Finding a paid content model that’s right for you
Paid content has become a key piece of the revenue discussion for media sites trying to pull themselves out of a downward spiral. With online advertising contracting and not likely to rebound to previous growth levels any time soon, there's no shortage of chatter about media sites' seemingly inexorable march toward paid content models.
The debate has been chippy. On one side you have the freedom fighters (“information wants to be free”); on the other the defenders of quality, worth-paying-for content. Regardless of which side of the fence you’re on, paid content is a movement that publishers can’t ignore.
Most of them no longer are. Rupert Murdoch has made his desire for pay models on his news websites well known. The Boston Globe recently announced it was exploring several prospective pay models, including a test-drive approach in which readers can access a set number of pages for free before the pay wall goes up. The Globe is also considering charging for vertical sections within the site, such as sports. Other papers, from The New York Times to the Newport (R.I.) Daily News, are similarly exploring new pay models.
Consumer magazines are going through similar processes. ESPN the Magazine, for example, is looking to expand the subscription-based “Insider” content it offers on its site.
Perhaps the most advanced species of paid content provider is found in B2B media, where publishers, through their service of a niche audience, have been more successful at putting a price tag on highly specialized content.
Take the legal industry, for example. Incisive Media, which publishes several legal trade publications as well as the law.com network of websites, has a loyal audience of paying subscribers. “What makes our market different is that lawyers are used to paying for information,” said William Pollak, CEO of the New York publisher.
The rest of us may not be so fortunate. So the question becomes, how do you figure out if there’s a model that’s right for your audience, and your business?
Any assessment of a paid content strategy will likely incorporate several factors, including:
Audience behavior and demographics: You’ve already done the legwork on defining your target audience for advertisers – now apply that information to your paid content scenarios. What is your readers’ propensity for purchasing online content? How many “loyal” readers would be willing to pay a subscription rate? How many casual readers are you likely to lose to a pay wall?
Competition: Do any of your main competitors charge for content? Can you come in slightly lower to gain share, or do you charge a premium price for more exclusive content?
Advertising: What impact will a pay wall have on your traffic and, as a result, your advertising rates? This is where the rubber meets the road for most publishers – and why paid content was mostly a non-issue before the online ad market flattened out. (Below, you’ll find some number crunching that some smart people have done to gauge the trade-offs between subscriber revenues gained and advertising dollars lost.)
Search: How will a pay wall affect your organic search rankings? If you put too much content behind a wall, Google and other search engines will have a hard time indexing it, and your search rankings will sink like a stone. Make sure you consider how much traffic search engines send to your site before throwing up barriers in front of the search spiders. (Last fall, Google formally introduced a feature called First Click Free, which enables premium content to be indexed. As the name implies, a user clicking on a search result for premium content will see the full text, while subsequent clicks within the site will require a log-in or purchase.)
B2B sites serving a narrowcast audience aren’t as concerned about ranking high in organic search. “We’re not looking for millions of eyeballs,” said Pollak. “We’re happy to have whatever traffic that Google wants to send us. But it’s not often traffic we can do anything with. For us, it’s about long-term relationships with customers.”
Types of pricing models
There are several types of pricing models to consider, including the following:
Tiered: With this type of “freemium” structure, some portion of site content, usually news or other “commodity” assets, is freely accessible. A second tier can take the form of a registration wall, which requires readers to provide some profile information, at minimum an email address, to access additional content that might include articles from the print product or other higher-value assets, such as videos or podcasts. The third tier is made up of premium assets that must be purchased – what Pollak calls “must-read” content for the target audience.
Subscription: Similar to the print model, users pay a monthly or annual fee to access site content. Many sites offer bundled subscriptions for print and online access, and online-only subscriptions are usually aligned closely with the print product. “The pricing for the online extensions of our print products has always been grounded in how much subscribers are paying for the paper,” said Pollak.
When pricing alignment between print and online properties falls out of whack, eyebrows tend to rise. The Newport Daily News was widely ridiculed for its print/online pricing plans: $145 for the print edition, $245 for print and online access – and $345 for access only to the website.
For exclusive online content that the print publication can’t replicate, publishers have more freedom to set aggressive pricing. Incisive, for example, charges a premium for database-driven products, such as compilations of court verdicts and other research-based content. For those products, pricing decisions are based more on what the audience is willing to pay and how much competitors are charging for similar information, according to Pollak.
Pay as you go: More publishers are looking at selling smaller chunks of content, offering “day passes” or micropayment models that charge a small fee based on the amount of content viewed. This model – mastered by Apple with iTunes – requires more advanced metering systems and more seamless payment interfaces than many publishers are currently equipped to offer. But the investment may be worth it.
“When you ask people to subscribe, you have to buy everything in order to get one good story – just like you used to have to buy an entire album to get one good song,” said Greg Harmon, managing director of Belden Interactive, a media research and consulting company. “That’s really been the resistance to subscriptions on the Web. But with micropayments, people might be a lot more receptive. It’s not an impossible plan, and it’s by no means a bad plan.”
Group or site licenses: For vertical or other B2B markets, media companies may consider selling site licenses to companies that do business in the industry they are covering. Selling these types of corporate licenses, based on the number of users or “seats,” can simplify subscriptions for both the buyer and the seller. Site licenses are common practice for technology products, and now, media companies such as Incisive see them as a real opportunity for content as well. “For us, it’s the opportunity to sell 100 subscriptions to a law firm rather than direct mailing to 100 individual lawyers,” said Pollak.
Consultants such as Nancy Wang from Mignon Media have modeled a number of paid content scenarios, taking into account factors such as subscription costs, CPM rates, the existence/continuation of a print product, monthly page views/unique visitors, and subscriber acquisition costs. What Wang admittedly has not done is factor in the operational costs of managing a paid model to determine the profitability of any of these scenarios. (In a blog post, she says that’s the next step for her research.)
Journalism Online, a startup developing an e-commerce engine for paid content, contends that websites offering original content can convince 8-15 percent of their “hard core” visitors to pay for some portion of their content over the next two years – while maintaining about 90% of their current page views.
Others are not so bullish. Nieman Labs’ Martin Langeveld did some back-of-the-envelope calculations based on newspaper revenues reported by the NAA and some assumptions about the impact of pay walls on unique visitor counts:
I assumed that an industry-average $1-a-month fee would reduce traffic by 30 percent, $2 would knock off 50 percent, $5 would chop out 70 percent, $10 would say goodbye to 90 percent, and $25 would wipe out just about all of it. And further, I assumed that the 2008 ad revenue level of $3.109 billion would be reduced by the same percentage as the visitor reduction (which is probably a generous assumption).
In each of Langeveld's scenarios, the gain in subscription revenue did not offset the lost advertising dollars.
A loss of visitors, however, does not necessarily correlate directly with a loss of page views. A pay wall will likely turn away the more casual visitors to your site. The group that’s left – a smaller base of more loyal visitors – may actually enable the publisher to charge higher CPMs for the ad-supported sections of its site.
So yeah, paid content is complicated. But it’s also an issue publishers no longer can choose to ignore.
“The amount of attention people are putting on this right now is worth it,” said Harmon. “It’s worth thinking about long and hard, and conducting a thousand different experiments until you find something that works.”