My understanding is that paid subscribers (and newsstand sales) largely went into paying for printing and distribution while ads paid for basically everything else. Therefore, I expect that part of the thinking was that ads by themselves could pay for digital content creation and delivery.

It's also the case that most people assume that an outsized percentage of costs goes into the physical copy of things. At one point, this came up a lot when eBooks were getting big--though, in that case, the publishers ended up being able to hold the line fairly effectively.

Finally, there just aren't that many pubs that can really command a viable subscription price online--or really any at all. That the WSJ, NYT, and apparently the Guardian can isn't necessarily a recipe for a broader subscription model.