There are early adopters of technology—and then there is Peter Kann, chairman and chief executive of publisher Dow Jones & Co. (www.dowjones.com). According to Kann, he had barely used a fax machine until the early 1990s, when his daughter bought one so she could fax her French and English homework to the machine that Kann’s wife had installed in their home. (Kann, a Harvard graduate who won a Pulitzer Prize as a foreign correspondent for the Wall Street Journal, joked that he was getting a C in freshman English at Wake Forest University.) In the mid-1990s, Kann wrote a column for the Journal that touted the advantages that manual typewriters had over personal computers. He still has two manual typewriters in his office.

These days, though, Telerate is behind him, and the decision to charge online is looking plenty smart. Other publishers are trying to figure out how they, too, can build an audience like the 625,000 subscribers who pay for the Wall Street Journal Online (online.wsj.com). To talk about how Dow Jones hit on its winning strategy and how the Internet is reshaping news and advertising, Context Editor-in-Chief Paul Carroll sat down with Kann and Gordon Crovitz, who is the Dow Jones senior vice president responsible for electronic publishing and who is chairman of Factiva (www.factiva.com), an online joint venture between Dow Jones and Reuters Group PLC (www.reuters.com). As you’ll see, Kann has become a big believer in the power of technology.
 

CONTEXT: Why did you decide to charge for the Wall Street Journal Online when every other news operation was giving away content, assuming they’d figure out later how to make money?

PETER KANN: Even though there were a couple of years when we were a laughingstock, whether to charge was never a great debate within Dow Jones. We’ve been providing information in print for 100-plus years, and we’re charging someone $175 for that package on newsprint. It just does not make any logical sense for us to give away that same package of information online, especially when you consider that the information is enhanced online. You can retrieve stories from prior days, you can personalize what you see, and you can update information constantly. You can even provide links, so that someone reading a story about a lawsuit online would be able to find all the background material, from statements by all the parties to the full e-mails that are being used as evidence.

We’ve been publishers online ever since Thomas Edison showed Edward Jones’s ticker machine to Charles Dow, and we’ve always charged for news delivered electronically. So the notion that information had a different value just because it was delivered on the Internet was not very persuasive to us.

We knew we had to charge. The only debates were over how much.

CONTEXT: You’ve shown that the subscription model can work, but people still expect content to be mostly free online. Will that change?

KANN: We’re not saying that the subscription model is the only one that can work on the Internet. Some mass-circulation magazines that basically give themselves away in print—for, say, $10.99 a year—will have a hard time convincing people to pay for an online subscription, because the information in the magazine isn’t essential.

We’re just saying that, for those who can get subscribers to pay, the model has big benefits. My guess is that more and more publishers will pursue this model. They have to think about where the revenue is going to come from if people stop reading their publications in print.

It will be nice to have company. In addition, if other publishers start charging $50 a year, we’ll have the flexibility to charge more.

CONTEXT: You’ve said you are somewhat surprised that two-thirds of the people who subscribe online don’t take the print edition as well. Has that been your biggest “aha” about online publishing?

KANN: We’ve learned that there is a potential audience out there that values the kind of information we deliver, but for a whole variety of reasons is more comfortable getting that information online. They tend to be somewhat younger and somewhat less traditional, though their demographics are really quite similar to those of our print readers. In some cases, online-only subscribers are people who’ve never been newspaper readers, maybe not even magazine readers. They are maybe like some of my kids. I’ve got a kid who gets all kinds of information online—probably also stuff he shouldn’t get. I doubt he’s ever going to read much in print. He’s simply a creature of a new medium, and that’s OK.

We can pretend those kinds of people don’t exist, or we can acknowledge that they do.

GORDON CROVITZ: The attitude of many online-only readers is, “I know what I want to be told.” They use the Online Journal to track information about a specific industry, about their company, about competitors. That’s different than the print-only reader who likes the serendipity of flipping through the newspaper to find stories he didn’t know he was interested in seeing.

From our standpoint, we see the online and print versions as complementing each other. You can’t get the full experience of the newspaper online. But, online, you can get updates during the day that you don’t get from the print version.

CONTEXT: What have you learned about online advertising?

KANN: I think, as an ad medium, the Internet is still developing. Advertising in every other medium has taken a while to develop. If you compare print advertising today to 20 years ago, advertising is simply much more effective now. The messages have become more sophisticated, and the graphics have, too. The same is true of TV advertising, even though sometimes we consider it intrusive.

Five years from now, people probably will look back on today’s Internet advertising and say it looked relatively primitive. But, at least for our advertisers, the Internet already seems to be an effective medium.

Although our online ad revenue is down from the peak it reached in 2000, so far this year revenue is up from last year. Our CPM [cost per thousand subscribers] has stayed steady through the whole period.

CONTEXT: Targeting individuals online with ads was one of the things that people talked about early on as a clear benefit of the Internet. Does targeting work?

CROVITZ: Sure. A significant percentage of our online advertising is sold as targeted advertising. For instance, the Online Journal divides news into 27 industries, and each one carries a sponsor. Part of the recent redesign online was to create more opportunities for, say, a business service that wants to target banking customers this quarter.

We don’t promise we will target all the red-haired women in Des Moines whose fathers were in the Pacific during World War II. That may have been the early promise of the Internet, but it isn’t really what advertisers want. What they want is to reach people who have shown some interest in a topic, who are qualified in some way to buy a particular product or service, and who therefore will find that a message resonates.

CONTEXT: What about new technologies for delivering news? How do you see those developing?

KANN: I presume there will be more and more ways to deliver information. Ten years ago, we couldn’t have imagined all the ways that people receive information today, and I imagine that the world 10 years from now will provide just as many surprises.

We will keep focusing primarily on the information. We need to be smart enough not to try to develop the new forms of distribution, because that’s not really our business, but we need to take advantage of them as they arise.

Currently, Wall Street Journal content is available through almost any means of distribution. We have a substantial presence on television. We distribute news via radio. We do it internationally, and we do it domestically. We do it online. People can even get access to some of our information from their cellphones or personal digital assistants.

CONTEXT: How has your relationship with your audience changed because their feedback is now more immediate?

KANN: The good news is that you hear from more readers, and you can print more of their reactions. In the newspaper, we print a dozen letters to the editor each day and try to answer some more. Online, you can run hundreds of letters every day, and let people interact with the letter writers.

You can also harness readers’ energy. It used to be that 10 reporters in 10 different bureaus might be asked to interview 10 people on some subject. The result wasn’t a scientific survey, but it did actually get at what people were thinking. Now the reporter doesn’t have to trot around to stand at a department store to ask a question. You can just send your question out and get responses.

CROVITZ: Perhaps the best example is our Web site, OpinionJournal.com, which has a feature every day called “Best of the Web Today.” It started out as one staff member trawling the Web. Within a couple of months, it had built a tremendous, loyal audience. By now, less than a year after its launch, the users are providing the content. Now the staffer gets hundreds of e-mails a day that say, “Did you see this? Did you see that?” His job at this point is to sift through what he gets, augment it with his own surfing, and put it all in context.

By now, we have about a dozen online-only columns for some of the print reporters, which is a way for them to build a deeper relationship with their audience.

KANN: The downside is that instant communication doesn’t necessarily make for better thinking. Instead of the considered letter someone might write, you get something such as “Hated that story.” That’s a rather different reader reaction. Instantaneous isn’t always better.

A very persistent gentleman the other day sent three e-mails and complained when he didn’t get a response. He objected to something on the editorial page, and he wanted more information. I sent him a message saying that we welcome alternative views, but hey, come on, we have a million-and-a-half subscribers. We can’t have reporters or editors stop in the middle of whatever they’re doing to do research for everyone who asks. I don’t think that it ever occurred to him that we get thousands of responses in the course of a week and that you could keep the whole staff busy doing nothing but providing individual attention.

Customers assume that if they have a problem—whether that problem is, “I disagreed with that editorial,” or, “My newspaper was delivered at 6:15 instead of 5:45”—that you’re going to take instant action. The instantaneous nature of feedback raises expectations, and you can’t always meet them, even if you try to do everything you can.