NewBizNews: Paid content models

In the New Business Models for News Project at CUNY, we will be fleshing out three kinds of business models to start:
* hyperlocal from the local perspective;
* a news ecosystem that comes after a metro paper;
* and paid content.
We will be joined by business analysts who’ll be making the models. But to make them work, we need much information and many perspectives.

Any business model is just a list of assumptions and ranges. There’s no truth to be had until a model is executed – and even then, of course, the quality of execution (and timing and luck and talent) matter. But we believe that the more specific we can get in the discussion about sustainable business models for news, the better. This not only informs the debate, it also demonstrates, we hope, that journalism is sustainable and has a future: a new and robust future.

We will be doing this in the open so we can get as much help as possible: again, as much data and as many perspectives as we can.

I’ll start the process by listing data points I think we’ll need in each set of models. I need your help to add to (and subtract from) these lists, to help define the variables, and to provide your experience and data whenever possible.

Let’s begin with the paid content model.

First, let me be clear that I have been skeptical about the prospects of charging for content online (here’s my reasoning). Here’s Clay Shirky’s more eloquent argument. Others believe that charging for content is not only possible but necessary; see the Brill/Crovitz/Hindery Journalism Online venture and see also Walter Isaacson’s manifesto for charging. Perhaps it would be helpful for the project to also aggregate such opinions (do you think so?).

My hope is that we can get very specific about numbers, fairly and completely presenting each view so you can judge. That is the point of the exercise. All opinions are welcome and the more directly they are expressed, the better (you know I’ll express mine bluntly). We want to hash out these models and address the tough arguments, questions, and objections; the better we do that, the more useful and credible the models will be. There will not be one final answer. That won’t come until the models are executed.

At the end of the day, what we’re trying to do is make hard, unemotional business judgments. The question is not whether content should be free or whether readers should pay; “should” is an irrelevant verb. The question, very simply, is how more money can be made. What will the market support?

The other question, then, is how much journalism the market will pay for? What kind of journalism will it support? This doesn’t necessarily start with the current spending on current newsrooms. Part of the equation, especially in the other models, will be new efficiencies (e.g., do what you do best, link to the rest) and new opportunities to work in collaboration and in networks.

Note other back-of-envelope calculations of paid content’s value by Martin Langeveld and Jeff Mignon and Nancy Wang. Anyone know of others? We’d also like to aggregate these.

So, to start on the paid-content framework, here is my list of data points we need to fill in so they can, in turn, fill in the models:

* Experience: It would be extremely helpful to get actual data from those who have charged for content online: The New York Times, The Wall Street Journal, The Financial Times, The Los Angeles Times (for Calendar), The Economist. Please, in the comments, add other efforts you know about (including charging for sports content). And if you have worked on any of these projects, we would kill to pick your brain – if not in detail about your own experience, then at least to give us perspective and reality checks in our process. For the good of journalism, I’d urge all these companies to open their books on paid content.

* Pricing models: There are various models for charging: subscriptions for access to all or some content on one or more sites over periods from an hour to a year and payments (or micropayments) for individual items. Some sites have made specific content premium; some have allowed limited access to any content (e.g., a few pages) before requiring payment. Is it useful to consider mobile models? What about the Salon roadblock ad (pay or watch this ad to get access)? Has anyone tried giving access to content as a premium for other business (a la frequent flier miles)?

* Price points: How much have the various players charged in each of these models? What do we know about experience with various price points and price sensitivity? What do you think would be credible price points? If you’re willing to pay, what would you pay?

* Bundles: When access to online content is sold with print subscriptions, what proportion of revenue is and should be attributed to each mediium?

* Subscriber/customer acquisition cost: That is, how much marketing is spent to acquire paying customers? Those of us who’ve worked in magazines and early proprietary online services (and, to a lesser extent, newspapers) have a healthy respect for subscriber acquisition cost. It will also be helpful to make assumptions about conversion rates across different customer types (e.g., marketing to an existing print subscriber, to someone who moved out of market, to someone who left the print customer base).

* Churn: It’s necessary to calculate churn – that is, customers who drop subscriptions – to calculate net marketing costs. For example, magazine relationships become more profitable after the first or second subscription renewal. How long subscriptions last has an impact on profitability and so we need to make assumptions about this, even though there will be limited data.

* Audience: We need to calculate total paying audience. This is probably best done in relation to a known existing audience – i.e., percentage of print audience or online audience that pays. That will best come from experience.

* Other operating costs: Credit-card clearance, customer service, bad debt, anything else?

* Total revenue collected: Obviously, this is the result of fees times customers. But as a reality check, it would be very helpful to know the scale of revenue in prior efforts to charge.

* Ad rate impact: The assumption is that advertising behind a pay wall is worth more because more is known about those customers and they are more engaged. What are credible deltas?

* Data collection: Is there further ancillary revenue and value from having subscription and payment relationships with readers? Are there opportunities to sell data?

* Audience and traffic impact: This is the pivot point in the argument for and against paid content. Simply put, will the advertising served to additional audience (at different rates) surpass the paid revenue (or will paid revenue surpass ad revenue lost)?

* Googlejuice: I believe that Google position is a factor in this decision as well. Google can search content behind pay walls, but with less audience and thus fewer links and clicks, what impact will that have on Google positioning? How does that affect specific content (e.g., topics) and the overall brand? This is difficult to calculate (we perhaps could consider trying to put a number to Google asset value) but it is relevant to the conversation.

* Qualitative questions: What kind of content would be best-suited to charging? Any experience here?

If anyone has any research on any of this, we’d be most grateful to see it. We do not need to attribute data to any company or person. What we want are credible numbers and the more information we have, the better. These models, all of them, are God’s work, remember.

That’s my list to start. What did I miss? What did I get wrong? What information and experience can you contribute?

Thank you.

  • http://wallisphoto.blogspot.com/ Jason Wallis

    You’re a genius Jeff. This is what SHOULD be taught at University! I will follow this with interest.
    The biggest obstacle to charging for content is the basic supply/demand curve… too much supply of “free” content on the web.

  • Taylor Walsh

    Jeff, does this model assume a continued connection with a physical print paper? I read this first assuming that it would apply to an online-only product. Maybe the model requires the flexibility for both circumstances.

    The major missing cost element here is sales. You outline several potential revenue streams, perhaps for different audiences. A comprehensive sales approach, including human beings as well as any nifty apps, would be necessary.

  • Chris

    Porn. Hate to say it, but they’ve been cleaning up with the paid content model for years… Both subscription and a-la-carte pricing models.

    • http://www.buzzmachine.com Jeff Jarvis

      but even porn is being done in by user-generated content.

      • Dan

        UGC, torrenting — there’s plenty of free porn out there, legal or otherwise. No clue why anyone would ever pay for it.

  • http://cbs.com Adam Elend

    One other iteration of paid content that you touched on with the LA Times Calendar example, but didn’t fully flesh out. Content for free, but a premium on actions – for example, CBSsports.com charges for you to use their fantasy sports application, but all the content is free. Anecdotally (I’m not at all involved with CBS Sports) they have seen numbers and marketshare rise despite the fact that they are the only pay service of the big three.

    Fantasy sports is an area where a barrier to entry can actually be helpful – if you have to pony up to join a league, you’re more likely to stick around through the season, which avoids the problem of ghost leagues, where most participants have simply stopped playing midway through the season.

    A potential pathway to overcoming the supply/demand challenge is to seek out those areas of the business where a barrier to entry could be beneficial (commenting, to take one example that will probably be controversial), and monetize those.

  • http://www.cosmicvc.com Charlie Federman

    Here’s the link to the Media Economic presentation that Jeff speaks so well about in his book. When you have a quiet time to really digest, worth a read.

    //www.scribd.com/doc/12177741/Media-Economics-The-New-Economics-of-Media-Umair-Haque-

  • http://www.hubspot.com Rick Burnes

    This is great. Nice piece, and super discussion.

    I think your list should include at least one more form of content monetization: Content created by businesses.

    Smart businesses are beginning to realize that it’s in their interest to create high quality content. If you’re in the food business, you can attract a lot of food-related search traffic to your site by creating food content on par with Jamie Oliver or Mark Bitman. If you’re a neighborhood restaurant, you can attract a lot of traffic to your site by writing about your neighborhood. If you’re a marketing software company, you can attract a lot of people to your site if you lead discussions on new ways to market. That’s what we do at HubSpot, and we have lots of data to show that it works. Our 13K-subscriber-blog generates about 400 leads a week for our sales team. That’s a business model.

    Journalists might object to content created by businesses — but these businesses will only attract attention and traffic if they create quality content. Read the comments in our blog. Marketers and small business owners find it very, very useful.

    Content from businesses isn’t going to be the model that replaces newspapers, but will be one of them.

    I’ve written more about this here:
    http://blogs.zdnet.com/feeds/?p=378
    http://mashable.com/2009/02/10/businesses-becoming-media-companies/
    And here’s our blog: http://blog.hubspot.com/

  • http://capitansnorkel.blogspot.com Carlos Salas

    El País, in Spain, charged for contents during many years but two years ago they realized the inmense error. During the while, El Mundo, its major competitor, took advantage offering contents for free since the beginning and now is the leader portal in spanish language throughout the world. El País lost the opportunity.
    However, media are scanning ways to charge because the business is not very profitable. As you know, Andrew Keen said yesterday that web 2.0 is fuc##cd. It is not the realm of money but of the vanity.
    I think media will find a way of charging for some products, as Chris Anderson says: fremium.

  • http://capitansnorkel.blogspot.com Carlos Salas

    Has anybody made calculations about how many subscriptions got NYT, Wapo, Time, Newsweek and so on through Amazon’s Kindle?

    I heard 12.000 for NYT. If so is true, I think new devices can be the Salvation Army of journalists The question is: must we change our way of writing, headlining, summarizing…?

    Are we going to tweet instead of writing great columns or articles?

  • http://www.ilookfor.com john

    Your model is very much helpful in the market. it is the business policy as per ECONOMICS that a potential pathway to overcoming the supply/demand challenges….

  • http://robertdfeinman.com/society robertdfeinman

    I’d just like to point out the the most successful pay-for-use models have, generally, been tied to a specific piece of hardware.

    This was the reason for the way the Ipod (and now Iphone) caught on. It is why the Kindle is starting to make inroads and it is the way many cell phone services get billed.

    Then there is also cable TV with the need for a special decoder box and satellite TV and radio.

    The ubiquity of the PC may be the reason that pay-for-use hasn’t caught on, there are just too many free options using the same platform.

    Perhaps if one could make the use charge invisible the way it is on the devices I mentioned, PC-based content might have a chance.

  • Bob P.

    Are you interested in looking at smaller, local dailies that charge for online content? I believe there are a number of them. Two that I know of: The Post Register in Idaho Falls, Idaho, and the Democrat-Gazette in Little Rock, Ark.

    The PR charges $6 per month (though you get free access if you take the home delivery of the print edition). Very little is available in front of the “pay wall” as it’s called. The D-G seems to offer a little bit more for free, but full versions of articles mostly seem to require a subsription — $5.50 per month.

    I think it would be interesting to see how these are working in local markets — since for many newspapers, local news will be the bread and butter. Smaller market local papers also have the advantages of still having a near-monopoly on local news. Who knows if that will last, but for now it remains a much different situation than some big paper trying to charge for national news — which would result in what you rightly call “whack-a-mole.”

  • http://withusnotatus.squarespace.com Matthew Quint

    Great template, Jeff.

    I suppose one of the other factors is “lost” revenue (and legal costs) after the switch to a paid content model when the digital “theft” of that content will begin to take place.

    Will peer-to-peer illegal sharing of news media develop, a la the struggles being faced by the music industry?

  • kus

    this work contains some facts (written in German):

    http://www.amazon.de/Paid-Content-Services-Erfolgsfaktoren-Perspektiven/dp/386550079X

    it’s my exam paper (media management, cologne), published as book one year later in 2005

  • Berend

    couple of thoughts here: @experience: the framework seems a bit rigidly modeled after newspaper publishing as we know it today (WSJ, NYT, etc.). I’d suggest you look at successful B2B analogs as well.

    further: @price points: a newspaper copy costs less than starbucks coffee we buy to enjoy our read or the few text messages we send while reading the newspaper… point is: 1) it is not about the absolute price point but about the value perception and 2) it matters whether the payment is direct and overt (handing over 50c for a physical copy) or indirect and hidden (getting a mothly charge a few days later embedded in a large bill at a much higher dollar amount)

    lastly: @pricing model: who pays directly vs. indirectly and pay per drink vs. lump sum? comeswithmusic nokia phones buyers pay for the music, but is included in one-time purchase with the phone – nokia pays the labels; cable tv viewers pay for the content, not in small increments but in one monthly lump sum – cable company pays the content producers (studio’s). along these lines, should internet access providers increase the monthly bill slightly and turn around and pass along most of this to newspaper/content producers (or right organisations representing them) in turn?

    good luck with the project

  • Steve -UK

    Jeff – it is worth modelling the impact of all major publishers moving to a paid content model. Looking at individual content creators in paid isolation amid a world of free will have an inevitable conclusion. But would the value of unique, original reporting increase if it was difficult to find elsewhere free on the web? I’m talking about unique, original reporting – not the rehashed wire copy on the BBC

    • Elli

      This is a good point. I think we will have to redefine ‘”news”. The fifth covering of the foreign ministers press conferenc will not be “news” you can have anybody pay for. The exclusive interview with him or her on an not-every-day topic might be.

  • http://fergle.com Fergus

    Surely someone in Australia can kick in Crikey’s model and numbers (www.crikey.com.au)? It started as a paid email newsletter. Is still that, but has expanded into a newsletter, website, blog network etc. Eric Beecher’s email anyone?

  • http://www.worldplenty.com John Banfill

    I believe you have come up with a great list to start. A little more on the qualitative aspects would be the question of why would anyone pay rather than utilizing what is free. What can you provide that is helpful enough to the audience for them to pay for it? I guess you could sort these out in the old engineering qualities of better, cheaper or faster – where any two will be a viable and profitable combination.

  • http://AboutAmherst.blogspot.comW Mary Carey

    The newspaper I work at, the Northampton, Mass.-based Daily Hampshire Gazette, charges for content.

  • http://wyman.us/ Bob Wyman

    Jeff, you remain too heavily influenced by the thinking of today’s failing newspapers… The hype about “hyper-local” reflects the geographical definition of traditional newspapers. But, hyper-local is only ONE form of focus and specialization. We do a major disservice to newspaper journalists if we allow the debate to focus on this remnant of the past. “Hyper-focused” makes more sense.

    Look to the Bureau of National Affairs (http://bna.com) as an example of a newspaper that hit hard economic times and responded by adopting a new business model based on charging for hyper-focused news (many products are daily and all are advertising free). In BNA’s latest 10K, they reported 1,745 employees (almost 1,000 Guild members), earnings of over $350 million/year, only $23 million of long-term debt, and a stock price that has trounced the S&P 500 over the last 5 years… This company, the oldest fully employee owned company in the US, should be the lead example of how a newspaper can redefine its business and not just survive, but thrive!

    Jeff, how about having one of your journalism students write up a study of BNA? Call it: “How one newspaper changed its business model…” You’d need to start back in 1929 with David Lawrence’s “United States Daily” newspaper and then work forward from there to understand the challenges faced by the paper and how they were responded to…

    We’ve been here before. Let’s learn from the past. Hyperlocal is only one form of specialization…

    bob wyman

    • http://www.businessword.com Donald Johnson

      Wyman took the words out of my keyboard. You can check out a number of trade-focused sites that charge for content. Look at the Moody’s, S&P, Morningstar.com and Value Line sites, which charge for content.

      How do local publishers translate BNA’s and other trade publishers’ experiences into business models for local journalism?

      1. Focus on content that directly helps people make money and avoid losing money as professionals, contractors, traders and, I guess, gamblers.
      2. Think small. The Rocky’s former staff tried to start an online service with 30 employees. Economically impossible. Try two or three staffers at most.
      4. Get one company or organization to sponsor the news site. I think a ReMax site that focused on a suburban or Metro home market and reported honestly as well as in great detail would be a winner, for example. How much could the ReMax offices in an area afford? $50k, $100k a year? How would they profit? List participating brokers and their listings. Links to listings. Profile pages for brokers. Stories about how brokers know their “farms” and bring in buyers.
      Have an equipment rental company sponsor a site on local muni RFPs and contract awards. Audience is contractors who rent equipment. Budget? $50 or $100k.

      5. Look at the single-sponsored sites backed by drug companies and companies that cater to expecting parents. I think they’re making life difficult for publishers of parenting pubs. They’re in the publishing biz, and much of their content is provided free by readers on message boards, etc. Some people with journalism training are involved in these sites, I’ll bet. But I’m not sure you need journalists to make them go. You need good PR and promotions people.

      The trick is to come up with sites that help readers and advertisers make money. Sites that are fun and interesting make it when they involve gaming, porn and gambling, but they don’t cut it with cutesy profiles of celebs. Sports sites may make it if they help gamblers win. Remember, sites published by major league teams are single-sponsored affairs and may make it difficult for outsiders to make money on blogs, etc. unless they offer really unique perspectives that help gamblers (paid content) or advertisers (free content).

      I’ve been a news junky for almost 60 years, and I don’t subscribe to the local town weekly. I just don’t care about local news and gossip. I almost let my Denver Post sub lapse, and I might give it up next year, because I don’t have much time for it because it doesn’t help me make or preserve money or make good decisions about elections. Interesting and entertaining, yes, but I can get that for free on the Web. I get Bloomberg and WSJ.com on my iPhone. How many others feel the same way?

      • http://www.businessword.com Donald Johnson

        Note to journalism profs. Teach kids to be marketers, market researchers, entrepreneurs, sales people and self-promoters. Teaching them to cover city council and school board meetings wastes their time and tuition.

        I think journalism schools will find that MBA programs will take even more of their best raw talent than they already do.

        And I seriously doubt that many folks will find pure journalism jobs, because the economics of journalism are so difficult and most media are so prostituted. Look at CNBC and how it’s becoming the flack channel for GE’s green businesses. Who wants to be part of that?

  • http://www.scoop.co.nz alastair thompson

    Dear Jeff,

    I would be happy to participate in this project. Scoop.co.nz – Scoop Independent News – is a new news model which has been operational in NZ and self supporting for 5 years. We publish a combination of aggregated raw news and news and analysis produced by professional journalists. We do not have a pay wall – but that does not prevent us earning subscription revenie.

    I am an ex newspaper journalist and founder/General Manager of Scoop.co.nz. We employ 7 FTE people – down from 11 last year before the crisis required some restructuring.

    Our experience I think may be useful to your discussion. Our experience fits all three of your base case models hyperlocal, ecosystem, and our own take on paid content – which doesn’t necessarily mean people paying to read content.

    regards
    Alastair Thompson
    Scoop.co.nz

  • LM Huntley

    How about charging for content before it is produced? Ask people to submit news ideas and then invite them to contribute to the cost of producing those stories. People “vote” for a story by paying a small amount, so the model relies on micro-payments of say $1 from 1,000 people to pay for one story.* The cost of reporting the story is covered so that when it is produced and distributed it’s free for unlimited use, which is what people have come to expect.

    Stories can’t be “voted” down, no one – or rather everyone – owns them, they are reported according to established standards of journalistic integrity and once a story is paid for, it gets published and stays published – no exceptions.

    This may work better for investigative and feature stories. However, if one story is overpaid – say Brittney Spears is coming to town and so many folks want to pay for it there’s more money than needed – the extra money goes into a pool toward other news reporting.

    I’m not suggesting that this would be a news organization’s ONLY revenue stream, but one of many. Likewise, not all stories would be user-financed and not all user-financed stories must be first suggested by users, the news organization can put its own suggestions up for consideration as well.

    * Use a special currency on the site, call it “points” for example. Each point is worth $1. People can buy point packages at a discount, say 50 points for $45.

    • http://www.businessword.com Donald Johnson

      Interesting idea. What you’re proposing is a research service. If a local contractor wants the scoop on a project being considered by a muni, it may pay $1,000 for a detailed report written by a reporter with the right contacts and the willingness to be a market researcher rather than a newspaper reporter. If a politician wants the dirt on an opponent or some backing legislation that he doesn’t like, he may be able to get some lobbyist to finance the production of a special report. The report, of course, could be leaked to the media, including local bloggers, etc.

      My experience as an editor and publisher is that readers seldom know what stories they want to read. They’re the last people to know what will make a good content provider, but they can react to what’s offered. Thus, I doubt readers would propose stories that make much sense or generate many cents in revenues from a broad audience.

  • http://growchangelearn.blogspot.com Tom Haskins

    Giving the readers “assignment editor” control could decide which stories to cover in advance, as LM Huntley suggests above. This perceived “loss of editorial control” could also determine how long to stay on a story by setting up a prediction market for stories that are episodic, ongoing and unfolding. As the story loses value, it’s life span gets shortened. If it gains traction, the journalists stay on it longer. In both cases, the readers own the production of content, feel responded to by the profession and trust the professionals. It reverses the loss of credibility from revenue generating, content push models. Or as you wisely wrote, it’s what Google would do.

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  • http://www.subhub.com Evan Rudowski

    Jeff,

    It is good to see you taking this kind of approach to a subject about which you have made clear your immense skepticism.

    At SubHub we have built a business model for our customers to use when they build a paid website on our platform. I think it captures most of the moving parts of the model. We’d be happy to share it.

    I must add that I think it’s very important to define what you mean by “paid content.” This is often lost in the discussion. If you mean newspapers putting all their content behind a pay wall, of course this is not workable. If you mean unique, exclusive, high-value content, it’s very possible.

    If you do not clearly define the product offering, you will not be able to pinpoint a model nor reach any useful conclusions. Paid content is not a generic term; there are many paid content approaches. Which one will you and your students choose to evaluate?

    Kind regards,
    Evan

  • http://www.hos.com Stephen Hill

    Jeff,

    Your breakdown of the elements of paid content businesses is helpful, especially to understand the differences with advertising-supported, donation-suported, and grant-supported journalism.

    As comprehensive as you’ve clearly tried to make it, I believe it still underweights several of the key psychological and network-related factors that make online paid content businesses different from previous monetization models.

    At the heart of every decision to pay is a value calculation that occurs in the mind of the individual user. Figuring out what would make *you* pay is helpful, but not nearly broad enough to include everyone else, whose motives and values will not be identical to yours.

    A range of environmental factors wrapped around the content — bundles, discounts, concealed subsidies, trends, peer pressure, economic issues these days — all affect this value calculation.

    Complicating the calculation further are “Internet-native” factors, including estimation of repeated use, time-saving potential, social network effects, personalization, interface design, and the uniqueness of the content or service.

    Because of these factors, paid content is really a different species of business with its own rules and characteristics. We sum it up this way: cheap is the new free.

    From the perspective of the content provider, SIZE matters enormously. No single solution will work for all levels and types of journalism or media. From the leading edge of the long tail down to the most obscure niche, there have to be a range of methods, options, and models.

    Our experience has been with a niche music service. We were in a relatively advantaged position to launch a subscription streaming service in 2001: we had an 18 year national presence on public radio, we had an established and well-accepted brand, and we had an inventory of unique, high quality content to offer.

    But the fact is, we had no choice but to charge. No one was going to give us any kind of funding, and our traffic numbers made any thought of advertising support a fantasy — especially in 2001.

    But it has taken us a long time to begin to understand the value calculation that our users make when deciding whether to pay. We have found that the entire area is very nuanced, and the relationship between free, paid, and “freemium” models takes careful experimentation to get right. We wound up with 3 major levels of service and no less than 25 different pricing options. (see PLANS at http://www.hos.com)

    Despite what must be a record number of payment choices for a site our size, we continue to be surprised by the granularity of service options that users ask for. Ultimately we may need to build an interface that allows users to pick service levels and payment options from a menu and construct a custom solution for themselves, like Dell and Apple do with their hardware.

    We have concluded that it is not up to us to tell our users how to interact with or how to pay for our content. Beyond the content itself, our job is to provide the choices.

    We’ve found you need to pack your paid service with value from the start, drive the price down as far as you can, keep adding value, innovate, repeat. Once you are rolling, daily interaction with your users will teach you everything else you need to know. After all, they have choices and they decide.

    Takeaway: Cheap is the new free. But value is fundamental if you want to get paid.

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  • http://www.interprintmc.com Chris Maikisch

    Question being posed:
    At the end of the day, what we’re trying to do is make hard, unemotional business judgments. The question is not whether content should be free or whether readers should pay; “should” is an irrelevant verb. The question, very simply, is how more money can be made. What will the market support?

    My viewpoint:
    We lack credible data and I agree with that. Say nothing about newspaper industry to take on risk and go for it. They forget the tried and true are of trial and error. They’re so risk adverse all the while the industry is deteriorating and remains the butt of every analyst’s joke. I will not take on the questions like,
    ” how much journalism the market will pay for? What kind of journalism will it support?”
    Let’s assume (there I go using that word) that in this sample newspaper example, the volume of news content that can be organically generated and classified as premium (hyper local, investigative reporting, features all with supportive media making the reading experience online relatively enjoyable) as not an issue.
    Then this boils down to Sales 101.
    It makes no business sense whatsoever to charge newspaper readers for the same content you give the online user free. If industry executives had to deploy a paid new content model online in 90 days these would be the questions they would need to ask.

    1. What is our visitor conversion strategy when the web site greets a potential buyer?
    a. Start setting visitor expectations from impression number 1….your homepage.

    Most newspapers have the same homepage layout. That layout is not ideal for audience conversion. When I go niche newspapers that do charge for access. I still get the impression the news is free. I am never asked to pay until I click on something they want me to now pay for. The message I get as a visitor is something like:

    ..”come on in, look around, no pressure. A lot of content here, everything is good. You want to click on that…good ahead, yeah. HEY, YOU GOT TO PAY”.
    Sales 101:

    Set the right expectations in the prospects mind early into the user experience. Publishers should clearly distinguish the areas of the site as to what is premium content and therefore requires payment, and what is free content. You would follow the 5 year old…design newspaper sites so a 5 yr old couldn’t get lost. Visitors to newspaper web sites would need to get an the immediate impression when the homepage loads that “Classified” content is free. This way before the first click takes place the expectations have been set. Newspaper are not known for being experts in merchandising the news, but they should be. Newspaper need “retailer experience” because their users do not have the expectation to come to news sites with their credit card in hand. Why is setting proper expectations early in the sales process important?

    Because it drives the conversion percentages higher.

    Unsold Inventory:

    Everyone who writes on the paid content model assumes the declines in audience will be terrible for advertising. How many newspapers have ad inventory sell out ratios of above 30%? For every online manager who tells you 50%, 60% and 70% or more of inventory is sold, is a guy who truly doesn’t know what his capacity is.

    Side Bar: I recently had this conversion with online manager at a chain newspaper site. His name and site will remain anonymous but his title was long and I naturally assumed he was experienced and very smart. He stated his sell out ratio was almost 80%. I asked him how many page impressions (with ads) on average per month his site was experiencing. His answer was 15 million. I asked if he knew what is average cpm was? (99% of every online manager doesn’t know) He answered “probably $15 cpm”. OK, sounds reasonable. What are you doing in monthly ad unit sales on those pages? He answered between $150,000 and $200,000 per month. Just on ads. By the way, a cursory look on his site led me to believe that his ad template render anywhere from 3 to 4 per pages. So, for math purposes let’s say 3.5 ad units per page. Well, when you do the math, you realize he has no earthly idea what his sell out ratio is.

    1. 15M page-views x 3.5 ad units per page is 52.5M in monthly ad inventory
    2. 52.5M ad inventory at $15CPM = $787,500 per month if 100% sold out
    3. He stated his sell out ratio was almost 80%, so 75% sell out ratio would total $590,625 per month.
    4. He is at $150,000 to $200,000, so even using the higher number, he seems to be at a 26% sell out ratio not almost 80%.

    The side bar point is if in fact most newspapers are at a 25% to 30% ad inventory sell out ratio, then conceivably they could withstand a 75% decline in page views with little impact paid ad unit sales. This would also drive the sell out ratio through the roof. Why is knowing your sell out ratio and the TRUE total unsold inventory?

    Because most publisher’s do not feel like being the innovator of a new web site model for news. If they had all the data, they might deploy these models and then the industry would have empirical data on conversion rates. They would tweak their user conversion process over and over until they dialed in for maximum conversion success.

    Classifieds:

    So much of the current revenue mix on newspaper web sites remains classifieds. Launching a paid news model online would have to take place with little impact to the current classified audience. This is merchandising 101. Some newspaper web sites do a good job highlighting the various segments of classified content within tabbed widgets.

    The Daytona Beach News-Journal’s site, news-journalonline.com does a good job on the homepage receiving and flowing the visitor to the appropriate channel of content. However most publishers recognize 65% of their online revenue comes from classified but then turn around and do a poor job merchandising to visitors their content. Some of the largest newspaper chain web sites do a poor job. Why is this a important?

    Because if publishers do not know how to protect audience, they do not know how to channel and convert audience. I feel these issues are more at the heart of why the newspaper industry has not been successful with deploying paid content as a revenue generating model. There are many other variables publishers need to consider, but the basics have eluded them.

  • Page Donovan

    Fascinating stuff. Anyone have definitive data on typical churn rates for paid content? I’ve been searching for days and can’t find anything … loads of data re: telcos but nothing related to paid content online, especially for web-only enterprises.

    Thanks!

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