Interview: Ien Cheng, Publisher: A Pay Wall ‘Third Way’ has announced it will partially drop its £99 ($110) pay wall in favour of a free, ad-supported model for users who read up to 30 stories a month (see earlier post). It echoes New York Times (NYSE: NYT)’ abandonment of TimesSelect and’s likely move to free, but doesn’t go as far. publisher and managing editor Ien Cheng told me the new approach will be financed by better targeted advertising and the continuation of the subscription model. More after the jump…

Forced by rivals?: The other papers’ moves did not precipitate’s decision: “We came to our own conclusion. We’ve been thinking and looking about this for some time. This is not at all a response to anything anyone else is doing out there. It’s a response to what we think is right for our users. Nonetheless, the timing is interesting because everybody’s thinking about it – there’s no surprise there.” The model came after traffic analysis, user testing and a beta launch “in secondary markets”.

Opening up to win subs: Cheng acknowledged has not achieved its growth potential so far. “When we’ve had a barrier against some of our best content, of course we’ve missed out on traffic there and, therefore, advertising – so this model’s going to allow us to get that.” Currently, “people find it much harder to get to know your content because they see a hard barrier at first, without even having a chance to get to know your best content”. The model is of a “perpetual subscription conversion funnel” that catches all, then converts some, free readers in to subscribers. FT expects to vary the number of free articles offered in different countries.

Paying for content: is far from abandoning the pay-for model that underpins its print, as well as online, offerings, which Cheng said the company wanted to “preserve across all channels” because people believe FT’s “unique news and analysis” is still worth paying for. “We had a fairly significant price rise on our print product in the UK recently and – guess what – our circulation’s gone up.”

Mixed, “third way” approach: “We don’t want to have a model that splits the content in to free or paid, implying it’s almost like two different products. It’s not a one-size-fits all model. Some users want to have unlimited access and think it’s worth paying our reasonable subscription price, some people are happy with a slightly less engaged relationship until such time as they decide they want more. We’re happy with both as long as both groups are going to grow. It’s not a zero-sum game. We can have both grow. That’s the beauty of online media – you don’t have to treat everybody the same.”

Registration and advertising: Advertising growth from casual readers is planned to come from better targeting. Users who read over five stories within 30 days must register for free, at which point they will cough up personal data advertisers can use to enhance profiling. “You’ve got to be able to target. Especially when you’ve got a high-end audience like ours – we’re a niche player, we’re not volume, so you’ve got to be able to target and registration is going to help us do that.”

Advertising and other growth: “Overall online ads are up 40 percent this year (based on last three months versus same period in 2006), with revenue from the core banner ads stream up 57 percent. Year-on-year, we’re up more than 70 percent on unique users, page views are up more than 50 percent. So we feel like we’re launching this new access model from a position of strength.

WSJ a looming threat?: Some analysts, expecting Rupert Murdoch to slash WSJ’s cover price and drop online charges, have anticipated agressive competitive against the FT, but Cheng said: “Any publication that goes completely free significantly risks ending up with an undifferentiated volume. That’s not our model. The FT’s model is to have a uniquely high-end global business audience and that’s what we do have and deliver to our advertisers Revenue diversification is a good thing, as long as you’re maximising your growth on a number of fronts. We think this model can allow to have both advertising and subscription growth. It’s obvious that there’s a structural shift right now to online (advertising) – that’s not going to go away.”