This is a commentary on today’s Pando Daily article about how Porous Paywalls don’t work which is mostly about the experiences of NSFWCorp.
A Porous Paywall is a type of freemium where newspapers (for instance) let readers read a limited amount content for free before requiring them to pay for the rest of the content.
I’m going to try and keep this short, because there are way too many factors to consider for one blog post.
Freemium is about adoption
The only reason any business gives out something for free is to widen the funnel and increase adoption that will fuel a chain reaction to eventually increase customers and revenue. Washington Post, New York Times, and other newspapers cited in that article can afford to have a strict paywall because they have enough adoption. For now.
Freemium is easy to screw up
The good part about that PandoDaily article is where it links to this essay: You’re Doing Freemium Wrong. A restaurant can’t serve food for free in the hope that it can charge the regulars enough to turn a profit. It can, however, let people walk into its doors to use the restroom, or get a glass of water, or browse the menu and ask questions about the food. For free. So that some of those people will grab a table and pay for food. If you set expectations that something is free, forget about being able to charge for that same thing ever again. If you can’t charge for what you are selling, sell something else. Freemium is not about power users. It is about widening the funnel, and making sure the top of the funnel connects to the bottom of the funnel (where revenue better exist!).
NSFWCorp’s experiment was incomplete
The article mentions their freemium experiment where “the vast majority of articles” was given away for free. The rate of new subscriptions plummeted. So what this experiment has effectively proved is making the majority of your primary offering free does not lead to greater revenue. It is one data point along the graph of all possible tuning for a freemium experiment. NSFWCorp just hasn’t explored enough to find the maxima. And it clearly wasn’t the minima either because existing subscribers did not unsubscribe and there were still a few continuing sign ups. They probably set up the experiment without understanding their users.
More about incorrect conclusions
If you read that article to the end, you will read about NSFWCorp selling lifetime subscriptions priced at a one time amount of $3 and increasing all the way to about $1500. They generated a one time revenue of $350,000. It is a membership to a club of sorts (your caricature on their site, some event invitations, subscription, etc) so it is hard to comment on the value. Assuming they hope to be around for 10 years, that is $3/month x 12 months x 10 years = $360 / subscriber in 2013 dollars. Giving that away for low prices is foolish, but there were only a handful of cheap “rooms” and the publicity may be worth it. Btw, most of the memberships sold so far are actually less than $300. But here are the INCORRECT takeaways from this: (a) users are buying “rooms” in their “conflict tower” (as they’re calling it) to support independent journalism, and (b) a lifetime subscription at some fraction (1/20th, 1/10th, 1/5th, whatever) of the total cost is better than a freemium model. There is no way to prove these with this experiment.
What it does prove, however, is that they have been able to create a “bundle” that is valuable to their existing users at those prices. That is, NSFWCorp is able to upsell to their users. Sort of supports the freemium theory in a backhanded fashion, no?