“It’s clear that the broken system is ad-driven media on the internet. It simply doesn’t serve people. In fact, it’s not designed to.” Ev Williams
It is slowly becoming clear that advertising is not the saviour of premium content: ad-blocker installs are increasingly prevalent; revenue generated by engagement is in decline; scepticism over the use of customer data is building and the market is now dominated by Google and Facebook, which now account for 99% of growth in online advertising.
In response to the anticipated demise of advertising revenues, Spotify, Netflix and Amazon have all successfully adopted the subscription model to monetise their digital content and support global distribution, proving that customers are willing to pay for premium content if there is a fair value exchange between quality and cost.
Online newspapers have, with varying success, introduced charging mechanisms, or ‘paywalls’, as they grapple with trends in customers’ consumption of unbundled content. Recently, the New York Times announced subscription revenues of $223m in 2016, with their subscriber base growing at its fastest rate since launch in 2011 – it now considers itself a ‘subscription-first’ business.
Most publishers have yet to achieve such success, partly due to the difficulty of aligning the pricing model with changing consumer behaviours. The growth of social media and prevalence of mobile devices have pushed customers to discover their content article by article, ‘snacking’ on content selected for them by data-driven personalisation tools or their personal network. This more casual approach doesn’t mean the customer is not engaged, nor that they are unwilling to pay; but they do not want to pay £9.99 a month for 12 months to read that single article. Whilst most publishers would view themselves as a ‘destination site’, a growing proportion of customers do not feel the level of loyalty or publisher primacy to buy premium content from only one publisher.
Netflix, Spotify and Amazon have introduced a micro-payments solution called ‘Direct Carrier Billing’ to evolve their pricing options to meet this shift in demand and underpin their subscription proposition. DCB uses a mobile network’s billing platform to allow a customer to securely add a charge to their mobile phone bill with no data input and just one click. Available across UK carriers, customers do not need to apply or pre-register to use DCB and it enables purchases between 1p and £20. This intuitive service increases conversion and facilitates a variety of charging mechanisms, for example; pay 49p to read an article or subscribe at £1.99 per week. The format works both within mobile internet and app stores, and with PAYG or Pay Monthly customers.
Direct Carrier Billing has the potential to change the publishing business model in a similar way. By accepting payments for as little as 1p, several new content and subscription approaches become feasible – reaching previously in accessible audiences.
Monetising the ‘long tail’: Accepting one-off micropayments for specific content allows publishers to monetise the portion of customers that have not historically paid for content. Customers that were previously willing to pay for single article, but not a subscription, had no way to consume (and pay for) specific content: item-specific DCB payments allow publishers to generate revenue from this cohort of customers.
Monetising the back catalogue – When it comes to digital publishing, there is still the culture that customers will only pay for content that is ‘hot off the press’, but many publishers have a significant archive of content that may not be current but is still highly relevant and has a market value. DCB payments allow publishers to attach a low but fair cost to this content, which otherwise would have been unlikely to generate revenue – especially as other payment types would make such a low transaction value untenable.
The subscription pathway – The temptation, when considering one-off payments versus subscription payments, is to assume that the former will in some way cannibalise the latter. Those that have introduced micropayments in publishing (most notably Blendle in the Netherlands) have seen that ‘subscribers’ and ‘payers’ are largely discreet audiences. Further, DCB offers a pathway to convert ‘payers’ into ‘subscribers’ by creating an ongoing dialogue with customers that were previously impossible to engage with.