Wednesday, May 19, 2010

Making the Info-Subscription Model Work: Freemiums, Social Networking, & Referrals


The commentary (both here on this blog and in other blogs) on my previous post regarding the New York Times and their proposed subscription-based revenue has been quite insightful and thought-provoking.

BUYERS: With Respect to the Consumers (Readers)
From the consumer side, there were a few competing perspectives. Some of you said that consumers won't stand for it. For example, in an article about the profitability of the advertising revenue model, Andrew mentions that quality news can already be found online, so when an information website switches to a subscription model, "its time to do your own switching, that is switching to a new free website." Anamaria Tolci (of Facts and Trends in the Emarketing World) recounts letting her online WSJ subscription lapse, stating that other free acceptable alternatives were available to her. Karina, in "Paywalls for news: Good idea or not?" mentions that television news viewership may increase if a significant number of online newspapers opt for a subscription model.

Others said, essentially, get used to it, because it's already here. For example, Renato (of brzsurfbizz) mentions that we've been paying for various types of content for years, and others, in various comments, echoed his sentiments.

Then there's the "right vs. privilege" of free information access debate. Some e-marketers make us wonder what kind of damage will be done by going to an information subscription model, such as Kristel Kouly from E-Marketing questioning whether journalists have an obligation "to provide the citizens of the world with quality news" or asserting that the trend toward subscription models could lead to "misinformation of the masses." As others point out, the NY Times is a business, and has to make money somehow (and if ad revenue isn't it, then maybe a subscription model is). Thus, many say that consumers shouldn't feel so entitled to freebies when it comes to information. (Damilola Dipeolu raises the question as to whether the NYT is "in the business for profit or for humanitarian services.")

SELLERS: With Respect to the Information Providers
Basically, the main problems with moving from free-content (using an advertising revenue model) to paid-content (using a subscription revenue model) can be seen as the loss of readers due to higher costs and no additional benefits, as well as the loss of advertisers due to the loss of readership. (Suzy de Castro's two recent blog entries regarding "The Future of the Newspaper Industry" and "Paying for Online News" discuss various business/revenue models for the industry.)

There are several potential ways to made the subscription model work, but I want to discuss a combination of three of them here: (1) the freemium approach, (2) the social networking approach, and (3) the affiliate referral fee approach.

1. Joe Yeung of Chasing Opportunties recently blogged about how companies are now trending toward "pay-for" models rather than free, ad-supported models. He mentions "freemiums" (when a basic model/edition/option is available for free, while a more complete or higher quality version is available for pay). We've seen this revenue model lure in consumers of product offerings from software to online services (such as Flickr, Skype, and Pandora), so why not for information as well? I know that when I read an online news article that interests me, I'm often left wanting more. Perhaps this is due to online readers only wanting short articles or to the lack of resources (i.e., money to pay reporters) for free info websites. Either way, in my desire for more in-depth info on a particular topic, I might be willing to pay on an article-by-article basis for an additional few pages, rather than searching all over the internet for essentially the same info. Thus, an information website that uses the freemium model gives us free news in brief, but offers more in-depth info at a charge.

2. Let's add a social networking element to this. On occasion, I've had a friend email me a link to an article that I'm not able to access because I don't have a subscription to that information website (e.g., the Wall Street Journal). So there I am, with a teaser of info about not just something I want to know, but something that's been suggested by a trusted source, a friend. Now I really want it, and, if a freemium-type model was in place that I could easily transact, I'm more likely to pay for the additional content.

3. Finally, how do the websites get more people to recommend even more material? Well, this one's a bit tricky, but it's possible that by offering to pay a referral fee, more "friends" will recommend the articles to more of their buddies. So what do we get?

  • Free shallow content to the masses.
  • Paid in-depth content to those who want it.
  • Rewards for those social networkers who "share."
Of course, this all could evolve into a bad online version of a multi-level marketing nightmare where you feel the need to place those socially networked friends on your blocked email list. (Is there any coincidence that multi-level marketing is called "network" marketing by those in the biz? Hmm...)

The real point here is that one particular approach is probably not enough to save the information content websites, at least not the information content sites where we would expect at least some level of professionalism and unbiased content.

As for online opinion, like in real life, it will most likely always be free.

Be sensible,
Anthony

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4 comments:

  1. I think it would depend also on the targeted market. It is logical that cnbc.com; businessweek.com; wsj.com and other financial well positioned pages, could have a success case charging up viewers for their reading curiosity.

    I personally like wsj but not so much for paying a monthly fee, since I feel pretty sure about that I can find good quality related information in other financial pages...I guess some people don't feel the same way since it is a business model that has been working for wsj for more that 10 years...but is it sustainable...?

    It is an equation of balancing the ad revenues offsetted by the fees paid by subscriber. For the case of "The New Republic", the price at stake is 1 million of unique visitors on a monthly basis with 30% of incremental ad revenue...how measure the risk involved in changing the business model...

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  2. I can completely relate to your social networking example, where if a trusted source, such as a friend, were to recommend to me an article that they felt was important enough to have sent me a link, I would probably be inclined to paying the "freemium" just to be able to be "on the same page" as my friend. As you also mentioned, this can most likely go sour if the information my friend is constantly sharing with me is not of any interest. In an attempt to not hurt a friend's feelings, I might simply block the friend instead of letting them know that certain articles were not of interest to me.

    Using Joe's example of the freemium approach, in my opinion, could be a good one if NYT manages to use it effectively. I can say from experience that I have often been tempted to pay for a "pro" account for sites like Pandora and Flickr just to have the luxuries of commercial free music and/or unlimited photo storage capabilities.

    If NYT hits the spot with its target audience, it might one day be able to mirror the business model of, say, the Wall Street Journal, where they would be charging for quality not quantity...

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  3. This model that will implement the New York Times is similar to that already applies to the Financial Times, which can read 10 articles a month free before requesting payment. Thus, the "casual readers" who only come to the newspaper a couple of times a month, would not be greatly affected.

    Another way to successfully charge for reading the Wall Street Journal, which provides some free items and others paid subscribers only. However, we should clarify that both the WSJ and the Financial Times are economic means, which point to a specific niche market which often uses this information to their work and therefore are more willing to pay for it than they would behalf the general readers, in my opinion.

    On the other hand, I believe that if the New York Times is successful, it is likely that others take the same initiative. But it remains to be seen whether the subscription revenue will offset the loss of readers that probably will result in the installation of this called "pay model"

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  4. I think that a company can survive without it. This king of marketing hasn't always existed. Many successful companies don't have this kind of presence and they haven't been negatively affected. However, in my opinion, nowadays every business should have some kind of online interaction with customers. This depends much on the type of industry but all the pros can be applied to pretty much any product or service. The Internet is a great resource for companies if used wisely.

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