Critical choice for media sites: Closed garden or open platform?

by John Einar Sandvand on August 10, 2010 · 8 comments

The Times has put a wall around all its content while The Guardian invites everyone to republish their articles. It is two completely different strategies. Can both be winners?

Every media house is struggling with the same question: Should we charge for digital content? Or is it better to leave it free online, like we have been doing for the last 15 years?

Thus it is fascinating to observe how two British news companies have chosen completely different strategies.

The Times recently closed free access to its web site. To read stories you now have to be a paid subscriber. At the same time stories are no longer available through search engines like Google.

The Guardian has chosen a strategy of distributing its content everywhere for free. Recently bloggers were invited to republish stories in full. BetaTales are among the blogs that signed up – and we have so far published an article about how social media affected the UK election and a summary of the discussion about the BBC News redesign.

Apparently we got two diametrically different perspectives.

  • The Times: Everything should be paid for.
  • The Guardian: Everything should be free.

So different thinking! Yet: Could both be right?

At least The Times and The Guardian are representing two extremes. Most media sites will end up with a strategy between these two companies. That very fact makes it useful to examine the two radical choices of The Times and The Guardian. What are the pros and cons for the two models?

The Times: Content has value and should be paid for

The decision to put up a paywall is consistent with the long term strategy of owner Rupert Murdoch. He has declared that all news sites within his corporation will put up a paywall. So far he has had quite big success with The Wall Street Journal.

The basic philosophy behind this way of thinking is that quality content has value and thus should be paid for. Yes, it may lead to fewer readers, but the ones that are left will be more valuable and engaged customers.  These loyal readers will also have more value to the advertisers. Also, the thinking goes, media companies need to train readers that content has indeed value and is worth paying for.

Traffic certainly has dropped since the paywall was introduced.  That should come as no surprise. Users have numerous choices and many will just go elsewhere when they are forced to pay. Especially that is true for general national news sites with a number of competitors.

Yet the financial success of a news site is not measured in the number of readers, but in how much profit the site turns. Depending only on display ads most news site makes very little money per active user. In Norway the annual ad income per unique weekly visitor will typically be less than 100 NOK per year (USD 15-16). In such a market the winner quite often gets a big advantage. The number 1 site can live comfortably from display ads alone, while the next sites in line are struggling. One way out of it, claim some publishers, is to give up on winning in the “numbers game”, and instead try to build a strong base of very loyal and paying users. If you succeed, the thinking goes,  you may be better of financially, even with a big loss in traffic. The reason, of course, is that you make much more money per user than in the free for all scenario.

But the strategy has a few great risks attached, which is why many publishers are worried about introducing a general paywall as The Times has done. One risk is of course whether the model is in fact profitable. A news site might find itself making less money than before as ad income drops faster that then increase in user payment.

While these are important considerations in the short term, there is a much bigger risk in the long term: To what extent will the strategy erode the readership base of the media company? One might actually ask whether the greatest value of a newspaper company is its content or its daily relationship with many users. Or put in another way: Should one monetize the content or the users?

Putting up a paywall also means that you are withdrawing the content from the social web. Less users will link to you and people will not find your content in search. Over time you risk becoming less relevant to the public at large. The number of people engaging with your brand every day will decrease, as will your chance to offer additional services to a large audience.

Most media companies now experience that the number of newspaper readers become fewer and older. This indeed is a long-term trend, although The Times probably hopes that its paywall will slow this development. A strategy that limits the readership online as well may lead to a less prominent role in society over time.

The Guardian: Content should be free and distributed wherever readers are

The Guardian’s strategy appears to be the exact opposite of The Times. Content is free and the media companies even encourages its use by other sites. The philosophy is that content should be distributed wherever interested readers are, be in on social media, blogs, through parthers, or on different devices.

The Guardian seems to be in the middle of a major rebranding process, going from being a newspaper for a British audience to becoming a global liberal news brand.

A very interesting part of Guardian’s strategy is its Open Platform. Rather than putting up a paywall around its content, The Guardian has put up a lot of effort in making it easy for others to distribute its content. The Open Platform consists of an API developers can use to access the content as well as tools for using the content. And contrary to almost all other media companies The Guardian does not only make available titles and lead paragraphs, but the full content. Now even amateur blogs can republish Guardian articles for free.

This strategy positions Guardian as a content provider rather than a content destination. Where content is consumed is less important than the reach of its content.

The business model is based on advertisement. This applies even when content is being republished on other sites. BetaTales has already published a few of Guardian’s digital media stories, such as how social media affected the UK election and a summary of the discussion about the BBC News redesign. To do so we have to agree not to make any changes in the content and also allow Guardian to include advertisements in the content. So far, though, most of the ads have been self-promotion.

Potentially this gives The Guardian ad income from a much larger audience than its own site. It can even categorize its partner sites into topical categories, making advertisers pay even more for targeting their ads to the right type of partner sites.

Whether this strategy will work depends on the total reach of Guardian’s content and what types of partner sites it is able to attract.

One clear benefit for The Guardian is that it is building a large global audience for its content – and it is extremely easy for this audience to interact with the contetn.  This adds to the influence of The Guardian. The big question, however, is whether The Guardian is able to monetize this audience in a sufficient way. Is the audience loyal enough, as compared to for instance The Times, and is it attractive to advertisers?

Also for these questions we need to wait for a year or two before sufficient data is made publicly available.

What should other media companies do?

There is no obvious answer to that. I all depends on the strategic position of each media company and what they try to achieve. The Times and The Guardian has chosen very different and extreme paths. I am confident that most media companies will choose a strategy somewhere between these two extremes.

In fact both the practices of  The Times and The Guardian are rare in the media landscape. Most media companies trying to move towards user payment have chosen less radical options than The Times, such as the meter model (Financial Times and soon-to-come The New York Times) And very few media sites, even though their content may be freely available on their own site, allow other to republish the full content as The Guardian is doing.

My guess is that most media sites in the  end will choose a freemium strategy. The main web site is basically free, ensuring a large digital audience for the media brand. The free site is good enough to cover people’s immediate need for the latest news. But the free site is also a marketing channel for premium digital content products. These can be access to specific content, membership in clubs, special guides, etc.

On top of the free level many media sites will try to build a paid service. This can be extra content, unlimited access (meter-model), special functionality, specific devices or distribution channels, like iPad, etc. Models will vary and in a year or two we will know much more about what models have proved to be a success – in which market.

One thing is for sure: There is not one solution here. What will work for one media company, will not necessarily work for another. Readers and target groups are different, as are how the brands are perceived and what competiion a media company is facing.

Too many media executives seem to be very confident about what is the solution. I think there is no reason to be. Making users pay for content will prove itself to be much tougher and take longer time than most media managers imagine. Yet media companies have no choice but to figure out how to do it.

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  • https://www.adneedle.com David Weinstein

    Only one model can win. Free content. For a number of reasons free content will always be more read and shared, and most importantly, it’s searchable. With a paid content model, there is tremendous initial drop on readership. This reduces the traffic that advertisers find appealing. Availability in search becomes non existent, and therefore is not referenced or shared (like this article). The readers shoulder the burden of revenue generation as advertisers see less reach in that pub due to initial drop off in traffic.

    Every couple of months a pub will announce that it’s putting it’s content behind a paid firewall. The immediate result, as happened with Newsweek, was a 90 percent drop as loyal readers were greeted with firewalls and no way to pay.

    Conde Naste decided recently it would simply “start charging for content.” A senior exec was quoted as saying “people are used to paying $180 per month for cable. They wont have a problem paying for content. Currently the magazine is $15 for two years with a free tote bag.

    None of this has anything to do with the value of the content. Its the paradigm of the publisher. News is instant and there is little need to wait for a month’s worth of articles to print and distribute material. It’s hugely wasteful, time consuming and unnecessary. Paid content would probably be more widely accepted if it was A) Marketed correctly and B) Offered value that readers could only get on line (like no ads?) Regardless, publishers still fail to creatively think of ways to promote thier chief asset, the content itself.

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  • http://www.odzaconsults.com Michael Odza

    This is a response to David Weinstein’s comment “Only one model can survive.”

    There are many business sectors where more than one model thrives, and while “free” anything is always going to attract more people than things with prices, a business can make good money charging if it gives good value. Tata makes a car for $1,000 or so, and Ferrari makes cars for millionaires. The fact that 90% of free visitors stopped going to a site after they started charging doesn’t tell you anything about whether Newsweek is making money from the other 10%. That’s actually a high percentage compared to many other news sites that have charged for years, like the Arkansas newspaper and the one in Idaho Falls — they get about 2-3% paying for their online editions, and it hasn’t changed in years.
    [Response by David on Linkedin Those inMedia group: Very salient points. I would argue that losing a large portion of your audience simply for failing to have the foresight to manage their expectations is indicative of a larger problem. And it scared off advertisers. The smaller pubs you mentioned aren't even generating enough revenue from subscriptions to justify losing the search exposure by limiting availability of their content. ]
    I completely agree about the smaller pubs, although I think they would argue that it has slowed the erosion of their print circulation, and therefore of their primary advertising revenue stream. But I agree, they’ve made a strategic choice which may have preserved an increment of cash flow now in exchange for cutting off at the root most hopes for future adaptation to the changed environment of the future.

    • http://www.betatales.com John Einar Sandvand

      I agree with Michael that several business models may succeed at the same time, depending on the type of media company and its position in the readership market. What works for one media company will not necessarily work for another.
      But at the same time it needs to be pointed out that charging for content can be done in many different ways. The Times has chosen a radical path that withoud doubt will erode its readership base over time. I hope they have calculated the cost of that when considering whether it was a smart move.
      I maintain that most media companies probably will end up choosing a path somewhere between The Times and The Guardian, both trying to maintain a large readership base online as well as charging for special services and products. Many models can be imagined. in a year or two we will know much more about which ones have succeeded – in which markets.

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  • http://marketinggrin.com/blog/ Digital Marketing Blog

    Free content really makes more sense if you want a maximum number of readers. I agree with the first comment, it is also important for searchability. It all comes down to what readership you want, which in the end could even be helpful for marketers as different sites will get more specific audiences.

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  • http://www.best-registrycleaner.net Best Registry Cleaner

    The Guardian has chosen a strategy of distributing its content everywhere for free.

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