Reinventing the Newsroom

How to Get Paid: Decrease Wallet Friction, Think Apps

Posted in Digital Experiments, Paid Content, Social Media, Social Search, Twitter by reinventingthenewsroom on February 9, 2010

So late last week I read Dave McClure’s slightly unhinged rant about subscriptions, and within a couple of paragraphs I started laughing. Not in that “Gee, anyone with an opposable thumb can now publish” way, but in that “This is beyond awesome” way. Posts like McClure’s remind me of why I love the Web, particularly the way it constantly brings new ideas and voices to my door that change the way I think. When I wasn’t laughing, I was nodding my head. First once, then twice, then lots of times.

McClure would benefit from an editor, he loves to swear, and his post reads a bit like it was composed while jumping on a trampoline, but don’t let that put you off: His thoughts on subscriptions, Web ads, transactions and passwords make for smart, bracing reading. I highly recommend getting your McClure direct and full-octane at the link above, but here’s my gloss anyway:

Web 2.0 companies have foolishly tried to follow Google and Yahoo’s lead in emulating ad-driven business models, wasting a decade trying out inefficient revenue models. McClure thinks that will change, in a rather dramatic way: “The default startup business model for 2010 and beyond will be subscriptions and transactions (e-commerce, digital goods).” He adds that “gradually we are discovering that the default revenue model on the internet should probably be the simplest one — that is: basic transactions for physical or digital goods, and recurring transactions (aka subscriptions) for repeat usage.” Or, as he then puts it more pungently, “Get Dem Bitches to *PAY* You, G.”

So what’s the problem with that? McClure isn’t interested in the ideology of free vs. paid or the link economy or Googlejuice. He does mention the problem of the penny gap (i.e. the hardest part of charging isn’t getting readers to pay you a certain price, but getting them to pay you anything at all), but then moves on — a bit too quickly, I thought — to “wallet friction.”

Here, he looks back to his time at PayPal, where the biggest customer-service problem by far was users not remembering their passwords. “Bingo, way to create the biggest HateStorm in Internet History: make it super simple for people to make their payment method unusable by simply forgetting their password,” he writes, adding that “PayPal was one of the classic stories of viral growth, however in this instance we also experienced viral growth in customer service: at one point more than 2 in 3 employees worked in customer service. And I’m guessing somewhere between 10-20% of first-time customers never used the service again, primarily because they forgot their password.”

So what passwords do people remember? The ones for services they use all the time — such as social networks, email and instant messaging, and sites for buying games, music and entertainment. From there, he reaches his conclusion: “In 2015, the default login and payment method(s) on the Web will be Facebook Connect, Google Gmail, or Apple iTunes.”

As I said, I would have liked to hear more from McClure on how we get across the penny gap. But I like that his examination of the problem focuses on consumer behavior, industry trends and practical issues, rather than supposedly immutable laws of the digital world. News organizations face a lot of problems that won’t be solved quickly or easily: There is a glut of commoditized content on many subjects, much of the content we produce isn’t good enough to ask anyone to pay for, and we have surrendered or drifted from our central place in our communities. Working through those issues will involve a lot more pain than what we’ve already experienced. But I don’t believe that it’s impossible for us to get paid for content that works for our readers, or to be rewarded if we can win back a valued place in our communities.

* * *

For another take on how we get paid, MTV Networks product manager Maya Baratz advises old-media companies to start thinking of themselves as apps.

Baratz characterizes apps as “not only allowing, but thriving off of, having your content live elsewhere” as opposed to platforms, which fuel their growth by attracting an audience to a destination. As an example of the former, take social games that don’t try to draw in users to a new site, but exist where the users already are, such as on Facebook. Her advice to news organizations is to turn the paywall argument on its head and get revenue through bits of content as they spread.

This gets at one of the central dilemmas of charging for content: By and large, news organizations seem to agree that paywalls need to be leaky to let content spread and be discovered through sharing and search. For instance, the New York Times has indicated that when its paywall arrives sometime this global epoch, articles found through sharing and search won’t count against readers’ monthly counts. (More on this here.) That seems wise, but the more we find content this way, the less paywalls will contribute to news organizations’ bottom lines. Combine Baratz’s approach with McClure’s decreased wallet friction and perhaps there’s a way forward that will remain viable as social media becomes more and more important.

Provided we can hurtle the penny gap, of course.

* * *

On a rather different note, my latest column for Indiana University’s National Sports Journalism Center looks at the growing use of social media by athletes, and explores how it may change sportswriting as “digital natives” become star athletes. As is often the case with my NSJC columns, I think these questions are relevant to more than sportswriters. Sports, as part of the Web’s old-growth forest, is an excellent place to track changes that will soon impact the rest of journalism.

Oh, and my fervent wish for a New Orleans Saints win came true! Now if only something could be done about the Mets….

2 Responses

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  1. Perry Gaskill said, on February 9, 2010 at 3:34 pm

    Thanks for passing along the McClure link. It was an interesting vent followed by some useful perspectives in the comments.

    Still, it seems to me that we continue to have some broader-view dogs not barking in the typical discussion about paywalls versus ad models:

    To a large extent, the delivery of information is still held hostage by predatory pricing and services control on the part big telco and big cable. What this has done has set up a framework in which news consumers are reluctant to pay more because they have already paid once.

    There are indications that, even when readers are willing to pay for subscriptions, there are serious disconnects between what publishers think the price point should be, and what a typical reader thinks the price point should be. From the standpoint of numbers, you get into a situation of cost/benefit issues where the costs of customer service and decreased page views can more than offset a realistic subscription revenue stream.

    One of the other things which seems to be largely ignored is the fact that readers who visit a news website are providing something of a quid pro quo with their time, attention, and story comment engagement. In the usual quest for more-is-always-better, we also tend to ignore the fact that some visitors have more value than others.

    It can also be argued that a more-and-bigger obsession has led to an interesting irony in that the original purpose of the internet was to act as a distributed system, and not be dependent on any single point of failure. Therefore, the question becomes why has that paradigm shifted into a model where overwhelming dominance comes from a limited set of vendors such as Google, or Facebook, or Twitter?

    At the risk of a bad sports metaphor, it’s as if what we’re seeing is a game of baseball in which every player steps to the plate and is expected to either hit a home run or strike out. And there is simply no provision for winning the game by getting a series of base hits.

    Yet another irony among those chanting the “information wants to be free” mantra, as if information is some sort of trained bear chained to a post, is that the quote originally comes from Stewart Brand, and what tends to get ignored is the other part of what Brand said:

    “On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.”

    Just my two cents…

  2. […] This post was mentioned on Twitter by Jason Fry and FutureofNews Eqentia, lawrencedonegan. lawrencedonegan said: RT @jasoncfry: My take on smart payment thoughts from Dave McClure + Maya Baratz. Reinventing the Newsroom. […]

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