A lot has changed since my last blog post. I may have mentioned the Facebook IPO in reference to its impact and value. I guess you could say the Facebook IPO had both: With a roughly $100 billion valuation when Facebook went public, it had value, and with investors suing the Nasdaq over the IPO, it had an impact.
The same could be said for metered paywalls. They’re having an impact, but metered paywalls on their own may not be enough. Back in November, the Minneapolis Star Tribune implemented a paywall and it was considered to be a success. It was reported that the Star Tribune should gain roughly $800,000 in the next year in new digital circulation revenue with the digital subscriptions they were able to get in the first month of implementing the paywall. Today, it’s a different story. A user visiting the Star Tribune is still asked to pay for content, but they’re also presented with an option to answer a personal (albeit vague) survey question to access content without paying.
If the metered paywall is such a success, why is there now another option?
The New York Times implemented a similar metered paywall roughly six months earlier than the Star Tribune. At that point, a reader had the opportunity to read 20 free articles prior to hitting the paywall. In April of this year, a year after implementing the metered paywall that paved the way for a slew of other publishers to follow suit, the New York Times made a major change when they lowered the number of free articles from 20 to 10. It doesn’t sound like a huge change, but it is. It hints that the metered wall isn’t working as well as anticipated. Now the question is: What’s happened over the past year that’s caused a major change with the metered paywall model of two top-20 newspapers?
The answer is simple: They’ve reached a market saturation point, or you could say, they’ve hit a wall.
Sorry, bad pun. It’s simple economics — the writing was on the wall. Okay, that’s the last one. Market saturation refers to a point at which there is no longer demand within a market due to any number of factors. In layman’s terms, everyone that’s going to buy has bought, and nobody new is buying. So in the case of the Star Tribune and the New York Times, what is the factor that’s causing market saturation so soon?
Only a small number of users ever reach a metered paywall!
A recent study underwritten by PayPal categorizes website visitors into four different types: fans (visit the site more than two times per week), regulars (one or two times per week), occasionals (two to three times per month), and flybys (one visit a month, usually via a search engine). According to the study, which looked at traffic analysis for midsize newspaper websites, fans only make up 4.3 percent of the visitors of a typical site, and regulars are only an additional 3.1 percent of the visitors. While only 7.4 percent of users visit a newspaper site more than once per week, more than 75 percent of unique users are visiting once a month.
If a metered paywall is in place that limits users to 20 free articles a month before hitting the paywall, only users categorized as “fans” are going to hit the limit. But not ALL of the fans are going to hit the paywall. More than two times per week could mean three times per week, which only equals 12 visits per month. Many of the site’s fans won’t hit the 20-article metered wall either. Then, on top of the small number of fans that do hit the metered wall, it’s more than likely a significant portion of them are going to be turned off by the idea of paying, quickly become “not fans”, and go elsewhere for their news (for free).
Therefore, market saturation develops very quickly in the metered paywall game.
So if the Star Tribune boasts it had roughly 8,000 new digital subscribers in the first month they implemented a paywall, and their site reports 5.5 million unique visitors, they were only able to convert .145 percent (just over a tenth of a percent!) of their unique users to digital subscribers. It makes sense that the Star Tribune would be searching for other solutions in a very short timeframe.
There are only a limited number of ways a publisher can combat the market saturation issue. One option is to lower the number of free article views before a user is presented with the paywall. This is the method The New York Times is taking by lowering their free view number from 20 to 10. This will probably have a very limited effect considering that even if this includes all of the “regulars” hitting the metered paywall, they’re only adding an additional 3.1 percent of the audience. So they are still missing the opportunity to monetize almost 93 percent of the audience. It could be that this is The New York Times’ strategy: acclimate the reader to the wall with the end goal of implementing a hard paywall.
Another option is to find a new monetization method, which is the route the Star Tribune is taking. After that, the only other option, and probably the hardest one, is to create a better product, increase overall demand, and subsequently increase the unique user base.
As it stands right now, based on the moves that the Star Tribune and The New York Times are taking, all of the “fans” that are going to subscribe have subscribed. All of the remaining “fans” that aren’t going to subscribe are avoiding the paywall by dumping their cookies or switching browsers.