Can Twitter Outlive The New York Times?

Technology executive Peter Thiel told the Milken Institute Global Conference that Twitter likely will outlive The New York Times. His theory is based on the wide use of Twitter and the fact that New York Times Co. (NYSE: NYT) continues to struggle with its legacy business — print. The Times cannot afford to print a million copies of its flagship paper every day. And those costs eventually will swamp any progress made by the medium’s digital operations. Thiel may well be wrong if the Times accelerates it efforts to distribute the paper online.

Some of the information from the New York Times first-quarter report was depressing for investors. And new CEO Mark Thompson’s comments about the firm’s future plans were vague, and they draw into question whether the Times board made a good selection when it hired him. Among his plans for growth at the New York Times:

New products under development as part of the strategy include:

A lower-priced paid product designed to allow access to The Times’s most important and interesting stories in a convenient, media-rich package for consumers looking for an efficient way to stay informed. Consumer research has suggested very strong demand for such a product.

Other new products, also at lower price points, that would offer deep access and additional content and other new features in specific content areas such as politics, technology, opinion, the arts and food.

An enhanced tier that would offer extras at a higher price point to “all digital access” and print subscribers. Subscribers will likely be offered access to Times events and the ability to gift subscriptions and provide full family access, among other incentives.

Price cuts are often signs of weakness, no matter what the industry. An increase in online subscriptions at low prices will hurt the image of the brand’s value. And it is a slow way to bleed that brand to death. The plan also signals that the period in which the Times can sell full-priced online products may be ending.

The bad news for the Times is that, while online circulation revenue is growing, online advertising revenue is not. The online advertising attrition is part of an industrywide trend. Internet advertising is considered an inefficient way to reach an audience, at least when that advertising is married to one website or another. There are ways to reach target audiences online without paying premiums to place ads on specific websites. That has caused a drop in online ad revenue across a many of the country’s largest websites.

Thompson commented when the quarterly numbers were released:

Circulation revenues rose nearly 7 percent, led by continued strength in our digital subscription initiatives. Paid digital subscriptions across the Company totaled approximately 708,000 at quarter end, an increase of more than 45 percent year-over-year from the end of the first quarter of 2012. At the same time, the difficult advertising environment has continued, though there are currently some signs of improvement in the second quarter.

However:

In the first quarter of 2013, digital advertising revenues were $46.5 million compared with $48.5 million in the 2012 first quarter.

The drop in advertising eventually could overwhelm the improvement in online circulation sales.

All these problems and opportunities leave the Times where it has been for a while, and observations about the troubles are not new. It cannot afford its current employee base and the infrastructure and cost of goods needed to keep an operation based on its current model. People, paper and transportation expenses remain too high.

Thiel will be proved wrong if Times management does what experts have suggested for years: Phase out the number of copies printed or the number of days the paper is printed. Fire many workers, including editorial employees. Do not cling to a business that has not been viable for years.

In other words, the Times has been warned over and over. If it takes the warnings seriously, the Times may outlive Twitter after all.