Knowledge Bridge

//Valer Kot /October 5 / 2013

The questions you have to answer before deciding on paywall

There probably isn’t a newspaper publisher in the world these days that is not trying to establish his or her newspaper brand on the Internet. Similarly, there probably isn’t a newspaper publisher that has not found out that the decreases in revenue (be it either from the sales of advertising or sales of the printed title, or both) are not compensated by revenues from online advertising. While at the time of popularization of the Internet during the 1990’s, hardly any newspaper publishers assumed that the majority of readers will enthusiastically change their habit of reading a newspaper to reading news on a computer screen, today, we all – especially after the effects of the financial crisis, which sharply decimated ad revenues at the end of the first decade – are asking the same question: To charge or not to charge for access to online content on our website? This Hamletian dilemma must, of course, be answered by you. We can only gather the arguments for and against in the form of asking questions, and thus try to help you find the answer to this dilemma.

Is it the right time to erect a pay-wall?

Before making a decision, you should know the answer to the following basic questions:

• Is the volume of traffic to my site sufficiently saturated or does it continue to grow significantly, thus leaving some space for traffic growth (due to e.g. the growth of penetration of internet connection or consolidation on the local market)?
• Are the visitors to my site sufficiently loyal? What proportion of the traffic consists of returning visitors? What is the average amount of time spent on page per user? How many pages on average are visited by a user? How often do readers return to my page during a day/week/month?
• If traffic to my site drops due to the introduction of a pay-wall, will it jeopardize revenues from online advertising? What percentage of my monthly ad inventory is sold? What will it mean for revenues should the decline in the number of unique visitors be 10% and the decrease in the number of page views reaches 20%? (The percentage of drop in traffic here is only illustrative – it may vary according to the form of pay-wall and many other variables, however, it is advisable to prepare several scenarios that will make the theoretical implications of introducing a pay-wall clear ahead of time.)
• What are you going to charge for? It is not only your premium content that your visitors are willing to pay for. Do not be afraid to experiment – you can charge for many different features or services on your website, not just for access to content itself. To give you a few examples, you can charge for additional features to your online weather forecast, you can charge for readers’ comments to articles, m-version of your website, ad-free version, uncut versions of interviews, or earlier access to articles from the printed edition.
• Will you be the first on your market to introduce a pay-wall? If not, what success have your direct or indirect competitors had with the pay-wall? What did they do wrong and what can you learn?
• How popular and developed are online payments in your market? Are online transactions available and how wide-spread are they? Do your local banks support recurring payments (these are crucial for any subscription!)? Have your local banks developed an interface for e-banking payments? What are the most popular other forms of payment on the Internet (e.g. SMS payments, pre-paid card, cash on delivery, etc.) Note: without having the ability to enable readers to pay quickly and easily, the success of the introduction of charging for your content is very dubious.
• Will you develop the system of online subscription internally or will you prefer to use the service of external companies which specialize in pay-walls and have optimized tools and experience gathered from previous implementations?
• Do you have a clear idea about the pricing for accessing your content? Are you planning to conduct a survey among your online readers to determine the boundary between a “low” and a “high” price? Attempts to make online subscription cheap – or, more precisely, affordable to the public – have at large proven not to be effective. The introduction of a pay-wall does not lead to a mass conversion of visitors into subscribers and so it is reasonable to set the price not too low, so that effective marketing could attract random subscribers and then you have to try to keep them at normal price. You may also consider price discrimination for companies or organizations (discounts for volume licensing) while offering a price advantage for the financially disadvantaged (students, seniors).
• Will the introduction of a charge include any other forms of your electronic assets (e.g.  mobile phone version, mobile applications, tablets, e-ink device version)? Making use of “opt-out” print-digital bundle offers you an opportunity to boost circulation revenue by delivering more value to existing subscribers. Under this approach, print subscribers are automatically enrolled in a digital access subscription at an additional cost unless they opt out of the enrollment.
• How much will the implementation of the pay-wall (whether internal or external) cost? What fees are associated with the various forms of payments available for accessing your digital subscription? What time should be allocated for the implementation of the pay-wall? How much time will be allocated to marketing communications and/or free trial?
• What form of charging will best suit the needs of your title: do you offer specialized coverage, which cannot be found anywhere else on the market? Or is there a real danger that following the introduction of a pay-wall, the readers will begin to migrate to the competition where a similar type of information and its processing can be found free of charge? Is it therefore more appropriate to introduce a metered pay-wall?

“I don’t want to and I won’t pay”

First of all – charging for online content meets with resistance from readers, which can be summarized into two groups. One group protests in the following manner: why do I have to pay for access to content when I already pay for the Internet connection to my ISP? Why are revenues from online ads not sufficient to cover the costs associated with the production of content?

Another group of people opposes a different way: charging for access to content on the Internet is in direct conflict with the Internet’s very essence, i.e. the free dissemination of information. Restricting free access to information is a limitation of the freedom of speech and is thus in conflict with the principles of democracy.

I think there is no need to disprove these arguments – it is more than obvious that such arguments are based on distorted, sometimes naive ideas about the online ecosystem and free access to information. Of course, when free of charge access to an online edition of a newspaper has been provided for over a decade, naturally, a habit has been created and therefore the resistance to any change is very strong. And it will probably take several years from the introduction of a pay-wall for the average reader of online newspapers to adjust to the new paradigm – i.e. that not all sources of information on the Internet are for free.

Therefore, when deciding whether to start charging, it is necessary to develop a consistent communication campaign, which helps to explain the objective reasons for the introduction of charging. Results of a survey used in the study “Paying for What Was Free: Lessons from the New York Times Pay-wall” suggest that people react negatively to paying for previously free content but change can be facilitated with compelling justifications that emphasize fairness. Framing the pay-wall in terms of financial necessity moderately increased support and willingness to pay (find more here).

Which kind of payment will you choose?

There are several approaches to charging for online content. So far, the most effective way of charging for content shows to be the metered pay-wall – the publisher sets a limit to the number of articles accessible free of charge for a certain period of time (e.g. 20 articles per month); as soon as the reader exceeds the set limit, the system prompts for payment (or registration with subsequent payment). This method of charging for content does not fundamentally jeopardize your website traffic and thus does not ruin your advertising sales (it is commonly known that a vast majority of visitors is not very loyal – they do not read more than a few articles per month; of course, details of your visitors’ behavior and their reading habits need to be carefully examined prior to defining the limit for free articles in case of a metered pay-wall – some interesting insights might be found here).

In addition, the homepage or the section fronts tend to be excluded from the measurement of the number of pages visited by a metered pay-wall – visiting these is not real content consumption. You are free to decide what to exclude from the metered pay-wall count – I would strongly suggest excluding content generated by users (e.g. blogs, users’ comments to articles, discussion forums, etc.). In addition, I recommend imagining a situation when you do not want your visitors to be constrained by charging fees for access to your content (e.g. emergency situations or special coverage of important social events in your country, when you want Internet users to choose your coverage as primary source of information). As soon as you incorporate a functionality that disables the counting of traffic of a given article against the set limit of the pay-wall into your CMS, it will allow your newsroom to play an active social role.

Apart from the metered pay-wall model, you have an option to use the so-called “hard” pay-wall. Using this approach, you disallow your readers to access your content without having to pay a fee. This model, chosen by London’s The Times, had caused a substantial decrease in traffic to their website (reportedly over 90%). This form of a pay-wall model is recommended more for very specialized and exclusive type of information – not for general interest news. You can combine both models (metered and hard-lock), although it will probably lead to a confusion among your readers and it will be more difficult to explain why there are different rules in place within the same website.

What are the hosted solutions?

Micropayments (also pay-per-view) – Charging readers a very small amount of money for single pieces of online content never gained much popularity among Internet users. The main disadvantage comes from the fact that processing fees charged by the payment processor are quite significant. That is why the idea has never really taken off with publishers. An alternative would be micro-donations – users have the option to easily donate small amounts of money.

• Flattr.com – bank transactions and overhead costs are involved only on funds withdrawn from the recipient’s accounts.
• PayPal.com – offers support for micropayments to merchants for US to US, GB to GB, AU to AU, and EU to EU transactions only. This feature is offered at a special rate of 5% + $0.05 per transaction.
• Znak it! – creates a virtual currency „znaks“, which can be purchased through PayPal. Znak it! fee is 6% from a transaction.

Metered pay-wall – metering enables casual readers to continue sampling content for free – so it does not impact SEO or limit exposure for “big” stories that cause traffic spikes. The only readers asked to pay under the metered model are the readers most likely to pay – the ones getting the most value from your content.

• Cleeng – offers micropayments, metered pay-wall or subscription model. Pricing models and features differ, Cleeng charges a flat rate to publishers. There is no commission rate for conversions – more details.
• Press+ – focused on metered solution since 2009, the leading digital subscription system for publishers in the US, now serving over 440 affiliates worldwide.
• TinyPass – offers metered pay-walls, micropayments, and downloads as well. User’s initial fee is deposited on an account and debited by payments.
• MediaPass – metered and hard-lock pay-wall product, mainly designed for bloggers.
• Piano Media – a national pay-wall system, Piano gets a 30% cut of the proceeds and divides up the rest to partner sites. In 2013 Piano introduced metered system which can be applied in conjunction with their national pay-wall (hard-lock or freemium) model or separately. (Disclosure: The author of this article worked for Piano Media.)

Alternatives – value exchange for access to content, visitors choose to complete an action you define (engagement advertising, take part at a microsurvey) or they can subscribe to access the content.

• Google Consumer Surveys – consumer surveys work as a pay-wall: a reader visiting your content have the option of responding to a survey to access content for free.
• DoubleRecall – adds interactive advertising to users and then allows them to read the article after interaction for the rest of the day. “Captcha” content release system based on a premise – users may prefer typing in two ad words per article than paying for content.
• Social Vibe – similar to Double Recall, an interactive advertisement suited for integration into an overall monetary plan.
• SponsorPay – an advertising monetization platform emphasizes mainly mobile interactive ad experiences in exchange for access mainly to games.

Article by Valer Kot