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Freemium model for newspapers and other survival ideas
Newspapers do a poor job of monetizing their web sites. Google is not the problem, in fact, search engines are their best friends. The AP news service told Miguel Helft at the NYT “It’s a balancing act,” he said. “We’d like to have a pay wall but we like the traffic we get from search engines.”. The newspapers should follow the example of many web based companies and implement the Freemium business model where basic content is free and premium content and services are paid by subscription. Most freemium based companies convert between 2% and 10% of their users to paid subscriptions. The average is about 4% but it depends on the premium services and price points.
Check out this quote from Eric Schmidt, CEO of Google, in the New York Times “Mr.. Schmidt encouraged publishers to create more personalized news products that could be delivered effectively on the Web, cellphones and other devices. “We think we can build a business — again, with you guys — with significant advertising resources, where the advertising is targeted to the content,” he said. He acknowledged that many publishers were increasingly thinking about charging for their content, and said he expected the newspaper industry to eventually resemble television, where some content was free, some was purchased by subscription and some was paid for every time it was viewed. But he said he expected that advertising would remain the leading revenue model in online media.”
The New York Times says “They Pay For Cable, Music, and Extra Bags. How About News?” The story points out where consumers pay for content and services, but fails to explain why. Understanding what consumers will pay for, and why, is critical to any business. The successful freemium guys have figured this out. Some fascinating examples in the NYT story;
In 1995, Encyclopedia Britannica began selling online subscriptions and attracted 70,000 paying customers. But in 1999 it opened its doors, hoping to take advantage of the Internet advertising boom. Two years later, it reversed course again, and now charges $70 a year for access to most of its site. When it resumed charging in 2001, it got back to 70,000 subscribers within 10 months, and now has about 200,000.
The Web site of The Financial Times, FT.com, had more than one million registered users in 2001, when it began charging for access to much of its content though many articles remain open to anyone.“After a year, we had 50,000 subscribers,” said Rob Grimshaw, managing director of FT.com. Eight years later, the figure is up to 109,000, he said, a small portion of the number of readers who visit the site.
Personally, I am amazed that the Encyclopedia Britannica can pull in $14M a year in subscriptions when Wikipedia and lots of other web sources are free. But that just illustrates my main point that businesses today need to employ multiple business models and pricing plans. In the old days you could make all customers fit into one model. Not anymore. Every business needs to understand what customers want and how they are willing to consume the product/service and pay for it. There are many examples of very successful free web services and free newspapers that are totally ad supported. There are many examples of freemium companies that provide a free base service and charge premiums for enhanced services or features. Subscriptions and one time fees work too. Newspapers need to employ all of these models, and come up with interesting bundled services, to get back to profitability.
Production costs kill newspapers. My home town newspaper prints Tuesday, Friday, and Sunday. The printing and distribution costs are just too high to support a 7 day model. Some newspapers update their web sites daily but only print a Sunday newspaper. The Boston Globe might want to consider a bundled service where you get the Sunday newspaper home delivered and daily access to premium content on their web site for one subscription price. National news, business news, and sports news is freely available on many Internet web sites. Local news, hyper-local content, is what people are willing to pay for…and where the advertising rates are FAR higher. Newspapers need to figure out how segment the market and optimize their revenue opportunities. Resistance is futile…and time is short.
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