The Truth About Paid Models, by Matt Mitchell, Founder & CEO of MediaPass

The following is a guest blog post written by Matt Mitchell, Founder & CEO of MediaPass.  I love what he has to say about the importance of balancing free vs. paid content as well as making sure advertising is a component of the overall revenue picture:

The process of launching, running and attracting paid subscriptions isn't a competency that online publications generally have. This was one of our assumptions when we started MediaPass but we had no idea the extent to which it would prove correct. We also had no idea that some of the smartest publishers in the world would commit some of the most egregious subscription strategy offenses. So I've decided to point out a couple of the more basic mistakes being made and also discuss the way publishers should be thinking about paid subscriptions.

Please Tease Me!
One of the greatest myths about charging for online content is that a publication will lose traffic. This is not to say that declines in traffic aren't possible. There are actually many ways to lose visitors and the Times of London picked perhaps the best: they ignored the fact that users need to be drawn in by the actual content. Go to their site and click on one of their sections such as Business or Life. The site will immediately take you to a subscription wall before you even see if there's an article you’d like to read. I'm not kidding. Check it out. This is not a good conversation to have with your readers:

Times: "Please pay us."
Visitor: "Why?"
Times: "Because we're the Times."
Visitor: "What articles are behind your pay wall?"
Times: "Pay us and find out."

People generally buy a subscription because they are interested in a specific article. When you're at the airport shop deciding which magazine to buy, do you pick one because every article in the glossary is something that interests you? No, you pick a magazine that has one or two articles that grab your interest. You do this because you are guaranteed to like at least something in the suite of content you paid for – even if the rest of the magazine isn't so great.

"Switching" to a Paid Model
Whoever said that free and paid models had to be mutually exclusive? Publishers don't need to "switch" to a paid model. Subscription elements should simply be added to better monetize the website as a whole. The key for any publication is finding the optimal mix of free vs. paid content that is right for their site. And it's rarely 100% one or the other.

Why Remove Advertising?
Some sites are now offering a paid model where users won't be forced to see ads if they are a subscriber. There is no benefit – either financial or usage related – to doing this. The core reason why online ads don't monetize well is that people have evolved over the last 10 years to the point where their brain doesn't even see ads anymore. Unless the ad is incredibly intrusive, users don't mind it being on the page. By taking the ad-free route, publishers lose additional revenue and get little-to-nothing in return. Advertisers will also pay much more for subscribed users because they are more engaged. So, publications that do this are getting rid of ad real estate that has doubled in value.

Many publishers are surprised when we tell them not to abandon their advertising. We think of advertising as a "why not." Ad monetization is very low but every little bit helps. There are actually many good ad networks and other companies trying to improve the poor performance of advertising. We're glad they are continuing their efforts because we all have the same goal of improving publishers' revenue.

Ads to Oranges
Forgive me for the cheesy title, but initial subscription results can't be compared perfectly to advertising monetization. The reason is simply that subscription revenue builds on itself over time through renewals and ads don't. The WSJ.com had only a few thousand subscriptions when they launched a decade ago. They now have well over a million. Luckily for the WSJ and others starting to charge for content, subscription monetization is usually so much better that it beats the performance of ads even when handicapped in the first few months.

There is a lot of speculation and commentary on initial numbers of large sites like the Times. They've been making the mistake of giving their great content away for a long time now. Unfortunately for them, they don't get to simply press a button and immediately recapture all the money they lost. They have clearly made some subscription process mistakes but luckily they are all errors that can be fixed. They have at least made the right move this year by beginning to charge for content. Now it's time for them to refine their approach and grow their subscription base the way the WSJ has. And I think they will.

Matt Mitchell is Founder and CEO of MediaPass, a service which helps online publishers increase revenues through the use of customized subscription model.

Comments

[Carolyn Jewel]

For what it's worth, in such discussions I have always heard that the WSJ is an outlier and cannot be fairly compared to a general newspaper such as The Times or the NYTimes. The WSJ content is not news in general but already specifically targeted to a group of users who consider the WSJ required reading for their specialized interests.

A general newspaper doesn't have the kind of specialized audience who feels that the information behind the paywall is worth the price.

I completely agree that asking users to pay up before they can even decide if they care about what's there is not a very good solution, as The Times seems to be learning.

As a consumer of general news, I MIGHT consider paying for an on-line subscription to my local paper. But I probably wouldn't for many many other newspaper websites that I currently only visit from time to time or upon finding a link to one recommended by some trusted source.

[Neonomix]

Intersting article, especially the part about keeping ads.

Now, just a quick note to say that the Times does provide a way to check out the article titles. It only does it wrong by forcing the user to roll over the section names instead of clicking them. By rolling over, one can indeed see the latest 3 articles, or click on the "More [SECTION] Headlines" to get a list of the latest 50 articles (such as http://www.thetimes.co.uk/tto/public/?view=list&section=Business).

So, after all, poor design leading to even more frustration...

[mrf222]

Well written article, Mr. Mitchell. I hadn't really thought of the paid subscription model as being complementary to online ads. You make a good point that readers don't really notice the ads as much any more so there is no benefit in cutting out an additional revenue stream.

Thanks for your thoughts.

[Ed Renehan]

You are dead right. The tease is the thing. A "taste" is important in making the sale, and that does not just apply to wine.