November 10, 2010

How to Finance Online Journalism (Freemium 2.0)

Filed under: business,current affairs,internet,marketing,media — Erik Dobberkau @ 22:30

In the last few weeks the debates on the business models of online journalism (which can be extended to any online business) have been boiling high, and it seems there are three alternatives at the moment:

  • Make everything free: This model is based on advertising, so it’s not really free, but a user or reader doesn’t have to pay extra. The downside for the provider of the service is of course that having ads on your site doesn’t generate much revenue when the monetary transaction depends on a user action (someone must click the ad). Pay-per-click will become the dominant payment model because it allows for exact measurement. This will result in decreasing revenue, so it’s not profitable in the long run. Free can also be combined with voluntary payments through Flattr or other (micro)payment services where users can donate.
  • Paywall: Users have to pay to see whatever content (and ads). But this permanent barrier prevents the spreading of the content too, so you’re less likely to gain audience because they eventually discover it.
  • Freemium: The free part of your content has only basic functionality. To enjoy the full service (premium), users will have to pay. This usually works very well but doesn’t seem to make too much sense for, say, a newspaper.

All of these three models have their individual up- and downsides and none alone seems to be sensible for online newspapers in particular. That’s when I got struck by this idea: Why not combine all of them? Here’s how it’d work.

Premium component: Users can subscribe for a monthly or annual fee and access all of your content. No hassle.
Paywall/free component: In case of a newspaper, each article has (i.e., is assigned) a monetary value (longer features with lots of photographs are expensive, short articles cheap). Users can read the headline and an excerpt (5 lines or so) for free, and if they want to read the whole article, they have to pay. Not a lot, maybe 10 cents. Once enough people have read the article and it’s been paid for, it becomes available for free until the end of time.
Example: an article’s value is €400,- , including the journalist’s royalties, photo royalties, rent, electricity, whatever expenses need to be covered (in proportion), so after 4,000 people have read the article (not including subscribers), it goes free. Why are subscribers not included? Because they’re paying for comfort, not access. I think it goes without saying that ads will be there as well (though I hope interruptive banner ads will go away soon in favor of relevant contextual ones).

Not only is this a reasonable pricing and revenue model, it also pays tribute to what people care about. The more often an article is read, the faster it goes free, the sooner it will be linked to from other sites, the more the idea spreads.

At this point you might want to ask “But why would anyone stop cashing in when people are coming to see it?” See, the logic is this: Good article/hot topic—lots of readers—incoming links—more readers. It’s not going to work the other way round. It’s always a bet. What’s new is that the financing is split between subscribers and casual readers: Subscribers are pre-financing, paying readers (and ads) re-financing. And free makes you a good person.

1 Comment

  1. […] This post was mentioned on Twitter by ClickandBuy, ideasarehere. ideasarehere said: How to Finance Online Journalism (Freemium 2.0) […]

    Pingback by Tweets that mention How to Finance Online Journalism (Freemium 2.0) « ideasarehere -- — November 11, 2010 @ 16:20

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.

Powered by WordPress