Times runs a regular feature online titled ”Talk to the Times” where its managers and editors answer to readers’ questions.

Here is an example:

Michael Worosz asks: As a loyal Times reader since well before your Web site became so robust, I have been pleased to see the migration of your content online. Given that subscription revenue is down, what business models are NYTimes.com relying on besides standard Internet banner and contextual advertising?

Ms. Schiller replies: The answer is somewhat complicated as Web advertising is constantly evolving. But let me try to break it down for you. Like most newspaper Web sites, our two largest categories of online revenue are display advertising (the banners, and other picture ads you see throughout the site) and classified advertising. Most local newspaper sites are heavily dependent on classified ads, at a ratio of about two to one. NYTimes.com is the opposite. Because we have a national reach and desirable audience, our display revenue is more than double the classified income. This positions us very favorably for current market conditions. Since display advertising continues to grow at a healthy rate (while some classified categories are declining), we’re on better financial footing than most newspapers sites.

We have a few other revenue streams as well. We sell text ads in partnership with Google. Those are the small lines of copy links you see on almost every page. We generate some income from crossword subscriptions, from e-commerce for sales of tickets, DVDs and books, and from our archive. We also license our archive to library services such as Proquest and LexisNexis. So that’s the architecture — what’s the strategy? To oversimplify a somewhat complicated smorgasbord of efforts, our strategy is twofold: scale and context.

First, scale. Here our goal is to scale our audience as much as possible to attract and retain advertisers who want to reach a large number of online readers. In this effort, we’ve been very successful. The NYTimes.com monthly audience is around 20 million unique users. We rank No. 5 behind only the big cable news sites and aggregators, like Yahoo and AOL — and light years ahead of other newspaper sites. But it’s not enough to just have a vast number of readers. The secret sauce for advertisers is the quality of the NYTimes.com audience — educated, informed, engaged and influential. Consider yourself flattered.

The second strategy appeals to the kind of advertisers who want to reach an audience in context. For example, some financial institutions or technology marketers want only to show their ads to business types, who are reading about business. Designers want to market to readers who are looking at our coverage of high-end fashion. That’s one of the reasons we launched TMagazine.com last year. And why we’re significantly expanding our business coverage with news sections, news reporters, editors, tools and data.

Beyond these two approaches, we are also constantly looking around corners to see how business models are evolving, and to try to stay ahead of it. We’re already considered a leader in creative new ad units. But given the speed of change in our industry, we are also in constant discussion with innovators and technology companies at the forefront of this very dynamic business.

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