With Apple taking ad blocking mainstream- how can publishers respond? Rob Weisz, CEO at Fonix, looks at why paywalls can offset advertising losses as digital readers become more savvy.
Reading the paper over a boiled egg in the morning or sitting down to watch the TV with the family on a Saturday night was once the norm. These days, with media running across a host of digital and physical channels, and choice of content – not to mention content provider – being a media consumer has never been so rich.
But this richness has left many media companies poorer. The Internet may have democratised access to information, but that has seen what was once paid for become free to the end user. And this has cost many media companies – whether they are traditional ‘inkies’ or TV, as well as newer entrants such as satellite and cable providers – dearly.
So what can they do to put it right? Online and mobile ads have traditionally been a substantial revenue source for publishers, yet recent moves around ad-blocking apps and Apple’s approval of them for its default mobile browser, Safari, has given the symbiosis between advertiser and publisher a shock.
The truth is that it’s hard to gauge how far ad-blocking will affect this relationship. What we do know is that the part of the ad-pie that ad-blockers affect is relatively small because users spend most of their time in-apps (not in mobile browsers like Safari).
Still, to protect future revenues the one thing that media owners and publishers can’t afford to do is nothing – ad-blocking might represent a relatively minor threat today but technology doesn’t stand still. Could it be time to reprise the concept of the paywall?
It’s a big step and one that will no doubt scare off the consumers that are prepared to pursue free content.
Yet when the New York Times installed a paywall, there was much doubt in the industry as to how successful it would be. However, it has been something of a success. Asking people to take out a paid subscription to view content has paid off, with 727,000 subscribers reported in the first quarter – earning the publisher more than its online advertising. While digital ads brought in $32.9 million, the paywall raised a $37.7 million in 2013 – a ratio that it has more-or-less stayed the same up to today.
Paywalls clearly have a place, but making the payment at the paywall is key to getting the people to pay for content. It has to be quick and easy and seamless. Filling in credit card details and entering personal information isn’t going to cut it: the user wants the content instantly not after a lot of thumb work, especially on a small device.
The answer is right under the noses of media companies. Many newspapers have long used charge to mobile services – to charge consumers for all sorts of phone based services. These services are designed for micropayments, for quick snacks of entertainment and put the charge for doing so on the consumers phone bill.
This chimes directly with models that media companies are trying to exploit – to get consumers to pay small amounts of money for small bites of content.
Television companies face similar challenges: how to make money from a more pay as you go kind of content consumption. Ad revenues on all but the main channels are being hit hard, yet online advertising can’t make up the shortfall. Charging for content, as in the newspaper world, seems the obvious answer, but is there a thirst among consumers for a pay-as-you-go model for TV content?
Sky’s launch of NowTV back in 2012 aims to tap into this, but will it be able to persuade users to part with small increments of cash for content: content more over that was more typically found online for free.
Many analysts expressed concern that Sky’s NowTV would cannibalise its existing pay-per-service model, and would shift the company towards a more a la carte pricing. This hasn’t happened as of yet, but it has shown how there is a shift it consumer taste and demands.
Again, TV companies are already familiar with the use of the payment technologies that could well help them serve a more snacking, pay-as-you-go TV content viewing model. In particular voice short-codes and charge-to-bill have long been the default way to pay for mobile content and things like voting.
Transfer that logic to paying for the main event – the TV content itself.
And why stop there with ‘traditional’ media? Netflix and Spotify, for that matter, have already launched a pay by mobile bill play, offering consumers the option of simple, frictionless payments to get content. Both of these are examples of ad-free services – paywalls – and both work extremely well.
Clearly it’s time the others to caught up.
Rob Weisz
CEO
Fonix
www.fonix.com