MediaMedia BuyingPaid Content: Three New Studies

Paid Content: Three New Studies

Three interesting reports involving questions about publishing paid content landed on Vin's desk this month.

Online Publishing Relies on Multiple Revenue Streams

Is there consensus among interactive publishing pioneers about free versus paid content? The answer to that and other questions is contained in the fascinating IP Zurich Report.

Norbert Specker, who for the previous eight years organized the Interactive Publishing Europe and Content Summit conferences in Switzerland, set up an unusual experiment there in January. He selected 20 chiefs of Internet magazine or newspaper operations from the U.S. and Europe, most of whose online publishing experience and perspective date from the early days of public Internet access (well before the boom). Among the luminaries are Neil Budde, The Wall Street Journal online founder; Steve Yelvington of Morris Digital Works; Simon Waldman of The Guardian; and others not likely to be swayed by passing trends. Specker dubbed this group of pioneers the “IP Masters.”

Their common vision is the ideal online publishing business model relies on multiple revenues streams. It’s not an either/or choice between advertising sponsorship or paid consumer content. They say reliance on either is inefficient. Paid content will be an important new stream but not fundamental for online publishing success.

Advertising will remain the primary revenue stream for online publications, the IP Masters think. They believe marketers still underestimate online advertising’s brand-building value. They estimate only 20 to 30 percent of their own sites’ ad revenue potential has been achieved. Greater potential can be tapped through more targeted advertising than run-of-site or run-of-page banners, and through better integration of sales with print media holdings.

The IP Masters bemoan the fact their sites’ content is too general and is redundant in terms of their companies’ print content. They feel online content isn’t uniquely suited for the medium and lacks an “entertainment factor” for the average user. These problems make content less useful and less used when free, even more so when paid.

The IP Masters were “very critical” of the past two years. They saw only marginal improvement in the online publishing business model. They’re optimistic the next two to three years will bring the industry closer to an ideal business model.

Micropayments Offer Additional Revenue Streams

In early December, I wrote how some European newspapers and magazines are pioneering innovative microtransaction solutions, notably processing systems based on mobile phone SMS. I proposed American publishers consider microtransaction systems. In January, I outlined how most publishers attempt to charge too much for access.

According to Van Dusseldorp & Partners’s Guide to European Content Payment Solutions, most European publications that charge still demand higher rates and don’t offer microtransactions. Only about one-third of 14 online newspapers studied offer alternatives.

Europemedia (partly owned by Van Dusseldorp) notes:

Many newspapers prefer to adjust their pricing models to allow only higher value subscriptions, rather than adopting micro-payment solutions, which would enable them to offer a wider range of services and pricing models. Through the acceptance of micro-payments, users could order single copies, search online archives, or download individual articles from the websites, opening additional revenue streams for the newspapers.

Pity. Microtransaction systems are user-friendlier and often less expensive than traditional credit and debit card billing systems. According to the Van Dusseldorp report, newspapers accepting microtransactions can offer a broader spectrum of paid services.

Examples: The Dutch Nederlands Dagblad chose microtransactions so, besides offering basic online subscriptions, it could charge for services such as single-day access, archival access based on time spent, and single-copy downloads of the paper’s PDF digital edition. The in Amsterdam and the German Rhein Zeitung use microtransaction systems to offer individual articles.

Ads Aren’t Working. Charge the Consumers?

Meanwhile, the Online Publishers Association (OPA) released an update of its Online Paid Content report, the earlier version of which I roundly criticized here last August.

In the introduction, Executive Director Michael Zimbalist says:

The year 2002 will go down as the year in which conventional wisdom about paid online content changed. Whether or not consumers will pay for content is no longer a matter of debate. Clearly, they will.

Yes, they will. That’s never been a secret. For over eight years, consumers have paid for online dating services, investment services, online credit help, online ancestry research, and online games. There’s an even longer online fee history for business-to-business (B2B) reports and research and other content categories counted in the OPA report.

What most consumers haven’t paid for are the content categories published by the OPA’s membership: general interest newspapers and magazines. That’s why I criticized the OPA for the original report. Imagine a greeting card industry organization issuing a report citing newspapers’ experiences as justification for charging for content. Essentially, the reverse scenario was outlined in the August OPA report.

Last year may be remembered as the year when publishers of general interest online publications realized ad-sponsored business models weren’t working, prompting them to review charging consumers rather than advertisers.

The latest OPA update is of interest. American consumer and business spending for online content increased to $1.3 billion during 2002, up 95 percent over 2001, according to the OPA’s count. Q4 2002 content spending slightly decreased. The OPA also reports 14.3 million American consumers paid for online content during 2002, compared with only 4.3 million during 2001.

Most of this growth was due to online greeting card sales and subscriptions to dating services, the OPA reports. These respectively enjoyed 30,665 percent (yes, thirty thousand) and 549 percent year-to-year growth rates measured during Q1 and 438 percent and 196 percent during the slower Q4.

I recommend you read all three of these reports.

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