The recent finding that PubMed Central’s (PMC) competing copies of journal articles can reduce HTML downloads by approximately 14% will prove important if it proves generalizable. I believe it likely will. The study was robust, the logic of the hypothesis is sound, and there’s no reason to believe otherwise. PMC is competitive by its very nature, and even designs its search interface to make itself more competitive.
PMC tries to compete with publishers.
In fact, the general level of traffic competition represented by PMC may prove to be even higher once other journals are studied — a quick look at PLoS data comparing on-site downloads to PMC downloads shows that PMC is taking 22% of their downloads — a surprising finding given that there is no price disparity driving such behavior. This may ultimately provide a hint of how undifferentiated traffic behaves, but that’s speculation for another day.
For the sake of this essay, I’ll stick to the 14% number — but, keep in mind, at least one open access (OA) publisher has a 20% traffic attrition rate thanks to PMC.
While a decrease in traffic of 14% sounds competitive in the abstract, what does it mean practically to a publishing business, especially one that is increasingly dependent on digital behavior and engagement?
The extent of the effect depends on the lines of business a publisher has, but because traffic is the lifeblood of online business, the effects permeate any line of online business. Whether you’re a subscription or OA publisher, having traffic leeched from your site has desultory effects. It’s not just a problem for one type of publisher or another. It’s a problem all publishers have in common.
Cost to ad sales – Online ads are sold on the basis of impressions, and impressions depend on traffic. Many of the more successful journals with online advertising generate multiple page views as users navigate to articles. This has changed a bit as Web 2.0 search technologies have allowed users to pinpoint articles from Google and other major search engines, going directly to content, but both modes of usage still occur. To put this into financial terms, let’s say an online publisher with a robust advertising business generates $500,000 per year in digital ads — targeted, run of site, or run of network. If traffic is suppressed by 14%, that can lead to a $70,000 per year loss in ad revenues, a number that goes higher if you factor in navigation habits that would yield multiple page views per use.
Cost to upsells and cross-sells – One of the goals many publishers have is to use their Web site to upsell customers to product enhancements (e.g., iPad apps, CME, or a personal subscription) or cross-sell them to new products (e.g., books, new journals, white papers, submissions to other APC-driven journals). These revenue streams tend to be smaller and more sporadic, but more than nothing. Let’s assume a publisher has about $100,000 per year in upsells and cross-sells, for the sake of proportionality. At a 14% decrement, that’s another $14,000 in lost business.
Cost to institutional subscriptions (opportunity cost for price increases, compounded) – Institutional subscriptions are evaluated on usage, which is derived from traffic. Decrease the traffic flowing to a Web property, and you decrease its usage. Institutions are increasingly sensitive to usage as one of the ways they evaluate a publication’s value, and publishers are very aware of this. If a publisher sees usage going down or not increasing at historical rates, this can limit their willingness to increase prices. A 14% decrease in traffic can be more than enough — by a sizable amount — to offset any organic increase in traffic. If a publisher holds back from price increases because of the PMC effect, this opportunity cost, incurred in Year 1, compounds itself in later years — that is, a 2% holdback lowers prices, and decreases the dollar increases in subsequent years, out into infinity. For a publisher with $1,000,000 in institutional subscriptions planning a 5% price increase, but settling on a 3% price increase because of disappointing usage reports, results in $285,000 in lost revenues over a 10-year period.
Cost to brand – Most publishers invest a fair amount in their digital presence because it’s important to their brand. Brands are the most valuable assets any organization can own, and brand equity is increasingly recognized as a main source of value, both current and future. As the head of Quaker Oats said in the early 20th century:
If this business were split up, I would give you the land and bricks and mortar, and I would take the brand, and I would fare better than you.
When users are diverted from an immersive, branded experience to a sub-branded PMC experience, the cost to the core brand can be significant. Yet, it’s hard to measure. Because journals have such unique brands and content, competition doesn’t provide much of a measure of brand value. So let’s assume that the brand is as valuable as one year of revenues, a fairly modest assumption. In the business we’re contemplating, we have about $2 million in revenues so far (of course, in reality, this business would be too small, and I haven’t counted all the possible revenue sources, so this is very clearly an underestimation). At a decrease of brand power of 14%, offset slightly by sub-branding on PMC, let’s say that nets a 10% deficit to the brand. This comes out to about $200,000 in lost brand equity each year.
Cost to editorial (audience defection) – For editors, it’s important to know who you’re trying to reach and how well they’re responding to your editorial decisions and features. With 14% of the audience accessing content on a separate site, the ability to know your audience, or to attract them with new features, or features not included on the PMC version, diminishes greatly. This can affect all sorts of editorial initiatives. Want to know if a new feature is working well? It’s hard to know if you get an 8% response rate to your survey vs. a 9.2% response rate; it’s hard to know if traffic is suppressed by 14%, so that 14% of your audience never sees it; and it’s hard to know if that 14% of your audience happens to be the most Web-savvy part, and the new feature was designed to appeal to them.
Cost to the parent organization’s membership efforts – Many journals are owned by not-for-profit entities, which offer their journals as member benefits. In many cases, journals are deemed to be the most valuable benefit of membership for an organization. When members find that the same content is available at no cost on PMC, there’s a clear risk for one of two things to occur — either they drop their membership, or member dues don’t increase as they would have otherwise.
Cost to product development – With the ability to test new ideas, survey users, and gather information on usage suppressed by 14%, product development takes a hit. The chance of missing the mark increases, the chance of receiving less bang for the buck goes up, and the likelihood of new products succeeding goes down. It’s as if a tariff of 14% is being placed on new business initiatives.
This exercise wasn’t designed to generate specific numbers you can bank on. It was designed to show how traffic competition can be deleterious for online publishers — which we all are — regardless of business model. Lost traffic is lost brand equity, lost eyeballs, lost commercial opportunity, lost usage, and lost engagement — all the factors that make online businesses successful are damaged by the competition PMC creates.