I've been thinking about charging people to read content online - sparked in part by this post - How publishers can save themselves - by Greg Satell (he's well worth following).

His point I take issue with is this: "Paywalls are rarely profitable once losses in advertising revenue are factored in."

His 'golden rule' which summarises this thinking is "marketers will pay more for consumers than consumers will pay for content." (I don't disagree with the rule). But by extension, the thinking goes that you're better off gaining as wide an audience for your content as you can by making it free - so that you have more opportunities to 'sell' your readers to potential advertisers. (ie more pages to hang advertising off). He's not alone in this thinking of course. Many others seem convinced that free is the only way to go. Just recently the team at Matter who have been championing quality writing online have dropped their paywall. They're witnessing 4, 5 even 6 times as much traffic now by dropping a charge of 99c per article.

So, are paywalls a dumb idea? I don't think we're halfway to knowing yet.

It hacks me off that people are trumpeting the death of the model on the basis of 12 to 24 months of effort. (It’s a couple of years since the New York Times put up its paywall.)

Of course, it works just fine for the big players who aggregate content like Google if everything online is free and available to all. But I feel like the constant message 'free for all is how it should be' is very simplistic.

It is fair to say right now that a broadstream publisher of news like the New York Times in the US and The Times in the UK is quite possibly making less money pursuing a path of charging fairly high subscription fees to access their content. The much reduced traffic that comes with the paywall seriously reduces ad revenue. But it's early days. I hope that not everyone opts for the 'let's just give it away and hope we can make it pay somehow in the future' model.

A few thoughts then about how paywalls might pay-off and why I think they are a good thing.

1) Data. Sure, advertisers want eyeballs. But increasingly they want deeper connections with readers (see 3 below). The old adage that has never been attributed: 'I know 50% of my advertising doesn't work, I wish I knew which half' still holds pretty true. At what point does it become more interesting to a media business to be able to sell the data on say 100,000 highly engaged regular readers that they know all about versus a million that just flit across their pages and leave again? And if a publisher really knows their readers - there are heaps of other things they themselves could start to sell them. Tip of the iceberg. One trend that I do believe in right now is 'own the data'.

2) Quality. I've banged on about the trade-off for the reader when it comes to free content a lot. The advertiser-funded free content model encourages high volume publishing with low editorial resource. The result is large numbers of often poorly researched, low detail pieces. For people who want to be informed, it's often a poor experience. Candidly, it's turning the web into a craphole. It's encouraging short termism in the extreme.

3) Trust. The latest revenue stream 'innovation' in the free content model is called 'native advertising - allowing brands to create editorial-style features themselves. Everyone is getting into it - some are even talking about brand newsrooms. Well, he who pays the piper calls the tune. I challenge anyone to say they honestly believe that this kind of content won't be biased. This is not to say that editorial isn't, but this is way worse. A slippery slope indeed and ultimately readers will get turned off by it. I have been. (But let's face it, the 'proper' editorial on many of these free sites is poor, so who cares anyway?)

4) Technology. The paywall remains a clunky thing. It's not surprising that people bump into paywalls and don't come back. But the big players using paywalls are already looking at hybrid models and there's heaps more to do. For now these 'leaky paywalls' allow people a certain number of free reads a month. I think this is of limited use. I am amazed no one (?) has tried charging a really small amount to read each article. There was much talk of 'micropayments' many years back - but I've yet to see it. (Except perhaps the guys at Matter charging 99c a read - but I wonder if even that was too high?) Think about how often these days you find a news story via a search engine - not a newspaper's home page. We cherry pick our news from multiple sources just like we download single tracks rather than albums from the App Store. Someone needs to figure out a cheap, frictionless way to charge tiny sums for this casual viewing.

If there was an easy way for you to pay say 1 cent or 1 pence to read a feature with a single click - connected to your Paypal account, would you do it? I would. The friction for paywalls is too great right now. 'Sign up, provide heaps of detail, add your credit card info'... Someone needs to make them work better. Someone needs to find a more subtle way to slowly reel a potential subscriber in. Think of those 100s of millions of page views each month. Just a penny a view would be significant income. The Guardian achieves over 400,000,000 monthly page views. Sure, it's a very rough calculation, but 1p a view is 4 million quid a month.

5) Creativity. There are many many ways to slice up content and sell it. Here's just one idea for the travel sector. How about The Times (which has its content locked behind a paywall) does a short term promotion for people to read just its travel content during January when many are trying to choose a summer holiday?  There are heaps of smart promotional opportunities that could be tied to the pay-for-content model based on different audience sectors and interests.

But why bother?

It's a subtle, but crucial distinction. The publisher is then being paid for their content, by the reader they exist (in theory) to serve. The alternative model in all its guises will slowly but surely turn publishers into little more than the mouthpieces of brand advertising departments, offering up only the most shallow of editorial to pad it out. This week London's Time Out magazine - which went free relatively recently - ditched its LGBT section in another round of cost cutting. As the Guardian's commentary put it - a 'high price to pay for free'.

I guess advertisers weren't that bothered about advertising in that section. How about a few more top ten lists of dream cars or handy tech gadgets to replace it?

Would you be happy to pay small sums of money to read single articles?

9 thoughts on “We have hardly begun with paywalls

  1. Agreed - the main reason tiny charges haven't caught on is because the web - unlike mobile phones - didn't come with a micropayments system (as Prestel did pre-web). It could still happen but I hope it is a universal app rather than PayPal

  2. Thanks to linking to my article and giving some food for thought. Just to be clear, I never said that paywalls are always a bad idea, just that they usually are and that they are no substitute for a good business model.

    Some paywalls are successful. Business oriented brands like The Wall Street Journal and Harvard Business Review are able to create viable subscription businesses as are brands that offer true one-of-a-kind brands like Netflix and HBO.

    To be honest, I don't buy the data argument, because there are plenty of ways to gather data without a subscription. I also think talking vaguely about "quality" is n't productive. It really is in the eyes of the beholder. I haven't seen micropayments work either, except for contests (we used to make some money off of Sudoku).

    I have, however, seen some subscription up-sells that are winners. Usually, these are for special events, like weekly tips for pregnancy. Other ideas, like in-depth travel guides for a specific country would probably work too. These can also lead to e-commerce tie-ins (e.g. affiliate programs) for extra incremental revenue.

    What I think is silly is publishers whining about distribution revenues that they never really had (or at least were gone long before the Internet existed). It just seems to me that if you were losing money on distribution before the Web, "Free" is a step up that you should be grateful for.

    The truth is, there's nothing inherent about distribution revenue that makes it somehow superior to ad revenue or any other kind of revenue. You simply have to run your business in a way that will allow you to produce the best product and maintain decent margins. Making a priori judgments about one form of revenue over another just doesn't make any sense.

    - Greg

  3. Hi Jeremy

    Good as per

    Couple of things

    1. Have paid 59p for a song on iTunes. Easy. Paypal is a dog to use (I find)
    2. why can't my paper and mag subscriptions be served into my broadband or satellite monthly payment?
    3. Tnooz is free. It's good

    Cheers Stuart

  4. When Matter dropped their paywall and shifted to Medium how did that effect their income?

    I agree a paywall has advantages, especially better knowing the readers -- one Australian pub I know of that is largely behind a paywall charged significantly more for advertising exactly because the ads are behind the paywall and the advertisers have a far better picture of who they are reaching. Obviously you need to be producing something that people want to pay for -- not everyone is doing this.

    Native advertising? Don't get me started.

    And, what Stuart L said.


    1. Hi Stuart
      That's the thing. I had a twitter chat with Bobbie Johnson at Matter about this. For now they are excited that they have exponentially more readers, but they have no income at all. (They don't have ads on their content). He assured me they have other plans afoot to derive income... but for now I'm left wondering!
      Will ask him if he fancies adding detail here

      1. Hey hey. Been offline, but it's an interesting discussion and good post.

        So yes, we were previously charging 99c per story at Matter, and we decided to drop that to zero and go another route. Maybe 99c was too much, but I know for certain that if we'd have cut our price to 0, we'd have had reduced one piece of friction ("the price is too high") but none of the rest (people would still have had to pay, our visibility and growth would still have been limited) and slashed the subscription revenue we *did* have. You could just as easily make the argument that we weren't charging anywhere near enough.

        Being a paywalled outlet was not an ideological choice, it was the result of a mixed distribution model that meant we had our hands tied (mainly the fact that we couldn't sell books on Amazon *and* publish the same stories for free elsewhere). So, we took that in hand and worked very hard to build a small subscriber base over the course of a year. It was pretty solid but it was behind our targets to achieve profitability. We have some other revenue streams too, but we wanted to try and solve problems—not just cope with them.

        Ultimately, I don't think price is actually worth focusing on, by and large. People will pay what they think something is worth, and that will vary wildly from individual to individual. We saw that from day one with our Kickstarter campaign, where thousands of people paid in advance for something they hadn't even seen yet— some of them to the tune of thousands of dollars. Others couldn't be bothered. The key is to find enough of those people.

        So, how's it going to play out? Our replacement scheme around membership will play into that same field. We'll see how it goes. But yeah, right now, we're in a building phase. Maybe it won't work. Maybe it will. But jettisoning the paywall gives us options and influence that we couldn't have before—and prevents us getting trapped in endless conversations about paywalls, which I find largely a distraction for all media outlets and *certainly* a distraction for new-to-the-world media outlets. :)

  5. Great post. I didn't see it mentioned in the post, apologies if I missed it, but how are The Times performing behind the paywall, does anyone know? I'm interested.

    I'd happily pay for content, but, it would have to be not available for free elsewhere and not just be about the content but the community behind it too.

    As for 'native advertising' do you really think readers will not trust the content and be turned off. I think as publishers we'd like to think that, but I am not too sure...

    Apologies for any typos, using my phone and have fat fingers :)

  6. Baekdal charges for his premium content and has written about how hard it is to make this viable: http://www.baekdal.com/opinion/baekdal-plus-is-now-3-years-old/

    "Before I started Baekdal Plus, I had over one million unique visitors coming to this site. So, if 1% of those subscribed, I would get 10,000 subscribers the first year and make $90,000 per month.

    That didn't happen. In fact, after the first three months I only had 29 subscribers in total. That's a conversion rate of 0.0029%. I was in complete shock. With only 29 subscribers, I was earning $260 per month and I was bleeding money fast."

    I'm a subscriber and know several other people who are. One of the interesting things he does is allow subscribers to share his paid-for content with a unique URL so he knows who shares what: http://www.baekdal.com/analysis/the-future-of-packaged-news/5F48C179DADB4078949F0F60C61A5FFEAEC4F6AF149D08CD5DB3BF63748051DC

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