New York Times and Paid Content

The New York Times has announced a new paid content model for their online content. The announcement is here:

A Letter to Our Readers About Digital Subscriptions – NYTimes.com.

The upshot is that occasional website visitors will not have to pay for anything but people who read many articles online with the Times will be asked to pay after using up a monthly free quota of content.

There has been a lot of hue and cry about this, just like there was when they tried to charge for their opinion content way back in 2005 or 06. Here is my take:

Any company like the NYT can be successful with a paid content model. The problem with this change is that they are removing content from their most loyal readers online. They are not offering anything new to their best prospects, they are removing what draws them in the first place It is also rather complicated which will suppress sales a bit.

Why not offer new value to your most voracious online readers and charge for that? The Wall Street Journal does just that with the top end of their online subscription options, providing new in depth content in focused areas. I might pay for an online subscription that provided access to more photos for each article (or the NYT’s photo archive, which is massive), podcast interviews with reporters on the ground where the news is happening, etc. Use what you have to create new offerings that you’ve never provided before but can scale in the online world.

Getting people to pay for something they already had for free is simply a tough row to hoe when there was no expectation set of that free access being temporary.

Micro Payments, Micro Profit?

The only way to make significant revenue with micro payments is to get an awful lot of them.

Any questions? :)

OK, I’ll say a bit more about my rationale for that position.

I work with a lot of membership organizations and the idea of micro payments is often very appealing to their leaders. They provide a very low price point on some products which they can point to when members complain about overall prices of products. It’s also quite trendy, with high profile examples like Kiva.com leading the way with that business model for micro-lending.

Let’s take a look at the math for a hypothetical association. Let’s say they are a scientific society with 20,000 members who pay $399 a year to join. We’ll use them as our pre-qualified base of prospects for a micro-payment product.

Evernote, the very popular note taking application that works on almost anything with a chip and a screen, recently shared some stats. Shortly after they started up, about 1% of their free users converted to paying customers.

If we take a mirco-priced product at $1.00 and 1% of our hypothetical base makes the purchase, then you end up with this:

(20,000 * 1%) * $1.00 = $200.00

Compare that revenue to what they get in membership dues:

20,000 * $399.00 = $7,980,000.00

The organization will literally waste more in jammed paper in their printers than they would make on this single micro-priced product. This is before taking into account the costs of producing the product and implementing micro payments, online access, etc.

Hell, having a single staff meeting to discuss this product already puts it in the hole!

This association would need a base market of about 2,000,000 people to make the revenue even slightly interesting with these assumptions. They still need a lot more people in that market even if you bump up the price and the conversion rate.

Other issues with micro payments include:

  • They must be frictionless to complete (think texting to donate to the Red Cross for Haiti, for example).
  • Products with micro prices are often perceived as low value by your prospective buyers.
  • You’ll often need a wide array of micro-priced products rather than just one to have the level of sales you need to create significant revenue.
  • Repackaging content from other sources into micro-priced chunks often requires selling it to an entirely different, and larger, market.

The only exceptions I might make for developing micro payments if you don’t have a large enough market include:

  • It serves a political or policy need that provides enough value beyond cash revenue;
  • People who purchase the micro-priced product are great candidates for macro priced products that you then sell to them (classic loss leader transactions).

I’m sure someone somewhere in the association world has done a successful micro payment model. (Let me know about it in the comments if you have!) But every leader and product manager must go into the decision making process with a realistic understanding of the numbers involved before committing resources to implement this model.

Revenue is a Great Metric

A brief thought for the day:

People paying you money via your site for products and services is actually a pretty useful metric. While certainly not the only one you should look at, I’ll take increasing online revenue over increasing page views any day.

What revenue flows can you measure through your site? Track them and see if you can correlate promotions, changes in design, user interface improvement, blog mentions, etc., to changes in revenue. This will provide you with knowledge about what works and doesn’t for creating online sales.

This kind of knowledge is not priceless: it has a specific hard dollar value to it. This is a very good thing. Don’t forget to leverage it.