To charge, or not to charge? It’s the existential question facing publishers when it comes to monetizing their content online.
Piano Media, which recently merged with online paywall expert Tinypass, is a software platform that helps publishers sell their content on the web — or at least get readers to perform some sort of transaction before they read content for free like turning off their ad blocker, or signing up to a newsletter.
The company’s client list includes big names include News Corp, CNBC, and Time Inc. Combined, the two companies are on track to do $US40 million in sales this year, according to Re/code.
Trevor Kaufman, Piano CEO, tells Business Insider he’s fairly confident only a few big players like BuzzFeed and news aggregators will be able to continue running a purely free-to-consume, ad-funded model for much longer (of course, the well-known online publishers also tend to have events businesses, research arms, or print titles that generate revenues too.)
Kaufman thinks most publishers have got it completely wrong online. Rather than trying to hunt down page views, he believes more media businesses should be thinking like e-commerce companies. Those that do, in his opinion, will win out.
Bear in mind, they’re also more likely to be the ones using Piano, but he makes some interesting arguments.
Not every page view is equal
Kaufman believes many publishers have neglected to work out which proportion of their traffic drives the biggest portion of the revenue. Instead, lots of publishers have been blindly chasing a total audience figure so they can sell ads at a higher price on a CPM (cost per mille/1000) basis.
Kaufman tells a story of a conversation with a publisher: “The publisher told me they had sold out of all their online ad inventory through direct sales — which is a high-class problem to have — but now they needed to generate more page views. I asked them how. The person said ‘through social media.’ And that seems to be the conventional wisdom. But is that really the most effective way to generate page views? Surely signing up 1% of your audience to a newsletter, where they are 10 times more likely to visit again, is more effective than having a one-time social media stunt?.”
“It’s this tonnage mentality of the media business that sets a broad set of dangerous precedents,” he added.
The issue with treating all users as the same, rather than nurturing loyal advocates, is that energy is expended chasing a fly-by audience, rather than readers who are willing to pay or give something up for a publisher’s content, Kaufman said.
“Publishers seem to have forgotten that increasing the number of loyal customers is what the business is all about. Even the New York Times is trying to emulate BuzzFeed, despite at the moment New York Times making more money from subscriptions than advertising. But I think you’re going to start seeing real differentiation on the web between premium product and free product,” he added.
In the second quarter of 2015, The New York Times company reported circulation revenue of $US212 million, up 0.9% year-on-year. Advertising revenue dropped 5.5% to $US149 million.
And even when publishers try to reward their loyal fans, they’re still getting it wrong
When you sign up to a retailer or a travel company’s newsletter, you’re usually incentivized to do so by being offered free shipping or money off your first order. Not so in publishing.
“With content we don’t do that at all. You sign up to a newsletter, then you get it in your inbox. But the moment you restrict access to content — that could be covering up the second half of articles, or just restricting special pieces, or making a viewer watch a video — you have a currency you can exchange with your userbase,” Kaufman said.
Content restriction is a tricky game to play. With so many online news outlets, users can simply choose to click away and never come back. But Kaufman insists it’s important to trial different tactics, or else risk not having a monetisation model at all.
He uses tech news site Re/code’s recent sale to Vox as an example (he insists that he “loves” Re/code as a publication, and this isn’t a criticism, but rather that Vox’s acquisition of Re/code is an indication of where the market is going.)
“Re/code is typical of what happens to publications that are too editorially-driven. Kara [Swisher,] Walt [Mossberg] and Peter [Kafta] all want to be part of the public dialog and, therefore, want to get their voice out. So the last thing they would ever want to do is restrict access to their content — they wanted no barriers because they wanted their stories to get out there. But they found out it is impossible to run a business with premium content on advertising alone. Wall Street Journal found that out, the Financial Times found that out, the New York Times, and Time Inc. found that out [all of which have erected varying levels of paywalls,]” Kaufman said.
And technology companies are all too willing to eat publishers’ lunch too
From the rise of ad blocking on one side, to Facebook’s Instant Articles and Apple News that both encourage publishers to move their content away from their own properties, publishers are being increasingly squeezed by tech.
Kaufman believes too many publishers are holding out for some “magical technology” that will arrest the decline in online advertising prices and save their business models.
“Well, guess what? It’s going exactly in the opposite direction,” Kaufman said. “Silicon Valley would like to disrupt publishing totally, which is a euphemism for destroy. Ideally, they would say ‘why does Business Insider need a website at all? Should it not just be distributed to Facebook, and Apple News? Why do you need to have any kind of customer relationship?'”
Both Apple News and Facebook Instant Articles offer an ad revenue share. But publishers have previously voiced concerns at how much data they might be giving over about their readers.
Kaufman’s Doomsday-esque analysis for the future of online publishing clearly serves his company’s mission, but it’s worth imagining that while the online publishing industry now celebrates being top of the comScore rankings, or being the most shared publisher on Facebook, that the model might not stay the same forever.
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