Another Brick in the Paywall
There have been some interesting thoughts, news and events the past week in regards to paying for content online that made me realize while I hold some strong beliefs and experiences in the area I’ve not written about these ideas in a long while.
Over the past couple of years I have helped advise three of the worlds leading news media organizations on digital content paywalls and through this I’ve gained great perspective on the challenge. The first thing to understand about these institutions is that despite the fact they have websites with millions upon millions of visitors every month these are not digital businesses. Digital makes up tiny fraction of their overall revenues.
Using the New York Times as an example, total revenues in 2009 were $2.2B. Digital revenues were about $300M, only 14% of the total. That 14% is with digital properties getting roughly 60M high quality unique visitors a month. Hearst and NYTimes both built 50 story state-of-art high-rise office buildings in NYC the past 5 years. They weren’t budgeted with digital revenue projections over the next decade.
It should come as no surprise then that in last years American Press Institute Study, 71% of Newspapers surveyed indicated that preserving print circulation was a primary driver for introducing paid access to online content. While this thinking may seem ass-backwards to us in the digital world it makes all the sense in the world to these organizations.Of course the irony is that this mindset reduces the chance for success.
It may really be too much to expect of these organizations to move into paid digital content in an effective manner. Everything they know about subscriptions offline will be of little help online. What they have done on the digital side over the past decade is build highly matrixed organizations for sales, operations and analytics all around one thing, advertising. Unfortunately, the skillsets needed to sell content online are most similar to e-commerce, not advertising. When Jeff Bezos buys a newspaper it may stand a chance.
Still, strategists and executioners (pun intended) are being charged within these organizations to wage the battle for digital content dollars. My advice has been that winning the content paywall war requires elite sniper units, not carpet-bombing. The strategies for success are all about segmentation & testing/targeting precision.
I believe if selling bottled water can work content paywalls can work too (Evian/TBWA is a good place to look for a marketing case study). However, they will require a ton of new thought that must be allowed to illuminate organizations grounded in old ideas. It starts with re-architecting the use of data to better analyze content consumption patterns present within the domain. This begets new metrics, different datasets and much deeper analytics over those datasets. The starting point is to understand the interactions and goals of the people consuming the content. It is then imperative to understand the value of visitor and content segments based on the goals of the consumer. Consumer being the operative word here because content is what is being consumed and not all content is consumed similarly and not all consumption has the same patterns or values.
Publishers should also not underestimate the role of creative in paywall optimization. Crossword junkies, Sports Enthusiasts, Style Mavens and the like will all respond differently to different messages. Recency and frequency metrics will also play a very large part in both segmentation, messaging and possibly most of all pricing. Thinking of an entire body of a domain's content as a one size fits all product in this day and age of Nike ID and Facebook News Feed will not work.
The endpoint is creating an intuitive and value aware purchase funnel driving people into becoming paying customers by ultimately making a content purchase. To be successful these strategies for success require understanding not only the root values but the interplay of all these dynamics mentioned above, applying machine learning and pattern recognition to them and optimizing conversion rate success through lots of testing and targeting.
Last but not least what’s required for the major news media companies is doubling down on brand. That means ramping up brand initiatives cross-media from sponsorships to advertising. Brand is the promise and while there is little promised online that actually comes true for any sustained period of time brand is a key differentiator and can ultimately be the key arbiter of persuasion and retention. We all know there is a plethora of news and information on the web but at the same time news and information consumption on a personal level has never been higher. Brand value while fragile should never be underestimated as a beacon in the fog of online news and information. In fact media brands have always been some of the most powerful brands in the world -- just ask the #1 brand in the world now, Google.
It is a huge challenge - from a data warehousing standpoint alone - but I believe it’s doable and the math makes it worth doing. If NYTimes.com can get 25% of its unique visitors per month to pay $5/month it = $420M in annual revenue. Add to that the ad sales to the other 75% and you have an almost billion dollar business on that domain alone. Add to that the other NYTimes domains and the Times quickly is 40% revenue from digital and growing overall.
Content has always been a transaction. For paywalls to be successful each piece of content must now be valued, measured and optimized the same way any other consumer product transaction would. This idea of content merchandising may be the hardest part of all for editors and journalists who run these organizations to come to grips with. But their grip is slowly slipping.