Andrew Sullivan And Monetizing Digital Content

People willingly pay for entertainment but not for information. Perhaps a sign of our age?

While we willingly pay $15/month to Netflix for movies and TV that we barely get the time to watch, we don’t want to pay $5/month to The Wall Street Journal for news that we’d at least skim through every day. And that strange behavior is because we’ve always paid for movies and cable, but never or very little for news or online textual content. Because the latter has almost always been subsidized by advertising, or given away free as collateral to sell other products.

We never pay for what we expect to be free or cheap, and our expectations are defined by too many things outside the control of a few writers or bloggers or even big media houses.

(A lot of software has this problem too: when was the last time an email provider successfully managed to get users to pay?)

Which is why it is very cool when Andrew Sullivan decides to put his blog behind a paywall. Of course, that he has a very wide readership and has had his blog be part of publications like Time and The Daily Beast helps when he experiments with such things.

How can I be in favor of paywalls and still disagree with the RIAA/MPAA? I’m not being hypocritical here because the problem of piracy less a law enforcement problem and more a pricing problem. Nine Inch Nails made more money when they gave away music for free on a “pay what you want” model. Economics, not politics. Sorry for the tangent: had to get that out of the way!

Back to The Dish. What are they up to? There are certain articles that have a “read more” button. You can click on that 7 times per 30 days, and after that you need to subscribe. Which is the right way to go about it: don’t block out the casual readers, but ask the heavy readers to pay because they are clearly getting a lot of value. Chris Anderson’s theory about the long tail has become common wisdom but revenue works differently. It is the short head where the bulk of the money lies. Hence a good strategy for content creators is to open up to a large audience and look for the (small) part they can monetize.

Now, the real question is: what more can Andrew Sullivan & Co do?

One: They are monetizing the most loyal part of the audience (the “head”) through a $20/year subscription. Given that they’ve made $600,000 in a month or so, that means an audience of about 30,000. These buyers won’t have to pay again until next year. But there is a mid-section of traffic that does not want to make a big commitment but still wants to read more than 7 articles this month that could be monetized  through a smaller commitment. Let them pay $3-$5 / month. It is more expensive than $20/year on an annual basis, but it is not a big upfront commitment. After you’ve made users buy once, you can adopt various retention strategies. I bet the mid-section is at least 2x-4x the head in audience size.

Two: They don’t ask you to register until you are about to go through the purchase process. From purely a funnel perspective, registration is after the payment flow so it should not cause any drop-offs in the checkout process – that’s smart. But asking users to register (give them some incentive to do so) much before you ask them to buy allows them to take a mini-step in investing in your site. Buying a subscription after that will feel less of a big step and buyer conversion will be higher – from non-head section of traffic. It won’t make any difference to the head traffic, because they would buy regardless.

Three: The moment you put a price in front of a prospective buyer, the first thing he or she does is assess if it is a good price based on a point of reference. With just one $20/year option for The Dish, the user is not sure what point of reference to compare with because this is a unique blog and one of the first to start charging. That is probably causing a drop in conversion.

The Economist did an intriguing experiment with providing this point of reference. On their subscriptions page, they offered a web-only ($59), a print-only ($125) and a web+print ($125) option. Most users chose the third option; it seemed a no-brainer. Why pay for the web-only when you could get it for free with the print edition. Without the web+print option, most users simply chose the cheapest option leading to lower revenues. Read Dan Ariely’s take on this.

There are many variables and dimensions to optimize, but I’ve focussed on conversions: getting users who have never bought to start buying. That is most important for a new offering. Convincing buyers to buy more comes afterwards.

I hope Andrew Sullivan’s experiments work out. There will be a lot more awesome content if writers and artists are able to monetize their content on their own.