The Evolution of Paid Content: Big Experiments, Diverse Outcomes

1. The evolution of paid content: big experiments, diverse outcomes Peter Kirwan March 2011

2. Consumers & paid content Q: “To what extent are you willing to pay for the following sources of online content?” (Nielsen 2010: EMEA adults, n = 27,000)

3. Consumers & paid content II Q: “Which of the following types of digital content would you pay for in the future?” (Forrester Q310: n = 14,247 European online consumers aged 12+)

4. 09/07: NYT paywall comes down 09/05: NYT paywall goes up 03/11: NYT paywall 2goes up 07/10: Times (UK) paywall goes up UK online display market down by 4% YOY (Screen Digest) The story of free Newspaper industry digital advertising revenues 2004-2013 in US and Europe (PwC, Wilofsky Gruen: 2010)

5. Last time / This time • Familiar fears • Online display will never be enough • Single revenue source = cyclical • New factors • B2B: classified & display migration • Accelerating print circulation declines (broadband) • Emerging technology solutions • Different response • Top-level ideology (Murdoch) • Cartel-like behaviour

6. B2B ad markets: western Europe Source: Trade magazine ad revenues in western Europe: PwC/Wilkowsky Gruen Associates

7. Different starting points Source: Valerie-Anne Bleyen & Leo Van Hove, Western European newspapers & their online revenue models (2007)

8. Six models • Lockdown • Freemium • Metered • Time-limited • Site licensing • Micropayments

9. 1) Lockdown

10. Lockdown: The Times • Google does index thetimes.co.uk • But: no First Click Free (or 2nd, or 3rd) • Twitter/Facebook clicks hit paywall • Sampling option: £1 for 1 day (site only) • Sampling option: £1 for 30 days (full sub) • Full price = £8.66/month • Trial access requires cc details

11. Lockdown: The Times • Pre-paywall: 21m monthly uniques • September 2010 (GNM/Hitwise analysis): • 54,000 users/month behind paywall • 28,000 = all access print subscribers • 26,000 = “paying for digital content”

12. Lockdown: The metrics • November 2010 (Official metrics) • 100K print subs activate web access • 105K “paid for customer sales” • c.50K “monthly subscribers” (web, iPad & Kindle) • “Many of rest” = 1 day subs / “single digital copies” • Frequency: • Old site: one visit per fortnight • New site: three visits per week (x6)

13. Lockdown: The metrics • March 2011 (Official update) • Monthly digital subscribers: • 79K “monthly digital subscribers” (web/iPad/Kindle) • Up from 50K (October 2010) • Conversion rate declining or churn very high? • BUT: “Paid-for customer sales” • 105,000 in first four months • 117,000 in second four month period • Better marketing = more sampling?

14. Lockdown: Revenue • Times/Sunday Times: Home page traffic • UK uniques, Dec 2010 = 1.22m • UK uniques, Jan 2011 = 1.61m • Subscriber conversions/month at 0.6% • 9,660 new web subscribers per month • 115,920 per year = £12m revenue annualised Source for traffic data: UKOM/Nielsen, January 2011

15. £12m/year: Success? • Positives • Recurring revenue base (minus churn) • Deep customer insights • Radically higher engagement • Number of paying readers up overall • Sky/News cross-platform bundling to come

16. £12m/year: Success? • Negatives • Cost of customer acquisition • Churn (. . . 30%?) • Buzz: “newsletter economics” (Clay Shirky) • Silence on advertising performance • Advertisers want big numbers (+ social) • 7-day newsroom costs £100m/year

17. Collateral effects • UK national newspapers now trialling or working on paid content: • Daily Telegraph (metered approach) • Daily Mail (working with Google One Pass) • Trinity Mirror (niche sites?) • Or willing to contemplate it: • The Independent • The Guardian (£40m “free” revenue)

18. 2) Freemium

19. Freemium “If your free service is loved and you do a good job articulating the value that comes with the paid service, you can convert to paying users with good results.” -- Fred Wilson, 2006

20. Freemium • Positives • Maximize monetization: niche/mass markets • Free content = cost-effective marketing • Considerations • Fixed or shifting categories for free/paid? • Journalists like eyeballs • What is valuable?

21. Freemium • Considerations • Poor free product = low incentive • Difference must be self-evident • Web + print = free + paid? • Build a new premium product? • Examples • Times Select (news free, opinion paid) • Macworld Insider (IDG)

22. Freemium: Macworld Insider • “The ultimate way to experience Macworld” • Full content RSS feeds • Members-only newsletters & forum • Searchable PDF back issue archive • Single page long-form content • No online advertising • Live chat with editors & writers • Club discounts • $39.95/year: standalone • $19.95/year: for print subscribers

23. 3) Metered

24. Metered • Customer-centric variant on freemium • Positives • Freedom to dial access up or down • Tiered access: free, registered, subscription • Additional flexibility: inbound social links • Editors don’t make free/paid decisions • Keep & maximise ad revenues

25. Metered • Considerations • User confusion (Paywall? Pay-hedge?) • User frustration (value of n+1 story?) • Free riders gaming the system • Do metered sites “punish” biggest fans? • Pricing must be finely calibrated

26. Metered: New York Times • Estd. annual paywall revenues: $100m* • Highly profitable incremental revenues • NYT digital ad revenue: $150m • Aim to retain all of this ad revenue * Gordon Crovitz, former publisher of the Wall Street Journal and co-founder of Journalism Online: 03/11

27. 4) Time-limited

28. Time-limited • Paid content = bundling • By users: lockdown, freemium, metering • But you can also bundle content by time: • Milliseconds: machine-readable news • Minutes: human-readable online news • Hours: print curation day/week/month • Archives: long-term value (Long Tail) • PDF-based magazine archives

29. 5) Site licensing

30. Site licensing/corporate subs • The FT’s strategy • Pull back from third-party paid aggregation • Press forward with in-house sales • Result #1: Direct customer relationships • Result #2: Significant owned revenue stream • Incisive Media (UK B2B publisher) • Corporate subscriptions growing rapidly • Customer relationship: data analysis • Long sales cycle: consultative sell

31. 6) Micropayments

32. Micropayments “The way Walter Isaacson phrases it, I thought of hypertext in 1960 just in order to make micropayment possible. . . This has it inside out. I came up with the idea of micropayment to make hypertext possible.” -- Ted Nelson, computing visionary

33. Micropayments “You’re going to see within the next year an extraordinary movement on the web of systems for micropayment. . . “ -- Nicholas Negroponte, 2000

34. Micropayments “Here’s the short answer for why micropayments fail: users hate them.” -- Clay Shirky, 2000

35. Consumers & micropayments Q: “I would rather pay for individual pieces of content (micropayments) instead of subscribing to an entire web site” (Nielsen 2010)

36. Consumers & micropayments II Q: “How would you prefer to pay to view news site content?” (Harris/Paid Content 2010: n = 1,188 adults aged 16-64)

37. Some final thoughts • Paid content ecosystem: early stages • Moving beyond “free”/ad monoculture • Emerging low-friction transaction platforms • Increasing corporate experimentation • Is text-based media different? • If you build it, will they will buy it? • Diversity is core to evolution. . .

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39. Thank you Peter Kirwan Phone: +44 (0)7803 975234 Email: peter.kirwan@fullrun.con Twitter: @petekirwan Blog: fullrunner.com