Page View Deflation, News Corp and TheStreet.com (NWS, TSCM)

News Corp's (NWS) stock is on a roll (look at the chart). A large part of the reason: the company's aggressive Internet strategy is changing investors' perception from NWS being an "Old Media"stock to a "New Media" stock. My Space, the biggest and most important NWS new media acquisition, grew by 367% in April, according to a ranking of the Top 10 Social Networking sites by Nielson/NetRatings. Now the pressure is on for NWS to monetize My Space. News Corp recently announced that it would start selling episodes of the hit TV show 24 on My Space; but it also has an opportunity to increase the ad revenue from My Space, which is currently generating less than $0.10 CPM (revenue per 1,000 page views). But how easy will that be?

TechDirt says:

Several months ago, we noted that something wasn't adding up when it came to MySpace. Ostensibly they are one of the most viewed sites on the internet, yet their ability to pull in revenues seems almost pitifully poor. This became the subject of much chatter this weekend, as The New York Times pondered the same question. According to one web designer, at issue is the MySpace's design, which produces a large number of extra page views each time a user accesses the site. With a superior interface, the user might get the same experience with a third (or less) page views. Advertisers understand that a lot of the page views are redundant, thus explaining why they're not will to pay too much for ad impressions -- giving MySpace a reported 10-cent average CPM.

What isn't clear is whether the company would be better off improving the site's usability. Undoubtedly they'd improve their CPM, but it might be at the expense of their stature as a top-ten internet destination -- something that's helped fuel a lot of their hype. Some publishers have openly stated that they won't adopt more efficient design techniques, out of fear of reducing their ad impressions, and thus revenues. Ultimately, this seems like a bad strategy. Nobody likes a cab driver that takes the scenic route, just to drive up the fare. Eventually, people will gravitate to sites with superior usability. It's better to become one of those, than to foist bogus page views on the users and advertisers.

Now, I'm not sure this is the only reason why MySpace's CPMs are low. For example, its user base isn't exactly known for its spending power and attractiveness to advertisers. However, in highlighting the page inflation issue, TechDirt identified a crucial isse that impacts not only NWS' MySpace but other companies too.

News Corp's MySpace isn't the only publicly-traded media company to have goosed its page views by breaking up articles into multiple page views. TheStreet.com (TSCM) seems to have played the same game. (As founder of Seeking Alpha, I obviously watch the stock market content space carefully which is why this springs to mind. I'm also short TSCM as a hedge for my work on Seeking Alpha.) In the short run, TheStreet.com seems to have goosed its page views by splitting articles into multiple pages, raising the number of ad impressions and maximising the company's ad revenue. To see this clearly, go read an article on TheStreet.com and count the number of times you have to click to get to the end of the article.

But blogs, meanwhile, are resetting users' expectations. Blog posts are rarely broken up over multiple pages, and many blogs even present multiple articles on a single page, so users are getting used to a better user experience. Even blogs that are being built into profitable media businesses, such as Engadget or Gizmodo, don't require the reader to click five times to read an entire article or look for the "Print This" link to read the whole article in one shot with no ads.

Two opposing forces are clearly at work: page view inflation from companies that are being rewarded by investors for growing ad revenues, and page view deflation from publishers using blog platforms.

Which will win out? Most blogs are controlled by individuals, and they'll never split articles over multiple pages to goose their ad revenues. That's because most bloggers' motivation for writing isn't ad revenue. ($3.57 per month in AdSense revenue doesn't pay the bills, so that can't be why they write.) And although more organized and corporatized blogs (such as Om Malik's blog) are increasing the number of ads they show, they haven't yet started to split articles into multiple pages. That means that blog readers will start to expect a better user experience from all online content sites.

Meanwhile, at some point the companies that are goosing page views by splitting articles will hit the ceiling of what users will tolerate.

As blogs become more mainstream and users become less tolerant of a lousy reading experience, page view deflation will kick in. And stock prices will fall.

Full disclosure: This article has been published in its entirety on one page. The author is short TSCM at the time of writing.