Online publishers: Proceed to checkout

The conventional wisdom that consumers won’t pay for news online has always been an oversimplification. Some consumers have always paid for information content, particularly if it has high professional or commercial relevance.

As for the rest, the willingness of most online readers to pay for content has never been adequately tested. As I discussed in the recent GigaOM Pro research report “Building a better paywall: strategies for monetizing news content,” most paid-content strategies by newspaper and magazine publishers, historically, have been aimed more at protecting paid print circulation than at exploring new payment models that fit how people actually use content online.

Even newer metered paywalls, such as the one recently erected by the New York Times, while showing some promise, remain anchored to the newspaper’s legacy print subscription model. Broader, more-innovative retail merchandising of the paper’s online wares, which might have captured incremental revenue from readers unwilling to pay for a full subscription, is largely missing.

Just how much power better merchandising of online news content could have to influence consumers’ willingness to pay was vividly on display last week in the early results that publishers reported from the rollout of Apple’s Newsstand hub as part of iOS 5.

Once activated, Newsstand aggregates all of your compatible digital subscriptions into a single app. Instead of individual subscription icons on the home screen, users will now see all of their subscriptions lined up on a shelf when they open the Newsstand app. The app dynamically displays the latest cover released by each publication so users can see instantly what’s new.

Equally critical, the Newsstand app includes a link to a dedicated section of the App Store where users can browse other publications and add them to their subscriptions without having to leave the Newsstand app.

That basic combination of dynamic display and ease of purchase seems to have had a remarkable effect. Exact Editions, which distributes Newsstand app titles for publishers, reported that overall sales doubled in just the first few days of Newsstands’ rollout and that some publishers saw increases of more than 150 percent for some titles. U.K. publisher Future Publishing said it sold more digital subscriptions through Newsstand in the first four days than it normally does in a month.

While it’s early days yet for Newsstand and the data is anecdotal, the results jibe with those of other online content industries. As I noted in “Building a better paywall,” consumer research conducted among online gamers showed that consumers’ willingness to pay for content online is highly influenced by many of the same merchandising cues that offline merchants have long relied on. Engaging and dynamic displays of merchandise, simplifying and removing friction from the checkout and payment process, and incentivizing desired behavior can all significantly increase consumers’ willingness to part with their money.

Regarding the work of journalists as merchandise and themselves as merchants may rub some publishers the wrong way, of course. But the main lesson in the early results from Newsstand is not that publishers need to become merchants themselves. Rather, the results clearly demonstrate that third-party merchants can add value for publishers if they’re given an incentive to do so.

Apple, for instance, takes a 30 percent cut of subscriptions sold through Newsstand. While some publishers may resent paying such a hefty “vig,” it’s getting harder to argue that Apple’s skillful merchandising — for which it amply rewards itself — does not add value for digital newspaper and magazine publishers.

One publisher that tried to hold out against Apple when it first introduced its iPad app, in fact, has now relented. Last week the Economist rolled out a new iOS 5 compatible app that enables in-app purchase of subscriptions, giving Apple its due but probably gaining paying subscribers in the long run.

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What’s the best strategy for publishers to increase online subscriptions?
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Paul Sweeting

Principal Concurrent Media Strategies

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