If you've been reading my previous posts you'll know that I've been thinking about newspapers' monetisation problem for a while. So far I've been mainly sharing some rather philosophical thoughts on the problem, but the point of all that is to serve as background for a more practical and positive strategy that I'm trying to put together.
These are the building blocks:
- One is what economists call price discrimination. It's no good to say "I will charge X for my content, and those who value it enough will pay and the rest won't get so see it". What you want to do is charge each reader as much as s/he is likely to pay. If someone is unlikely to pay at all, then it's better to let that person read the content for free, because then at least you get the ad revenue. The trick is to do this in such a way that those who might have been willing to pay don't get the stuff for free. Albert Sun recently wrote a post with the basic ideas.
- Marketers' approach to price discrimination is to do segmentation: identify distinct groups of readers who share similar needs, see what they are interested in, and see if you can find a way of charging them a different price according to their willingness to pay. Typical example: business travellers vs leisure travellers. Most business travellers buy return flights with outbound and return legs in the same week, while leisure travellers usually spend a Saturday night away. So you charge less for flights involving a Saturday night stay – you charge as much as leisure travellers are willing to pay, which is less than business travellers would. Note that the product you are selling here is the same, and it costs you the same to deliver it to either segment. But you would make less money if you chose a single price for all customers.
- The key is how you do the segmentation, and here the web offers a myriad of possibilities that are not available in other media. The FT started along these lines by identifying users who visit the site more than 30 times per month and only charging them. Others have gone about it by identifying 'premium' content that would appeal to a select audience and making the rest free.
- But you can be much more granular than that. For each visitor you can tell if s/he came via your front page or via a direct deep link; whether they live in your core city or country; whether they came from search, social networks, news aggregators or blogs (and which blogs); how often they visit you; whether they are reading current news or old archive content; whether they are on a PC or on the move; whether they are at work or at home (sometimes); etc.
- The challenge is to combine these parameters judiciously and ask how much leverage you have with each segment – and not just ask what content or activities should be paid-for. For example, you might conclude that a medium-frequency user who never visits the front page is unlikely to pay a subscription if he is abroad (because most of the site might be irrelevant to him), while local users may be likelier prospects. Don't ask any segment for more than it is willing to pay, and be willing to give any of them your content for free (with ads) if that's all you can get from it – provided this doesn't mean giving it for free to those who could pay.
- Finally, you need to move away from thinking of your content as the beginning and end of your readers' needs. Increasingly, your content – i.e. articles – are just stepping stones in sequences of pages connected by hyperlinks. It is these sequences – or flows – that are at the centre of people's needs, and they are often orchestrated by people who have no affiliation with you: news aggregators, social contacts, blogs, etc. These mediators, and their brands, are standing between you and consumers. But don't fight them; work with them. Treat them as channels (in the marketing sense), market to them, and devise win-win strategies that work for you and them. This need not mean just exchanging money – e.g. it could mean exchanging demographics.
Enough for now. Hopefully you can see where this is going. I would be very interested to hear from people working along similar lines.