Revenue Diversification for Digital Publishers – The Present, Part 2: Premium Content Subscriptions

In the prior two posts in this series, we covered The Past, wherein publishers focusing too heavily on display revenue found themselves in a mighty pickle; and The Present, part 1, where we discussed a variety of methods for diversifying revenue, other than subscription-based, direct-to-consumer revenue, which is now the subject of this post.

Premium Content and Subscriptions

The meat of where publishers are focusing attention at present is around having some kind of paid content or premium play.   We’re familiar with implementations which have been in place for the past years on big name publishers such as the New York Times, Wall Street Journal, Washington Post, etc.   More and more publishers of large and now medium sizes, however, are making an effort to get direct consumer revenue from their content.

There are several approaches to generating premium content, which vary in degrees of sophistication and investment required.  Here are a few.

    • Ad-Free
    • Metered Wall
    • Hard Wall
    • Behavioral Pricing
    • Membership
    • Free Registration Wall
    • Strategic Partnerships

Ad Free:  Handling Ad Blockers or offering an Ad Free experience

The advent of Ad Blockers to the mainstream market is another factor to complicate the revenue value chain.  Ad blockers work most effectively on desktop browsers, where most ad spam takes place. They are generally browser plugins, but some new browsers such as Brave have native ad and tracker blocking, and encryption, built in from the get-go.

What’s important to publishers here is a pretty simple determination.

    1. Find out how much of your traffic (desktop and mobile) is utilizing an ad blocker
    2. Calculate the loss of pertaining revenue due to that segment not seeing or loading ads
    3. Determine if that is a large enough problem to warrant doing anything about it

If you want to do something about it, your options are a) to engage with a company that offers “ad replacement” (very cheap usually text based ads that are not blocked by ad blockers), or, more often, to offer gating options to users of ad blockers, as follows:

Scenario 1:  “We see you’re using ad ad blocker.   Please deactivate it to continue to our ad-supported content.  It’s important for our ads to support our journalism.”

Scenario 2:  “We see you’re using an ad blocker.  If you’d like to continue to enjoy an ad-free experience, please register for our premium account…”

Both of these scenarios or others like them essentially use the detection of an ad blocker as a springboard for transacting a more advantageous delivery of content to the end user.  All of these scenarios take on the implicit risk that the visitor will walk away, removing both traffic and revenue. This is why the publisher should determine (as above) the size of the problem and whether it is worth doing anything, at all.

In scenario 2, however, the option is also open to offer users who do not use ad blockers, to get an ad free experience if they pay.   Anecdotally, I would offer that just offering users not to view ads, will not generate much in the way of subscription revenue conversion.  Consumers, accustomed to getting publisher content for “free” (with ads) often have a problem with paying for the same content, without anything extra to the value proposition.  Unless you are a staple brand (such as NYT or WSJ) some users just can’t do without, asking for users to pay simply to turn ads off, may not be quite enough. It follows that the other varieties of direct to consumer revenue generation add additional benefits, in a variety of ways.

Metered Wall

The New York Times is a great example of a Metered Wall.   Clicks from search into a NYT story will generally let you read the story, but only so many times per month.   A customized subscription elicitation will appear at the bottom of your story, showing you an offer to subscribe.  If you do not subscribe, and click to subsequent stories, eventually you will exhaust your count of free views. At this point, the top of the story appears, with the rest blurred out and covered by a large, blocking elicitation to subscribe.  You cannot scroll, or attempt to capture the story before the wall pops up. Yes, there are ways around it (use a different browser, try clearing your cookies, use a different computer or your phone) but it is inconvenient enough for a sufficient amount of interested readers, that the NYT has seen great subscription growth using this method.  Then again, they are the New York Times. Will your audience pay when they hit the wall? Or is your content not consistently important enough for them to do that? These are the questions you need to address. One approach to answering them is to do some customer research about price tolerance. In many cases (in my experience) you may find that the revenue returns you model based on that research, may not warrant the investment in a walled approach.

One significant benefit of the Metered Wall approach is that you may fine-tune the meter as time goes on.  For example in my own personal experience, the New York Times initially gave me 10 free views per month, and it later reduced to 5, and then finally, 2.  Then, I subscribed. This optimization of the meter can be done for all users equally, or differently for individual users (where they can be identified across devices, platforms, and browsers).  This approach verges into Behavioral Pricing (below).

A great many other publishers have implemented or are implementing approaches to the metered wall.  Examples include Conde Nast, The New Yorker and local news groups e.g. Tribune Media.

Hard Wall

The Hard Wall is the easiest implementation of all, because it’s all or nothing.  Every single post requires a premium subscription. This is the approach the Wall Street Journal has taken (for the most part), and due to their stalwart financial audience, it seems to serve them well.  It works also for other audiences who have high tolerance for investing in exclusive content, such as trade publications or brands who release incisive analyst research which can potentially guide investors toward wiser decisions.

Behavioral Pricing

The concept for behavioral pricing is that the more data a publisher can gain, via first party user data all the way to 3rd party licensed data, the finer decisions can be made about what price to offer what users.  Fly-by users may be given free access, whereas regular visitors may have a good introductory price, with a lower price offered if they choose not to engage. Then, some users may be known as high-ticket users, and may be given the highest price point of all, for starters.  If a decent volume of these subscriptions can be sold, the recurring revenue can be material enough to justify the investment in the technology behind the behavioral price targeting.

Membership

Membership is a promising approach many publishers of middle-to-larger sizes have adopted.  The concept around membership is that while you capture a potential subscriber’s interest with excellent free content, you surround the content with a finely-merchandised array of membership benefits.  Membership benefits might include:

    • Premium Content (e.g. investor analysis)
    • Community Access (e.g. commenting, social networking features)
    • Exclusive Access (VIP event access, membership tokens or free member merch)
    • Events (e.g. tentpole offline events, online live streaming events)
    • Custom Features (e.g. UGC / authoring capability)
    • Mobile app (with custom features e.g. podcasts, calendar integration, etc

The diversity of publishers using this approach demonstrates its popularity.  You have got industry content creators such as DigiDay or TechCrunch (who have expensive exclusive events periodically through the year) and also have premium-only content.   There are individual thought leaders or pundits such as Ben Thompson’s Stratechery, or Jessica Lessin’s TheInformation, which both have member-only access and whose hugely popular newsletters are a staple to a great many, who may choose to subscribe to access all of their posts and analysis.  The Business Insider, now TheInsider, is largely built around premium analysis subscriptions. TheChive has an interesting spin on membership, offering the BFM (Bill F… Murray) coin, which members can show to get into Chiver parties all across the USA for free.

Free Registration Wall

Not ready with a sufficient value proposition to ask users to pay?   Well, it might be worth it to put up a wall just to collect email addresses and have users create free accounts.  Now more than ever as changes to browsers will affect the utility of 3rd party cookies to target ads. First-party data will always be the best, so get it where you can.  Just, as above, make it clear why the user should want to create a free account, with a pithy benefit statement, or an appeal to maintaining free journalism, as seen often on The Guardian or Wikipedia.   Max Wilens wrote in his 9/30 DigiDay post, “Even though the right value exchange will vary from site to site, each publisher should be able to come up with something.”

When you’ve succeeded in setting up an effective registration wall that doesn’t unduly impact your gross traffic, you’ve succeeded not only in generating an ongoing source of first-party user data; you’ve also laid most of the groundwork for later introducing premium offers, if and when you are ready.

Strategic Partnerships

Other publishers or content service platforms create partnerships with other companies to provide exclusive benefits to members (for example, 20% off on luxury auto rentals via Audi Silver).   Indeed, the bundling of Spotify with major wireless carrier contracts or new line additions is an example of strategic partnerships which are offered as a benefit of membership.

With a defined audience, publishers can offer much more than just original content to paying members as a benefit of membership.   Major publishers or content providers of all types have partner management groups whose main focus is on closing mutually advantageous deals with commerce, travel, financial service, career recruiting, or other value-added service providers, to help them convert more sales on their end, while the publisher converts more paid subscribers on their end.   This is akin to co-marketing grown up, to include financial conversions on a quid pro quo custom negotiated partner contract.

From Here to There:  Implementation of a Registered or Premium Content Strategy

All of these approaches will require some investment in either building or buying technology which enables the publisher to collect registrations and to segment or specifically target users based on what is known about them, for premium upgrade or general marketing or ad targeting purposes.  Are they unauthenticated visitors? If so, try to convert them using a free registration or paid subscription conversion flow. Are they authenticated registered free users? If so, continue to try to convert them to paid during site visits, but do so also via email marketing (where opted in).   Are they authenticated paid users? If so, do not hassle them with upgrade nags, give them what they paid for, and do your best to retain their paid accounts.

Large publishers such as NYT and Dow Jones (WSJ) have invested millions in their metered wall, hard wall, or behavioral pricing technology.  Luckily, the market of publishers for solutions in this area is a fast growing one, and many partner options exist. They are usually structured on a SaaS model, and generally take on the burden of financial account processing so that the publisher does not need to worry about hosting customer credit card details or other personally-identifiable information beyond the profile basics of name, email address, etc.  My recommendation is to choose a solution that is cost-effective but which also includes some element of strategic consultation for the implementation itself. Asking for an ROI analysis of the SaaS costs is always a good idea, even if you don’t get it.

A few examples to look at, with no particular preference given, are:  Chargify, LaterPay, Piano, Pico, Recurly, Zuora. It’s easy to find others via comparison sites such as G2.  Another very turnkey option with likely lower flexibility, is Google’s Publisher Subscriptions product. And more recently, WordPress.com announced integration of Stripe for recurring subscription payments.

Summary

It’s clear that there are many ways to approach direct to consumer revenue via premium content, membership benefits, etc. – most all of which require some subscription mechanism to process payments, and some product marketing work, all of which is hoped to result in the much-sought revenue.   Finding a turnkey solution for such solutions will come at a cost, so be sure you believe your value proposition and benefit statements to users has a good chance of generating sufficient subscriptions to offset those costs on a planned timescale.   I’d suggest doing some research about price tolerance and benefits to assess your target market’s willingness to pay, at all, and if so, for what.  Or, if you’re certain that subscriptions are necessary for continued survival, go ahead and implement quickly and cheaply, then iterate.  Every publisher’s business is somehow different, so your approach will require some thought, analysis, and planning.   I am hopeful the above guide will be informative and useful toward that effort.

Continue on to what we may see in The Future

NOTE: This post was originally published in the Vuukle Blog and is reposted here.