How Leaky Should Your Paywall Be?

After a period in which media brands embraced “leaky paywalls,” they’re increasingly starting to tie things down. But if your digital publication is reliant on ad revenue, you might want to hold off.

The paywall is in fashion once again—but as always, the idea of putting content behind a barricade  raises broader business questions.

Last year, the trend of putting content behind paywalls started creeping up again, after a period when it seemed like social media encouraged a much more open approach.

Since then, paywalls have taken an interesting direction—once very leaky, they’ve started to “harden up” again, with publishers choosing to cut back on the number of free articles one can read before having to take action—whether that comes in the form of paying or through registration. Even companies that were once more permissive with their paywalls, like The New York Times, are starting to push registration on readers.

In the case of the Times, the paywall strategy is being driven in part by a desire to have a stronger understanding of who’s reading—and how it can optimize its message.

“When a user is registered and logged-in, we can communicate with them and understand their preferences and patterns of consumption more effectively than if they were anonymous,” a NYT spokesperson told Publishers Daily last month.

Associations have a reason to be interested in keeping an eye on this trend. Simply put, if an association creates a magazine or website, often it’s niche, which may lend itself to a paywall. Additionally, if an association is focused on member-oriented content, that content is likely behind a pretty solid paywall. But does the “hard” approach make the most sense?

Not if you’re dependent on advertising. Recently a media industry economist, Mather Economics President Matt Lindsay, pointed out that hard paywalls tended to create severe damage to a digital news outlet’s advertising apparatus.

“Hard paywalls also reduce digital advertising inventory that still provides significant revenue for digital publishers,” Lindsay wrote in an article for the International News Media Association. “The loss of pageviews can cost publishers more lost advertising revenue than they earn from new subscribers. The tradeoff can be difficult to measure since subscriber revenue is recurring while advertising revenue is not.”

A study from the Journal of Marketing [paywall; summary here], a publication of the American Marketing Association, underlines this point. Studying the Times’ successful paywall before its recent shift to adding a registration requirement, it noted that the paywall had a double-digit decrease (16.8 percent) on the number of visitors the site had, while depressing other engagement metrics like number of pages viewed and time on site. These, the report said, tended to hurt advertising numbers.

However, the benefit for the Times was that it led to an increase in print subscriptions, which is where the newspaper makes most of its money, as print ads drive most of its revenue.

Basically, the phrase “robbing Peter to pay Paul” comes to mind when talking about digital paywalls. And you may have other reasons to move away from ads, just like the Times did.

Nonetheless, there are still a lot of things happening in this space right now that the paywall model is strongly evolving. Some of the most interesting trends to watch:

A paywall you never stop tweaking. You’d think that Bloomberg, the wire service and financial information outlet, would have a difficult pitch on its hands by trying to sell the public on a multi-tier news paywall that starts at $34.99 a month. But the model is actually working for the company, in part because it has staffed it with people who are experts at generating digital subscriptions and has shown a willingness to experiment with the model. (Also helping: They have a lot of experience selling big companies on a subscription-based financial terminal.) Per Digiday, the company’s paywall is based on an algorithmic approach that includes 22 criteria, including time on page, referral source, and return visits. The company has also been willing to discount heavily—its starting price is a more reasonable $9.99 per month—and offer annual subscriptions that are more pocketbook-friendly to businesses that rely on Bloomberg’s content.

An ad-friendly alternative. What if you’re too ad-dependent to switch to a paywall, but your readership hates all the ads? There’s a solution to that in the works. In recent months, I’ve had a chance to beta test a new service by the startup Scroll. Basically, the best way I could describe it is that it’s effectively like Medium’s membership program, which offers access to that website’s many writers, along with a selection of publisher articles, for the rest of the web. In the case of Scroll, the service (which costs $5 a month) effectively removes ads on sites that rely heavily on them, including USA Today, Vox, Gizmodo, and The Atlanticall of which it had to sell on the idea well before it launched. The interface is simple and the kind of thing you don’t think about as you’re using it—until you realize that annoyances like auto-play video ads and persistent banner ads are a thing of the past. It’s not a paywall—and only some of the outlets listed above are offering one—but offers up something of the best of both worlds. It creates fewer annoyances while still giving readers a choice that’s better than ad-blockers. And with a recent partnership with Firefox makers Mozilla, there’s a chance the model might take off in a big way—and benefit the little guys, too.

What have you learned from your own paywall experiments? Share your insights in the comments below.

(GoodLifeStudio/iStock Unreleased)

Ernie Smith

By Ernie Smith

Ernie Smith is a senior editor for Associations Now, a former newspaper guy, and a man who is dangerous when armed with a good pun. MORE

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