Case Studies to Guide #2: Paywall Implementation at Gazeta Wyborzca and Malaysiakini, by Marius Dragomir, Dumitrita Holdis and Ian M. Cook.

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Authors: Marius Dragomir, Dumitrita Holdis and Ian M. Cook – Center for Media, Data and Society (CMDS) at Central European University (CEU) School of Public Policy (SPP).

Guide #2 – Launching a paywall: What you and your team need to know, by Tomáš Bella.

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About author: Tomáš Bella is co-founder and web director of an independent Slovak daily newspaper: Denník N (dennikn.sk), which also develops open-source software for publishers REMP (remp2020). Previously, he was Editor-in-Chief of the largest provider of Slovak web journalism, sme.sk, and co-founder and first director of Piano, now the world’s largest company offering publishers paywall software.

Recently, international media reported that Piano Media, a company you co-founded, has bought the US company Press+, which is bigger than Piano. Who then bought whom?

Piano has bought the American company, which expresses the conviction of shareholders and investors that Piano has a brighter future.

What is the difference between Piano and Press+?

The Americans controlled the US market and offered the publishers of mainly local newspapers a so-called “quick” solution – they were setting up payment systems for their online versions. Piano is more about seeking individual solutions and tries to help large publishers and newspapers survive the onset of the digital era.

Printed newspapers are experiencing a dramatic decline. Is there an example of their successful transformation into an online form?

Basically, what’s happening is that apart from circulation decrease, advertising is also going down and hopes that ads – which translate into income for newspapers – will be transferred to their websites are not fulfilled. The only option then remains to increase income from newspaper sales – in their digital form. So far, New York Times (NYT) is attempting to go this way relatively successfully. Ten years ago, their newspaper sales income was 25 percent of total income because the majority came from advertising. Today, sales income is more than 50 percent, which is quite a success, yet it’s still not enough. In any case though, an important change is the fact that for newspapers, readers have become more important than advertising clients. And that is very good.

How is daily SME, where you are editor-in-chief, doing in this respect?

We are taking a similar route as NYT and since we started quite early, we also have decent results. Thanks to the Piano payment system, we have had a relatively quick increase in paying readers on the internet and if this keeps on, there is a chance that paying readers will compensate losses from advertising. However, many media companies in the world may not have enough time for this change since they started too late with it or because they do not have content someone would be willing to pay for.

What is the problem? Are readers not ready to pay for news content on the internet?

That is one part of the problem. The other part is technical. Many newspapers are not technologically ready to introduce paying for content on their website. Newspaper publishers haven’t been used to thinking about their readers the same way as, for example, Tesco retailer does. For years, Tesco has been tracking its customers’ customs and adjusts to them to make shopping easier for them. For too long, newspapers have been used to doing business with a few large advertisers – now they have to accommodate a large number of clients – their readers.

And Piano offers this knowledge to the publishers?

Yes. Publishers often don’t have a clue about how complicated the whole process is.

Do you think that even in such a small market as the Slovak one, a newspaper such as SME can survive the digital revolution?

In principle, yes. The question is though, what will the newspaper look like and how large it will be. If all the advertising suddenly disappeared, the newspaper would survive. But it would probably need to lay off half of the staff. So really, it’s a battle with time. We also need to know what should be in the newspaper so readers keep on buying it and keep it alive.

Based on the experience with Piano, can you summarize what today’s newspaper reader – not only a Slovak one – is like?

In the past, everyone kept a close eye on how many clicks a certain text on the web had and aimed at the highest readership. It wasn’t that hard – you supply an attractive headline, something about sex let’s say. But these texts were and still are for free. Thanks to Piano, we now have an opportunity to track an entirely different parameter: readership of articles that readers pay for. In this case, the headline doesn’t play such a major role and the outcome is interesting – paying readers generally read what journalists themselves would like to write. And that is quality articles.

The SME daily in its printed as well as digital form had, under your leadership, started to experiment with long articles, sometimes reaching ten pages. What has been the outcome?

It’s an experiment in which we want to find out what readers are willing to pay for. Ever since we introduced Piano, it was clear that readers are ready to pay for commentaries by well-known authors. Other than that, we still know very little about what they want. For example, we sent a reporter to the United States to follow in the footsteps of the current Slovak president Andrej Kiska, who tried to run a business there 20 years ago. For the first time, we were able to figure out – on the basis of income earned by people purchasing it online – whether it paid off.

And how did it turn out?

We made profit in the region of thousands of Euros. At the same time, it’s the first concrete answer to the question whether it actually pays off to send editors on trips abroad. This question has long been the subject of academic debates carried on until now and such trips were thrown out of the budget due to costs. Simultaneously, it shows that these days, it’s important for newspapers to have fewer high quality long articles than many short news stories, which are available everywhere.

Until now, we have basically been speaking about an online version of news. But what about paper? Will printed newspapers survive?

I think some renaissance of newsprint will come – just like with the renaissance of watches – they have basically become a matter of status. It may be similar with printed newspapers – once everyone can read them on their phone, they will – for some people – become a status symbol like Swiss watches. Before that, a fall to the bottom awaits us. And I don’t dare to estimate how deep the bottom is.

Shouldn’t we perceive the end of the era of printed dailies and perhaps newspapers in general as something that needs to be expected in capitalism and a market economy?

The problem is that newspapers have an additional function than just merely surviving in the market environment. On one hand, it can be said that the dramatic developments in media will clean the market of many unnecessary journalists. On the other though, the development can be so fast that no newspaper will survive. This is a certain flaw of capitalism, because in a global environment, you can compensate for the disappearance of, for example, an airline by another airline. In the case of a newspaper though, this can’t happen due to the language barrier. Should a Czech or Slovak newspaper vanish, a German one will not replace it.

Is this a real threat?

Yes. It’s already happened in the United States – in some large cities, all local newspapers have disappeared. And the results of that are beginning to be felt. Americans claim that a clear relation between the existence of newspapers in a certain city and a level of corruption exists. The function of a newspaper doesn’t just lie in that it is read by people. – They serve as an important source of information – for example about corruption cases – for television news.

During the 1990’s, Czech newspapers concentrated heavily on high readership so much that they turned yellow. Are we not paying a price for not having – in Central Europe in general – raised readers of quality content?

Increasing readership – and the number of clicks on websites – made sense economically because that was the way to increase advertising revenue. But then came Google and Facebook, where most advertising has been moving in the digital era and suddenly, higher readership of a news website doesn’t guarantee higher ad revenue.

How come Piano has not been successful in the Czech Republic, while for example in Poland, it worked?

Simply said, Czech publishers still believe that advertising revenue from websites can grow and therefore they are not urgently forced to look for a solution to making online news readers pay for content. In the case of Poland, the key was the market leader Gazeta Wyborcza’s strategic decision to go the Piano way and others then followed. There is no such leader on the Czech market.

Piano’s payment system is expanding and – with the purchase of the American competition – recently gained 630 clients. The company now has more information about reader behaviour in the world. What does the analysis of this data say?

The biggest value of Piano lies in the fact that its clients – newspaper publishers – experiment in various ways and we can analyse what works and what does not. We can then advise other clients what steps to take, which type of content to charge for and so forth.

So what is an online reader like? What has Piano concluded?

A paying reader is much more loyal – not only are the more loyal ones the first ones to pay, but when they finally do it, they actually read more. The second significant piece of knowledge learned is that very often, readers appreciate and find value in things that journalists frequently look down on and don’t consider “real work” – things like press reviews, summaries, graphs, tables, etc.

You have travelled the world because of Piano and have met hundreds of newspaper publishers. Can you somehow summarize their state of mind?

It has very often been a horrific experience in one particular thing. For example, an 80-year-old publisher from Northern Italy, whose grandfather had been a news publisher 100 years ago is suddenly asking me, a young person, to tell him how to save his newspaper. Their experience has been that it’s enough to make a good newspaper and that alone will guarantee its survival. And now something has happened and they don’t know what.

Does this mean that a whole generation of publishers wasn’t prepared for change?

Yes. For the past ten years, they’ve been attending conferences which were supposed to prepare them for the transition to the digital era. But back then, it was all about getting as many clicks on the website as possible. Today, we are finding out that it doesn’t work. I think the success of the New York Times and some other newspapers lies in grasping very early on that readership of their website will not be proportional to ad revenue and that they need go another way, the way of a paying reader.

Has that been the point of Piano?

Yes. It was important to break down the barrier of web users’ resistance which claimed that information should be for free. It has taken some time but it’s changing, especially in the case of SME. The number of paying users of Piano has exceeded 20,000. Some publishers, however, were not satisfied with their number of paying readers and left Piano. It’s becoming clear that this national model, when a number of publishers join in one payment system, has its limits.

What are they?

It works well when publishers think about how to convince as many readers as possible to pay for content and how to make it easier for them. It doesn’t work when newspapers think about whether someone else in the national payment system somehow earns more money and, if so, then how to take it away from them. And lastly, it’s about how many enlightened publishers of the first type you can find as opposed to the second type.

If we simplify the whole problem, newspapers received two major blows in the past ten years. First was the onset of internet, which is pushing printed news out. The other was the dramatic fall of ad revenues while publishers were hoping advertising would just transfer from their print to digital edition. But this has not been happening because advertising has moved to, let’s say, Facebook. Is that correct?

Yes. Some media, which will live on advertising alone, will most likely still exist in the future, but that is not the case of quality newspapers we are discussing here.

Meanwhile, The Guardian seems to be taking a different path. They are trying to increase readership of their website and still do not charge for content.

I’ve met people from the Guardian and, in general, they are not opposed to charging fees for their content. They are only waiting for the right time; until then, they want to gain as many readers as possible. And for now, they are running at a significant loss.

Is there any model at all that at least raises hopes?

That would be the New York Times and The Economist. Their online versions have significant revenues from their paying readers. But those are global media.

Do you think that small national markets can follow this model?

Yes. But there are many obstacles. Sometimes, they are very trivial. For example, unlike in the United States, where the automatic extension of subscriptions is common, this is not the case in Central Europe and it is very difficult here. It wasn’t until last year that we managed to convince one bank to facilitate an automatic extension of its subscription for Piano and deducted the fee from the client’s account.

Why is that? Is it a cultural difference?

Yes. In the US, once you pay a subscription, they extend it every year automatically. If you want to cancel it, you have to ask for a cancellation. Here, it’s the other way around. We were worried about how people in Slovakia would react if we automatically extended subscriptions to Piano. But it went well and thanks to it, the number of subscribed readers has increased. This trivial technical detail is in reality quite deciding.

Are there other barriers, which if eliminated, would help gaining subscribers?

If, for example, everyone had an Apple smart phone, the problem would basically be solved. Publishers may have many objections to Apple, however, payment through Apple is technically very easy and doesn’t present the client – in our case a reader of online news – any obstacles.

Is there an option in case I want to read just one article which interests me and pay for it online without having to subscribe to the whole newspaper?

These are called micropayments, which exist but are very rarely used in practice because they are too complicated.

Are we then just waiting for a revolution which would enable such things? That I will open some article online, pay for it in a matter of seconds and I would be allowed to read it?

That is my dream too and numerous companies in the world are trying to solve this problem. So far, without success.

When they succeed one day, is there not a danger that the world will be divided into paying elites and the rest, which will be left with information for free and thus of much lower quality?

I think the world has been divided this way for quite some time now. For example, it is already divided into readers of Blesk (a Czech tabloid) and Hospodarske noviny (Economic /Financial times). I’m not even very worried that the Internet will cease to be an egalitarian platform, even if some people will have a better connection than others. Rather, I think the world of the Internet will adapt to normal society in which no one can just walk in wherever they want and demand a right to speech.

You are probably talking about those who comment in discussions below articles, and many of which tend to have psychopathic tendencies. Why can’t they be blocked?

A few years ago, the general opinion was that hatred would disappear from discussions after anonymity was banned. As it turned out, people continue writing offensive commentaries even under their name. You can see it on Facebook. We thought that the problem was the Internet, which provides anonymity. Today, we see that the problem is not the Internet, but society.

Why can’t these discussion forums under articles be forbidden or moderated the same way it’s done in the West?

Because it’s too expensive. The BBC has a whole department which monitors and moderates discussion comments. The department has 25 people. And no one here is daring enough to get rid of discussions completely.

Isn’t that a certain difference between us and the West?

I get asked a lot about this in the West, because this phenomenon of gigantic discussions with thousands of commentaries doesn’t exist there. They believe it’s due to people being forced to keep silent during Communism and now feeling the need to express themselves. Any restrictions are received very sensitively. Yet I think the group of people which comment and read these discussions is much smaller than it appears. Nonetheless, it’s a very loud group and that is why newspapers are afraid to get rid of discussions.

Is there any other difference as far as media go between the West and our part of Europe?

The biggest difference is between markets where people subscribe to news and those where they buy them in kiosks. In Germany, Austria or in Scandinavia where subscription prevails, a sense of stability exists and newspapers are not pressured to put such an emphasis on headlines and front pages. Newspapers are much more self-confident.

The internet as a public space has also created the blogger phenomenon. Journalists, mainly western ones, saw blogs as competition and considered them enemies. SME’s website, which you were heading for a long time, on the contrary opened up its space to bloggers. It was the first daily in the world that did something like that. How has the blogger phenomenon developed over time?

It has gone through a classic development curve: big expectations subsided. Nonetheless, the blogosphere has its place and bloggers on SME’s website still have many readers. Fewer people write blogs these days but more people read them. It’s natural selection.

What other natural selection awaits newspapers?

One question for example is whether it makes any sense to have a foreign editorial team or a sports’ section in a small market such as ours. Answering the question what a newspaper can afford to drop and what needs to stay in order to keep its essence is the hardest. And the answer must be found quickly, because there is very little time.

How do you read news? On mobile, paper or computer?

As far as news goes, I mainly get stories on Facebook, where I find links to particular articles in various newspapers. I then read those.

Isn’t it a little risky?

It’s been said that you make your own Facebook. The way I do it is I open the link, save the article on my computer and then I read it in the evening on my tablet. By the way, the tablet has greatly influenced the way newspapers are read, especially longer texts. It’s strange but the fate of newspapers may depend on whether tablets will cost $20 instead of $100 and how big their screens will be.

Which news website in the world do you like the most?

Ten years ago, I would have answered this question easily because back then, news websites were read by opening their home page. It’s no longer like that. I mostly read articles I get links to on Facebook. As a reader, I land directly in the article and don’t even see the home page. That’s how most readers behave these days. This is yet another shock for online newspapers – their homepage no longer tell its readers which content they should consider important. In addition, it further threatens ad revenue, always heavily focused on the homepage.

Comparing the homepage of SME and Czech news websites, can you see a difference right away? And what is it?

Media’s seriousness can be determined by a method of counting the number of headlines on the homepage. SME has many more than the BBC, but perhaps due to a lucky coincidence, it had the advantage of being the main player right from the beginning on the Slovak market and it could thus set the rules. Czech websites are different – for example, a Czech tabloid is much more aggressive than its Slovak counterpart and even Czech serious news websites compete for clicks with tabloids. Naturally, this influences their look and content.

Piano allows you to analyse reader behaviour in large numbers. What else have you found out about people that surprised you?

I was surprised to find out that people behave on the Internet differently than we had thought for a long time. As I mentioned already, they read long articles. According to original assumptions, they should not have done that. I was also surprised to learn that passionate opponents of paid content have become its passionate advocates. Salesmen are familiar with this phenomenon – once I own something, I don’t want to give it up. That is why the key task is convincing the reader to pay for online content at least once. At that point, the reader is willing to keep on paying and eventually becomes an advocate of this practice.

The newspaper market in Europe, and in the Czech Republic and Slovakia especially, is undergoing yet another radical change. I am talking about ownership changes. Penta, the Slovak financial group, infamous in connection with the Gorilla corruption case, has purchased several important media companies. According to latest information, its purchase of 50% of SME is about to take place. What do you think about that?

Should this happen, it will be the aftermath of the inability to transform the newspaper into a normal business. And for many newspapers, it’s already too late.

Are you saying that foreign owners are leaving because newspapers have not managed to stay profitable in our market, so they are, as a result, now being purchased by local oligarchs?

Yes. Newspapers ceased to be a normal business, in which it’s possible to foresee the future to a certain degree. SME daily has at least a small advantage due to income from Piano and a certain hope can be seen. But it doesn’t have to be enough.

What will be the journalists’ reaction if Penta enters SME?

Only a few years ago, we would be talking about how many journalists would leave the paper and how this will damage it. Today, the situation is different. Many newspapers have stopped fulfilling their socially beneficial function due to economic cuts. The question to be asked now is whether it’s better for society to have a small independent newspaper with about 30 journalists or a large newsroom, where the owner exercises its interests let’s say once a year. It’s a pressing question to which I do not have an answer.

You travel around the world, attending conferences as a Piano representative and media visionary. What do you start your presentations with?

I usually show the map of Europe and point to the spot where Slovakia is.

How did you come up with the idea for Piano in the first place?

It was really my friend Marcel Vass’ idea. He manages an internet advertising system called Etarget and realized that media would face large problems in a few years in the same way as his clients would. The idea as to how to ensure in the easiest way that readers pay for online news content was born from this realization. That is how the Piano national model, in which publishers agreed on common advancement, was created. It seems though that this national model has too many pitfalls. Nevertheless, we have gained many valuable experiences.

Having bought the US competitor, are you now the global leader in advancing online paid content?

Yes.

Is it utopia to think that one day, for a single Piano subscription, I will be able to read a number of global news and weeklies I now have to subscribe to individually?

I hope it’s not utopia. It should turn out this way one day because such should be the logic of capitalism – it would be convenient for most customers. Millions of dollars are poured these days into the development of payment technology and a huge race for the winner. It’s clear that many readers would purchase online news if it was easier. Therefore it’s a great opportunity and a way to make big money. In the end, we may be saved by technological development.

You left the position of CEO of Piano a year ago and remain only as one of the owners. Why?

It’s more a matter of business these days. And there are better people for that than me.

Why did you return to SME?

Because I see an opportunity here. The media market is a witness to such things, that – as is often said today – if you still have a job in the media, it has never been more interesting than now. All the wrong choices have basically been made and there is nothing else left to do other than freely experiment and ask such heretical questions as whether to cancel whole departments. In certain respects, it’s very liberating and frees much creative energy.

You then remain an optimist?

Basically yes. But it doesn’t mean that in some countries, it won’t end very badly.

After finishing journalism studies, Tomáš Bella joined the Slovak daily SME in 2000, where he edited a computer supplement and was involved in improving the SME.sk online portal. With 2 million users, Sme.sk is the leader on the Slovak online news market. In 2011, he founded Piano Media, company which helps publishers introduce payment for online news content. He returned to SME in 2013 as Deputy Editor-in-Chief. This year, Piano Media became the global leader in know-how on paid online content. He is married and lives in Bratislava.

Interview by Martin M. Simecka, published in weekly Respekt (No. 39, September 22, 2014)

© Copyright Economia, a.s. – Published with kind permission of the publisher.

The two charts above may seem contradictory. Yes, global online ad expenditure has multiplied tenfold since 2004. Yes, digital spend will surpass the printed press worldwide (in many countries, it already has) in 2015. But despite this impressive turnaround, the newspaper industry still gets most of its rapidly diminishing advertising revenues from print, not from digital. Indeed, many traditional news brands have reached huge audiences online but just a tiny amount of the global digital ad revenue cake. Why is that? Just a lack of vision, or is it an unfinished digital transformation?

The advertising paradox

The slow transformation to digital has indeed played a role for many traditional media, but unfortunately it is not the main factor behind this paradox. The most important cause is competition and this cannot be fixed. Media have moved from a world where ad revenues were shared among a very small bunch of papers, TV and radio stations in each country to a world of limitless competitors, from the huge new arrivals like Google or Facebook to the myriad bloggers. It’s almost a perfect market, awash with inventory, that is now getting even more ‘perfect’ with the development of programmatic buying, where machines (not fallible or emotional humans) match supply and demand in real time.

The laws of economics are ruthless. With an increase in competition/supply comes, inevitably, a decline in prices: so digital advertising has always suffered and will always suffer downward pricing pressure. This is why news outlets all over the world are searching with renewed passion for complementary revenue lines. And the main focus is now on ‘user generated revenues’, either traditional revenues based on editorial content or revenues based on new services.

Revisiting ‘editorial revenues’

Only five years ago, almost every news outlet in the world was banking on an open-web-pure-advertising-revenue model. But the global economic downturn and the low prices of digital advertising described above convinced many of the dangers of ‘single crop farming’ in digital. Only two international business brands – the Wall Street Journal and the Financial Times- were previously pursuing a subscription-based model, based on the exclusivity of their contents and the predominance of companies among their customers: WSJ as early as 1997 and the Financial Times 10 years later. But it was only in 2011 that a major general news property, the New York Times, dared to put its contents behind a paywall.

Three years later, the NYT has grown to 760.000 digital subscribers, an impressive number that has encouraged many to follow suit, even if The NYT’s journalism and singularity are difficult to match. Just in the US, there are already 450 national, regional and local news outlets (out of 1,380) that have introduced a digital subscription model according to the Pew Research Center. Are the models all the same?

No. Indeed, the discussion around ‘paid content’ and its presumed nemesis the ‘open web’ became so heated (creating two quasi-religious factions), that no one wants to talk about ‘paywalls’ any more. The forbidden word, as in Harry Potter’s ‘Voldemort’, is now replaced by ‘membership’, ‘club’, or anything else without ‘pay’ in it. And in most cases the offer does go beyond a pure payment for contents, offering users access to extra services, apps or discounts, and – of course – a special engagement with their favorite news brand. In any case, all offers include one or many of the following features:

• Hard paywall

It’s the oldest and usually simplest mechanism tried by publishers online. Users can only visit the homepage for free (sometimes also the sections’ homepages and/or ‘soft’ contents like photo-galleries), while most of the content online is reserved for subscribers. This was the system used by the Wall Street Journal in 1997 (now, fine-tuned) and by some general news big brands around the world at the turn of the 21^st Century, like El País in Spain in 2002. But most of them reverted to open websites after a disastrous drop in audience and very limited digital subscriptions. Surprisingly, Rupert Murdoch announced and put in place a hard paywall at The Times of UK as late as 2010. Last year, The Times and The Sunday Times totaled 130,000 digital subscribers, with a massive fall in online traffic (also affecting the paper’s audience) of more than 60% and a similar drop in digital advertising revenues.

• Soft paywall/Metered paywall

Introduced in 2007 by the Financial Times and popularized by The New York Times in 2011, this scheme tries to ‘square the circle’ of subscriptions and advertising revenues. The idea is to design a paywall that is porous enough to allow a very big number of free visits (and, therefore, a large enough digital advertising inventory), but not too much so as to discourage subscriptions.  The logic behind the system is the fact that loyal and very active readers are more willing to pay than casual users – though the latter massively outnumber the former. So the system relies on a ‘meter’ counting the number of times that a user visits the site and, from a set number of visits per month, the paywall pops up asking the user to log in or subscribe.

The Financial Times launched its paywall with a limit of 10 visits per month, excluding the homepage that is always open. Four years later, The New York Times took a much more cautious approach, because it had a much larger audience and advertising revenues to loose, and because the ‘exclusivity’ of a general news outlet is always more questionable than that of a financial one. So, the Times opened the limit to 20 free visits per month, excluding homepages and photogalleries which are always open. And to allow the virality of the internet to continue its magic (the main ‘collateral damage’ of paywalls), the NYT decided to keep access open to any visit coming from search engines and social networks.

All in all, this metered paywall only reduced the number of online visits by 5% and page views by 10% when it was launched. And to the surprise of many who thought this was too open an approach,  the number of digital subscriptions grew to the current 760,000. In the meantime, the NYT has reduced the number of free visits per month to 10 but, on the other hand, has completely opened access to video, whose ads are especially lucrative, and to some areas of content outside the US, where the rate of loyal users is lower. Indeed, the key to ‘metered paywalls’ is precisely this: they give publishers the ability to tweak the system on-the-go, depending on usage results and the need for inventories.

Ever since the NYT launch, hundreds of news outlets worldwide have introduced a metered paywall, including titles as different as The Telegraph in the UK, Folha de Sao Paulo in Brazil, The Onion in the US and El Mundo in Spain. Most are very recent developments, so we do not have meaningful numbers yet, but it will be interesting to see whether they are able to reach similar conversion rates to such an iconic brand as the NYT and whether they also manage to keep advertising revenues almost untouched.

• Freemium model

Freemium models are almost as old as the basic paywall. Their logic is straightforward: you cannot charge users for the same contents you were offering for free just before. So the basis is to keep the existing web open, while creating separate contents and/or products only for subscribers; i.e. a Free area + a Premium area. Indeed, this is a very typical model for software or mobile apps, which provide a basic service free of charge and a paid premium for accessing advanced features.

Many media outlets, old and new, have tried this model, including the New York Times previous ‘Select’ offer, Le Monde, Slate (very recently) and even the champions of the open web, The Guardian, with its premium tablet and mobile apps only for subscribers. But many ditched this approach after trying it out because it didn’t trigger a large number of subscribers (most users are fine with the free part) and because it usually involves an extra effort/cost from the newsroom or the publisher to create additional content/services for the premium area.

• Membership

Membership usually brings a set of advantages to the subscriber in addition to the editorial contents of the publication – such as free or discounted prices for conferences, exhibitions, theatre and concerts; or special events with the newsroom, etc.) to make him/her feel like they are a member of a ‘club’. As noted above, most paid offers from publishers – be they paywalls, freemium models or some other form – are also marketed as memberships. The emotional and ideological link with the news brand is indeed one of the – if not the only – most important factors for readers entering a paying scheme. Importantly, the New York Times realized recently that users respond better to a marketing campaign focused on the survival of the quality journalism they represent, than to other campaigns focused on the many features and advantages of their offer.

New media properties also use this emotional link with their readers/users as a key to their survival. New brands all over the world are being launched thanks to crowd-funding campaigns among their potential readers: people willing to pay to enjoy the type of journalism the brand promised. And many of them are inviting these readers to become subscribers or ‘members’ as a way to avoid a heavy reliance on advertisers – especially dangerous for small companies – and to support independent journalism. As the new Dutch kid on the block, ‘De Correspondent’ (famous for raising more than 1 million Euro of crowd-funding in eight days) put it: “De Correspondent is a commercial, for-profit enterprise, but our business model focuses on selling content to readers, rather than selling readers to advertisers”.

Beyond publishing

‘Diversification’ is the magic word for many media groups searching desperately for new sources of revenue in addition to advertising and to the – always challenging – paid content. The logic behind this model is: if I have a trusted brand and X hundred thousand – or even million – users visiting my website every day, I may be able to offer them other services or products endorsed by my brand. This way, publishers can leverage their own media power to build new businesses more or less connected to the editorial, instead of always relinquishing this to advertisers.

Given the difficulties of moving from the publishers’ trade to the service providers’ or retailers’ one, media groups are typically partnering with specialists or even buying their way into these new businesses. The two most widespread diversifications are online services and e-commerce.

• Services

Many publishers worldwide have been offering ‘collateral’ online services to their readers for more than a decade. Indeed, some of these services – such as classifieds – were a regular and very lucrative offer on print papers, and it was a natural transition to exploit them online too. The main difference between media players has been the size of their stake in this market, and their speed to approach it. While some news outlets have been particularly slow and cautious to enter the online business (for fear of harming their declining print product), others have been fast and assertive. In markets where supply of these services is mature, the late entrants are struggling to earn decent incomes from their affiliations with big players, but those who got in early are earning very significant revenues from their own fully-fledged operations. In some cases, much more than their revenues from the editorial business.

The Nordic champion Schibsted and the German group Axel Springer have been the most bullish in this diversification, and not surprisingly they are also the two European players with strongest digital revenues. Schibsted began as early as 1999 to position itself very aggressively in the online classifieds business in Norway, then bought start-ups in Sweden, France and Spain that are now blockbusters in their respective markets. Today they are shopping for a second round of personal finance services websites all over Europe to replicate the feat.

Springer initiated its diversification a little bit later, 2005, buying startups also in classifieds, affiliate marketing, price-comparison and women’s communities. In 2012, the German group was already earning more revenue from its digital operations than its print publications (that includes the 3 million daily copies of Bild!). A little bit further behind, the Guardian Media Group also relies on its dating and jobs classifieds online services for more than half of its digital revenues, and has recently sold part of the family silver – its 50.1% stake in Autotrader – for more than £600 million to finance its money-losing editorial operations. Last year, Autotrader made £252m in revenues and £32m in pre-tax profits.

• E-commerce

“Retailers have been very good at being publishers for a long time, it’s time for publishers to be good retailers,” the commercial director of the Daily Mail Group, Marcus Rich, said last year. DMG consumer media division is undoubtedly pushing e-commerce as a key strategy for the Daily Mail brand extension; they already make £5 million in direct cruise sales alone. Pure players like Gawker Media are also keen to run this race and, according to its founder Denton Memo, will make around 10% of their digital revenues from E-comm this year. Even media power houses like the Italian RCS-Corriere della Sera are swiftly moving from taking their first steps in e-commerce (selling ‘extended editorial content’ such as books or movies) to the second step (partnering with retailers around editorial topics such as travel or beauty) and even third steps (integrating pure e-commerce offers in the editorial content), according to RCS’s CDO, Alceo Rapagna.

But most publishers are still in the early infancy of an e-commerce strategy, even if they consider it important.  According to a Forrester Consulting survey of 106 media companies in December 2012, more than 70% thought that having an online store was important, and about the same number said that having a separate deals site was important too. Indeed these two options were ranked third and fourth for driving audience and revenue only after an ‘Advanced website functionality’ and ‘More online advertisers’. But 30% of them added that they didn’t have the budget for adding real e-commerce. Are we in Year One of e-comm for publishers, just as 2000 was for services?

In late May 2013, the Financial Times launched a new, mobile-friendly news service called fastFT. It’s a mixture of traditional news wire and Twitter-like stream with an emphasis on speed and brevity, delivered both in a newsfeed on FT.com as well as on the standalone page. The article “6 product development lessons from how the Financial Times built fastFT” summarizes lessons to be learned from the product development.

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.

Malaysia, like many southeast Asian countries, tightly controls traditional print and broadcast media, but sensing an economic opportunity, the government decided to take a hands off approach to the internet. The internet would be free of the censorship and controls that the government exercised over print and broadcast media. “This provided a window of opportunity for Malaysiakini to establish itself as the country’s first free and independent media, albeit online,” site co-founder and CEO Premesh Chandran, wrote in the 2010 IPI-Poynter Brave New Worlds report (PDF).

At the MDLF Media Forum in Jakarta, Chandran shared how the site was able to convince their audience to pay for Malaysiakini’s independent journalism. Emphasising their position as an independent source of news and information was key. “The rest of the traditional media is very much controlled by the government so our readers come to us for an independent perspective on issues,” Chandran said.

It was a selling point to readers, but a challenge to attracting advertisers in the years immediately after the site launched. Early online advertisers were government-linked companies and would hardly be willing to support an independent news site like Malaysiakini.

In 2002, the company realised that it needed to explore other forms of income. “Subscribers, they are the ones who want this independent news so let’s start charging a fee,” he said. Staff were initially sceptical, and the site faced unique challenges, including having to provide an anonymous payment system because the site was seen as “politically sensitive”. They developed their own pre-paid card and were able to convince a convenience store chain to sell it.

They started out charging the equivalent of about $20 to $30 a year for their service. Now, the annual subscription is about $50.

The unique nature of their content helped them earn subscribers. “When we launched (subscriptions) in 2002, we were really the only portal in the country offering independent news,” he said, adding:

It is very important for a site to ask why does it exist, what is unique about its content. Who really wants its content? Who is going to be wiling to pay for this content? If you don’t have a differentiator with your competitors, it is going to be really difficult (to charge for content).

However, Chandran also credits Malaysiakini’s success with changes in the country. “People are desiring more democracy. People are desiring justice. People are saying no to corruption,” he said, adding:

People would subscribe to Malaysia not just to read us but as a way to support more independent media, which in a way is supporting a change in democracy in Malaysia.

Malaysiakini taps into these changes by making their readers feel a part of something larger: a movement for change. “People are proud to say they are a subscriber to Malaysiakini … that Malaysiakini means something to them, that Malaysiakini has changed something in their lives,” he added.

Malaysiakini’s paywall is like many paywalls these days, providing some content for free as an enticement for new subscribers. The letters section is free, and they provide one free article a day. “But 90 percent of the site we charge for, but only the English and Chinese parts of the site are for subscribers only,” Chandran said. The Malay and Tamil parts of the site are free, both because credit cards are less common in Tamil and Malay communities and Malays make up the majority of the population. Malaysiakini wants to be able to reach the large Malay population.

For news organisations that want to develop a paid subscription system, he said, “people don’t mind paying when they know they are getting something … but keep it simple.” He compared it to the satellite TV subscription model, and like that model, he believes that it will work in many countries around the world.

There are no silver bullets, only shrapnel.

It’s a clever way of saying that there is no single solution, no single revenue stream, to address the challenge of journalism businesses trying to make the digital transition.

In country after country, as digital media has disrupted the traditional sources of revenue for news outlets, especially print media, many news executives have lamented that they’ve been forced to give up “print dollars for digital dimes” (a US ten cent coin). Longing for the fat profits of the past will not bring them back, but it is true that digital advertising isn’t coming close to offsetting the declines in traditional revenue. Around the world, digital advertising rates are under pressure, and while many rapidly developing digital markets such as Russia are seeing dramatic growth in digital advertising revenues, as we’ve said many times here at the Knowledge Bridge, much of that new digital ad spend is going to new players such as social media and search engines, not to news businesses.

Rather than long for the past, at Digital First Media, where Brady is the editor-in-chief, they talk about “stacking” digital dimes. While revenues from digital sources may not be as great as revenues in the past, by combining several different digital income streams, digital revenues can start to replace declines in traditional sources. Many news organisations are realising that there are a number of ways to make money from digital media that go far beyond the simple model of selling display or banner ads, which as we have noted before are suffering from downward  pressure.

Could it be that some of the revenue woes that news organisations are facing are made worse by a lack of imagination and a lack of awareness of all the revenue possibilities available to digital media companies? To get a sense of how wide-ranging the revenue possibilities are, a long list of digital and web revenue models was collected in an open document online started by venture capitalist Fred Wilson.

The list includes more than 20 different models for advertising alone, but also includes e-commerce, subscription and transaction-processing models. Not all of these are applicable to news and media, but they start to demonstrate the wide range of possibilities, many of them unexplored by news groups, to start creating a number of complementary revenue streams.

In the advertising section of the document, some of the revenue models cover new ways of increasing the return of digital advertising, such as ad retargeting, which delivers targeted advertising to digital audiences based on their recent activity on online. For instance, if a person visits an e-commerce site and puts something in their shopping cart but doesn’t buy the item, for a limited period of time they would see ads based on the item that they had almost purchased. The thinking is that the person might still be looking for that item as they have expressed a clear interest in buying it, so a seller of a similar item might be more successful targeting that web user than by simply using random display ads.

The advertising sales section also includes affiliate fees or sales. Some news groups, including The Guardian, have used affiliate sales via Amazon in their book reviews: after reading a review of a book, readers have the opportunity to buy it via the e-commerce site and the news outlet receives a small fee for the business referral.

With the rise of smartphones and even less expensive mobile handsets with GPS, location-based services  such as Foursquare have been one area of rapid growth in recent years. If a person checks-in using one of these services – alerting their friends that they are at a certain store, café or restaurant – they might get a coupon. Such local deals might be an untapped source of revenue for local media.

This just scrapes the surface of all of the innovations in advertising that are listed in the document. Under subscriptions, there are three different types of paywall amongst the dozen or so models identified. The paywall models include a full paywall like the one at The Times in London, a metered paywall where readers get a limited number of stories free before being asked to subscribe, such as the ones in use at the News York Times and the Financial Times, and also a freemium model, where some general content is available for free but premium content requires a subscription.

Advertising and subscriptions/paid content are just two of the revenue models. The document also explorers revenue opportunities involving mobile, data and transaction-processing. As we said before, not all of these models would be applicable to news organisations, but it is an incredibly useful list that publishers should keep close to hand.

This isn’t to say that digital success is simply a matter of stringing together a number of random digital revenue streams. You’ll need to look at your market and your audience to prioritise which of these models might deliver the greatest return, but this list of revenue models shows that you have a lot of options and opportunities. A good example of this approach is the Dallas Morning News. They introduced a paywall in March 2011, and they are now also offering marketing solutions and social media support for advertisers as a new source of revenue. News organisations need to apply their creativity not just to creating innovative news products but also in exploring the myriad revenue opportunities available to support the mission of journalism.

The Wall Street Journal and the Financial Times both charged for their content, but apart from the South China Morning Post in Hong Kong and some minor, but oft cited examples, such as the Arkansas Democrat-Gazette, we had very few examples of digital paid content success for general newspapers. With both The Wall Street Journal and Financial Times being internationally-recognised business newspapers, they were seen as exceptions to what was seen by some as the rule that people wouldn’t pay for general news and information online.

The New York Times paid content launch has widely been seen as a success, and the trickle of news groups adopting paid content strategies has become a flood. A fifth of newspaper websites in the US now require payment for digital all-access, a figure that has doubled over the past year. Much of that growth has come from one of the largest US newspaper groups, Gannett, which is rolling out paid content strategies across 80 sites. Through a mix of higher print cover prices and the new digital subscriptions, Gannett’s CEO Gracia Martore told analysts that the company would meet its target of increasing circulation revenue by 25 percent by the end of 2013, which would add $100m of operating profit at the large group. Gannett’s newspapers are local and regional rather than the international media brands of the New York Times, the Financial Times and the Wall Street Journal.

The rush to roll out paid content strategies goes beyond the hard-hit US newspaper industry. Paid content projects are appearing across Europe, with German publishing giant Axel Springer announcing the end of the ‘free beer’ era on the internet and Slovakia’s Piano paid content system expanding to Poland. With the growing number of paid content projects, we now have a lot more examples of what works and what doesn’t.

Successful paid content pioneers have found:

• Hybrid systems are more effective than total paywalls such as The Times in London.
• Analytics are key to understanding what people are willing to pay for.
• Focus on usability, making the paid content system clear and easy to use.
• Success also depends on how well you market your paid content options.
• Digital subscriptions are simply part of your total subscription strategy. Many publishers are bundling digital access with print subscriptions.

Hybrid systems work better than total paywalls

Publishers have tended to view paid content in black-and-white terms, that it must be either completely closed or completely free, said Tomáš Bella, the founder of Piano Media. Bella was at the Slovak daily newspaper SME when it put all of its content behind a paywall in 2006. “The revenue was so small that it was not worth running the system,” he said.

Now, he adds, “from binary – free or paid – we are moving to a much more nuanced model.” People are moving to mixed models so as to keep digital advertising revenue as high as possible while also adding digital subscription revenue. Piano pioneered the national paid content model, which the company likens to a cable television model, where the subscriber pays a single fee to access content from a number of channels or sources. Many of the sites have a hybrid model, a mix of free and paid content, on their sites.

This more nuanced approach has led to a number of different models in terms of the balance of free and paid content for Piano customers. Slovak weekly news magazine Týždeň has experimented with digital content in the past, by selling a text-only copy online. However, their audience didn’t embrace it because it differed greatly from the magazine, which is known for its photos that make up about 40 percent of each issue. Most avid readers would wait until they could buy the printed magazine rather than pay only for the digital edition.

In 2009, they launched an updated website with staff blogs and blogs from external contributors as well, greatly increased the amount of video on the site and included more images from their award-winning photographers, said Federika Homolková, managing director of publishing house for Týždeň.

More than half of Týždeň’s content is only available to Piano subscribers, including content from the print magazine and more than half of the videos they produce.  With digital advertising rates declining and the ongoing economic crisis, creating so much original content would have been difficult to sustain without the digital subscription revenue, Homolková said, adding:

I’ve met with managers of newspapers from Poland, Germany, Holland. Can your website survive just on advertising? No. You need another source of revenue.

This year, Piano expanded to Poland, bringing together major daily newspapers, magazines and Polish National Radio to a national paid content system. Gazeta Wyborcza has joined the scheme, making about 10 percent of their content, as measured by pageviews, for subscribers only, according to Michał Gwiazdowski, digital content publisher for the newspaper.

Before joining Piano, Gazeta Wyborcza only published some content online from its special supplements weekend magazines and a special supplement for women, and what content it did publish digitally was published only after a long delay following the release of the printed magazine. However, now the content for subscribers is published on the same day that the print edition is released, Gwiazdowski said.

Another hybrid model is the popular metered paywall, in which a customer is able to read or view a certain number of pieces of content free, anywhere between five to 20 pieces of content, before being asked to pay. This model has proven popular because many website visitors are ‘casual users’, reading only a few articles a month, and it only asks the most loyal audience to support the site. The commercial benefit is that the site remains open to search engines and social media, which helps to maintain traffic and therefore digital advertising rates.

The New York Times has seen only “modest reductions” in page views and unique users since introducing the metered paid content strategy last year, according to Michael Golden, vice chairman of the NYT Company. Fifteen months after launching the strategy, the newspaper now has 592,000 digital subscribers, according to a memo from New York Times publisher Arthur Sulzberger Jr. to staff. The memo included details of the third quarter results at the newspaper, and the new figure represents an 11 percent increase in subscribers over the second quarter.

Analytics: What content are your customers willing to pay for?

For sites offering a mix of free and paid content, the next question is what content to charge for. “It`s not as obvious as many think,” said Gwiazdowski, and with Gazeta Wyborcza, just starting with the Piano system, he will be watching user statistics closely to improve their paid content offering. To help Gazeta Wyborcza and other members of its scheme, Piano deeply analyse how audiences use their customers’ sites and consume content before making recommendations on the free-paid content – i.e. hybrid models with a mix of free and paid content – options.

Based on the analysis of traffic at member sites, Piano has experimented with new ways of dividing the paid and free content. For instance, some content might be available free to readers in the country but require payment for readers coming from elsewhere. With its national payment system, they have found that charging for early access rather than archives has been more effective. They have even experimented with charging for an old site design that some users prefer to a new design. “Publishers should understand that they bring more value than content to readers. … They often don’t grasp that the structure and design of the site is valuable,” Bella said.

It is only possible to make informed choices about these options with research. At the recent WAN-IFRA World Editors Forum in Kiev, Golden said, “Your customers will tell you what they want.  Are you listening carefully?” The New York Times researched what readers wanted and what they expected before rolling out its paid content strategy. They also did research on the prices that readers were willing to pay and also the content bundles that were most attractive.

The New York Times can afford to spend the money, but for smaller publishers, this is where companies like Piano Media and Press+ help by providing research and analytics support to help publishers understand how to structure their paid content offering.

Usability and ease of use key to customer adoption

This data is also key in optimising the usability of the paid content system. This is one of the reasons that led Bella to suggest a national payment system because the data suggested that a single bill, a single username and password would be appealing enough to users and deliver enough revenue to publishers to be attractive.

Golden said at the World Editors Forum:

Such a plan touches every part of the organization, IT, finance, marketing, editorial, advertising, production. Your customers expect a wonderful experience and you have to unite to deliver it.  The standard is set by Apple, Amazon, Google. We have to measure up.

Bella compared the attention required to e-commerce sites who meticulously measure the performance of their sites and optimise every detail of their sites, down to the look of individual buttons.

Marketing: Communicate the benefits to your audience

Golden echoed that sentiment when he explained how marketing had been key to the success of the New York Times’ paid content plan, and he urged editors to aggressively promote their paid content offerings. He said, “Act like an e-tailer.”

Bella said Piano has run 10 marketing campaigns in the three countries in which it operates, Slovakia, Slovenia and Poland.  “How you communicate the benefit, makes a big difference,” he said. You need to combine selling the paid content offering and explaining what service the newspapers are providing.

With Týždeň and Gazeta Wyborcza, both publications are either creating more original content or posting more content online due to the support of digital subscription revenues. “I think we helped ourselves – we gave more content than before, so we were ‘opening’, not ‘closing’ content,” Gwiazdowski said. Communicating that to audiences is important in selling the shift to paid content.

Some marketing solutions that have proven successful include:

• Email marketing that includes the best articles from across Piano’s national networks. Users see this as a new, valuable service. The New York Times has email newsletters promoting its content, which entices readers to return to the site more frequently and hopefully to become subscribers.
• Sites have created special sections to highlight their best premium content to entice new subscribers.
• Homolková at Týždeň said that making the case that the payment scheme costs only a few Euros, the cost of two beers, and delivers a range of content has also proven effective.

In addition to traditional marketing channels, Gwiazdowski said that Gazeta Wyborcza also tried some novel methods targeting their online audience. “We talked to people (in the comments) under articles, on Facebook, via e-mail. We’ve been explaining what readers can get and why we need to charge them for our content. I think talking with people helped,” he said.

Another strategy that is working is the “all-access” print-digital bundle. Publishers in the US are finding that they can charge higher rates for the bundles “…if you tell customers ‘we’ll get you our content however, wherever you want it’”, says US newspaper strategist Ken Doctor.

While Piano has learned successful marketing strategies, they have also learned marketing strategies that do not work. Early on, the company “let ourselves be forced to say that ‘you are paying so the quality of journalism will go up’”, Bella said. One week after the paid content system launched, some customers were demanding to know how the quality had improved with the launch of the system.

Bringing it all together

One of the key things that Bella learned with Piano and that the New York Times experienced is that paid content success is much more than launching a system to take payments. You’ll need to analyse carefully how your audience uses your site to gauge what they are willing to pay for, and you’ll need to do market research to fine tune other aspects of your strategy. This will also help you optimise the usability of your site for your strategy. You’ll also need to effectively market your strategy, stressing not only how being paid for content benefits your news organisations but also how it benefits your audiences.

Gazeta Wyborcza joined Piano in August, but the scheme has already exceeded expectations, Gwiazdowski said. In the long term, by 2015, he believes that “paid content will be one of the biggest sources of income for publishers like us”.

The revenue from Piano has proven critical for Týždeň as competition for online advertising has grown from Google, Facebook and the increasing number of websites. Fortunately, the revenue from Piano has been growing month-on-month, Homolková said. Paid content revenue has meant that the Týždeň’s website is financially sustainable.

This isn’t to say that digital sustainability is simply a case of developing a paid content strategy. Publishers need to understand that it is more complicated than simply adding a payment system. To succeed, publishers need to think carefully about the marketing and user experience and whether they have the resources to do it, Bella said, but if publishers take this comprehensive approach, then a paid content strategy can bring good results.

One thing digital first usually does not mean is digital only. Some newspapers in the US and Canada have reduced days that they print to only the most lucrative ones in terms of advertising, but for most newspapers, digital first is part of a multi-platform strategy. Another thing is that digital first is not just a North American trend. South African business newspaper Business Day recently announced its own digital first strategy. In announcing the shift, Editor Peter Bruce said:

Business Day will, very soon now, become a “digital first” news brand. We will begin to publish what we know when we know it on our newly designed website first, and make the newspaper after that. Then, a few months after that we’ll wrap a mesh around the website and the applications (apps, they’re called) we have on iPhones and iPads and our stories – our product – will be for sale as BDlive.

By shifting to digital first publishing, they are planning to slowly, but profoundly, reposition the paper. For many newspapers, with print revenue under pressure, they have had to shrink the size of the newspaper, meaning that they need to rethink what they use those increasingly precious pages for. It doesn’t make sense to reprint news that was published online and via mobile apps hours or possibly even the day before. Instead of looking back and repeating old news, Business Day will be “a different kind of newspaper – reflective, forward-looking and planned”.

Bruce says that the new digital product BDLive will be for sale, and practically, that means that Business Day is also following another major trend in newspaper publishing by creating a metered paywall for its website, a paywall where some or a certain number of articles are free. Bruce said:

Some paywalls are watertight. BDlive is going to leak like crazy – there’ll be stories for free even before we ask you merely to register and more before we ask you to pay us anything.

For sites like Business Day and the New York Times, readers are asked to buy a digital subscription after they read a certain number of pages or articles on the site. The business case for a metered paywall is that the site still can attract readers on the open web, and therefore still maintain the sizeable audience necessary to attract premium advertisers. At the same time, metered paywalls do this while providing another source of digital revenue. The other benefit of metered paywalls is that they can evolve. Publishers can shift the number of articles that are offered free of charge, allowing them to carefully measure and maximise subscriber and advertising revenue.

Bruce must hope that in a year’s time he can claim as much, if not more, success than the New York Times. The Times now has a half million digital subscribers and has just announced that readers, both those who buy the paper and those who subscriber to its digital products, now provide more revenue than advertisers. Not all the news is good at the New York Times. As Joe Coscarelli of New York Magazine pointed out: “The transition was accelerated by the death spiral of print ads, and the stalling of growth for online advertising, but more expensive subscriptions and charging for website access play a role as well.”

This isn’t just an historic shift for many newspapers, but as Business Day’s Bruce points out, it’s a necessary shift.

Unless we do this SA can kiss goodbye to its own stand-alone daily business newspaper. … After 38 years in the trade I still ache for the smell of newsprint in the morning and fully embracing digital is my way of saving Business Day as a newspaper in the long term.

When does paid content make sense?

Advertising-supported content has been the norm for digital publishing with only a few, and then mostly business publications like Business Day, charging readers. Stuart Thomas of South African tech and media site Memeburn said that Business Day and the New York Times have similar audiences: “a well-educated, relatively high income readership”. He said:

That readership is willing to pay for quality content. But if Business Day’s going to make its digital offering work, then that emphasis on quality must come above everything else.

Chris Moerdyk of The Media Online says that Business Day has realised that “its most valuable asset is not a masthead on a piece of paper but rather a newsroom full of specialists who used to be called journalists, reporters, sub-editors and editors”.

Just as importantly, Moerdyk paints the editorial shift of moving to digital first is less of a challenge than shifting from a print-based to a digital-focused media business.

The biggest challenge, in my opinion, will be revenue generation. Because, if you think that the shift from printed product to digital takes a lot of mental adaptation, the move from selling newspaper advertising to digital revenue generation is massive by comparison.

He said that in the shift to digital the mind-set of sales and advertising staff has to change radically. Faith in banner ads is waning, and digital advertising techniques are becoming more targeted and focused on allowing brands to communicate directly with individual consumers. He said:

Whether BDlive will succeed or not will most certainly be entirely dependent on their sales force completely understanding the online environment and particularly the way advertising as we know it, is changing so radically.

That is one of the key things we’re trying to do with the Knowledge Bridge, help news organisations not just shift their editorial thinking to digital but just as importantly make the radical shift in thinking about the revenue and sales that will sustain your journalism. This month in the Digital Briefing, we’re going to cover how to create an effective digital advertising strategy, and next month, in September, we’re going to cover paid content. If you know of any interesting digital advertising or paid content strategies outside of the US and Western Europe or if you have a great strategy that is working for you, please drop us an email at kb@mdlf.org.