All the to-ing and fro-ing about content pay-walls is fascinating. Entire industries are reinventing their business models, in public, and right in front of our eyes. Industries that are trying to undo a decade of giving content away for free.
I guess it's easy to say in hindsight but advertising was never going to be the key to building sustainable content businesses online. You only have to do some simple maths to work that one out. Back in 2007, Scott Karp called it the 10% problem - describing how the application of traditional media principles to digital content inevitably leads to the discovery that revenue per online user is typically a fraction of the revenue per offline viewer, reader, or listener.
Take display advertising – a form of advertising that typically makes up the majority of offline ad revenue at most content businesses. Its online equivalent, banner advertising, has it's fair share of issues. It can be annoying and is easily ignored. Click through rates, the measure of effectiveness, have been in decline. A study of more than 10Bn banner enquiries across Europe last year by AdTech, showed an average click-through rate now between 0.11% and 0.19%. Site owners chase scale – the more ad impressions they serve the more they can charge for – but much of this scale is monetised through a waterfall of network partnership arrangements that yields an average revenue-per-user far lower than offline. For content owners structured around high yielding offline inventory and expensive traditional media operations, the economics are tough.
Yet the irony is that, as Nicholas Carr pointed out, we already pay a lot for the content we consume. More than we've ever paid before. Think about your monthly broadband bill. Your subscription TV service. Your mobile. But somehow we've ended up paying the people with the network and the pipes, not the people who actually created it.
Jeff Jarvis describes the NY Times proposal for metering-reading (allowing a certain amount of content to be consumed for free, but charging those who consume more) as "cockeyed economics". They would, says Jeff, "end up charging — and, they should fear, sending away — the readers who are worth the most while serving free those who are worth least.". At one level I can see his point. But then if anyone is going to pay, it will be the people who are passionate about what you're doing and will likely be consuming more of your content.
Which brings me to the one thing that has been strangely absent from all the discussions about potential payment models – the role of social technologies. Murdoch has said that Google traffic "brings a consumer who more often than not read one article and then leaves the site. That is the least valuable of traffic to us". Hallelujah. At least someone is acknowledging in public something I've said many times before – that audiences are not homogenous, that one user is not the same as another, that some are more valuable to you, and more engaged, than others.
I find it strange that when the biggest change on the internet in the last five years has been the development of the social web, some content owners have spent so little time developing their own social platforms. Social technology delivers insight through data. Priceless insight into your users. Data which can be used to create added value. Added value which, as a reader, can really mean something to me. Added value that I might actually pay for.
I agree with Helge that the internet is mass of niches. Small is beautiful. Niches are highly targeted, and high yielding. The mistake in applying 'big' broadcast thinking is that it is stuck in the 'big', and doesn't think small enough. Niche can start big, and become small. Like personalisation, algorithm and convenience. The Guardian iphone app allows me to access good content at my convenience, but also to personalise it for offline consumption. It's been downloaded 70,000 times in it's first month. Or niche can start small and become big. Like providing unique, quality content as a service to a targeted audience. The FT's online content charging revenues are forecast to overtake their print ad revenues this year (and given how much the FT charge for print advertising that is some achievement).
Small steps. But there is no question that many content owners need to diversify. Analysis of the UK's largest media groups (ranked by revenue) by OC & C is dominated by companies that charge their customers. It is too late to charge for what is already ubiquitous, but people pay for scarcity. I'm not a fan of micropayments for news in its current form. And I don't have all the answers (for it will surely be no single solution), but if it was up to me I'd be experimenting furiously with how to create some scarcity out of the ubiquity. Developing unique, highly targeted or personalised services, packages and subscriptions, informed and supported by social technology. I'd add as much value to those services as I could, and I'd make that value as visible as possible so every non-subscriber could see what they were missing. I'd experiment with packaging news in ways that offered new levels of personalisation so I could follow stories as they unfolded. And I'd take a long, hard look at my traditional operational set up. As Thomas Baekdal says, the biggest problem might not be how to make more money, but instead "how to get rid of all those unnecessary expenses".
Easy to say. Less easy to do. I wish them luck.