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Everything Has Its Price

An excerpt from a new book by former Time Inc. executive Walter Isaacson makes a point that is still not fully appreciated by everyone in the content business:

“At Time Inc., we initially planned to charge a small fee or subscription, but Madison Avenue ad buyers were so enthralled by the new medium that they flocked to our building offering to buy the banner ads we had developed for our sites. Thus we and other journalism enterprises decided that it was best to make our content free and garner as many eyeballs as we could for eager advertisers”

Isaacson confirms an absolutely critical insight: it’s not that “information wants to be free.” The reality is that many of the largest content companies chose to make information free. And with no history to provide a guide, and a sense of a giant gold rush and land grab underway, other content producers followed suit. Soon enough, pretty much all content on the web was free, and guess what: users decided they liked things that way, so much so that any content producer brave enough to offer paid content experienced derision from other content producers and almost militant pushback from users.

All this led to the sorry state of affairs where advertisers have moved much of their advertising dollars elsewhere, and users have been fully conditioned to expect their content for free. Intriguingly, what saved most data publishers from this fate was the fact they typically had little in the way of advertising revenues. Thus, offering free online content was clearly nothing more than an express lane to bankruptcy, and this gave them the backbone to continue to charge for their content. And they are all better off for it.

Even today, it remains true that you can make more money faster selling advertising than selling subscriptions. And that’s why many media companies, with their executives steeped in advertising sales culture, still can’t get fully comfortable with the notion of paid content. Subscription-based businesses are desirable, durable and diversified in terms of the customer base, but these businesses build slowly. Indeed, almost all the characteristics that make subscription-based businesses attractive as businesses make them unattractive to those who grew up selling advertising. It’s truly a cultural issue.

All this leads me to think that the emergence of the freemium and metered models is critical to the future of many content publishers. More and more websites are sporting “plus” and “pro” versions that offer different and supplemental content on a paid basis. The publisher keeps a portion of its content for free, the better to aid discovery and get the user hooked. And a portion of the audience will pay to get even more of that content.

Just as we trained users to expect all content for free, we now must begin the slow but essential process of training them that going forward only some content will be free. You can also argue that this shift simultaneously weans both users and publishing executives off of free content. There are still plenty of eyeballs to sell while at the same time the publishers begin to diversify their revenue streams.

And for those data publishers that have always charged for their content online, I will say just two words: carry on.

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