Could micropayments give a boost to publishers?
Feature
In response to the ‘stranglehold’ big tech has on the digital publishing industry, publishers may look toward micropayments as a way to diversify their business models. But are they proven to work yet?
News is being “deprecated” on Facebook; X (formerly Twitter) is throttling publishers like The New York Times; Google Search has become a increasingly less effective SEO minefield.
“You could never really trust those platforms,” says tech and martech investor Alex DeGroote. “But you really can’t trust them now. News Feed revenue has died this year, so all they’re left with is data revenue; [publishers] lost half their digital business.”
Reach, the UK’s largest publisher, saw its revenue decline 6.1% this July, in part due to a 16% decline in page views the company attributed to Facebook’s move away from news prioritisation. Digital darlings like BuzzFeed and Vice have seen similar, if not sharper, collapses.
It is within this backdrop that digital publishers are needing, again, to adapt their business models. As the ad-supported model has been found to often be inadequate to support newsrooms, subscription models have popularised, with positive business results for some the UK’s biggest outlets. Those publishers, including the parent companies of titles like The Times, The Telegraph, and The Guardian, have, according to DeGroote, done a “pretty good job” of further underwriting their businesses with affiliated commission revenue, such as for travel companies, financial services, and—especially if the outlets have strong sports or celebrity entertainment sections—gambling and cosmetic companies.
A spokesperson for the News Media Association (NMA) tells The Media Leader, “the underlying challenges of the digital ecosystem — that is, the unfair stranglehold the tech platforms have on it — have to be tackled in order for publishers to realise the true value of their investment in news, be that via advertising, subscriptions, or micropayments, whichever strategy works best for them as individual businesses.” They add that for many, a multifaceted revenue strategy will be key to long-term success in the market.
The latter model — micropayments — has been toyed with by publishers for years. A quick perusal through The Media Leader‘s archives finds articles variously describing micropayments efforts by Google (2009), Facebook (2010), and ITV (2012). But publishers were mostly absent from the conversation; Wolfgang Blau, Condé Nast’s international president, told a London conference in 2017 that micropayments could eventually become a reality thanks to innovations by Chinese publishers, but most Western publishers have scoffed at the idea. As such, there are no firm estimates on how large the market for micropayments might be, given that thus far, it’s been but a small, often ignored consideration.
But, as the NMA alludes, publishers are in a place now where they need to experiment and innovate to survive and thrive, and micropayments may play a key role.
Hitting a plateau?
“While subscription does work, and has always worked and has always been around, as a single silo model, it’s very restricted,” argues Dominic Young, a former News Corp director and founder of micropayments tool Axate. “It’s always been true that quite a small portion of your audience wants to be a subscriber, so if that’s the only option you give them, you only ever manage to get quite a small proportion of your audience.”
Young tells The Media Leader the general rule of thumb is that only about 2% of an outlet’s audience will ultimately be paying subscribers, and though that may be sufficient for some brands, especially those with affluent readers willing to pay high prices for quality content, it’s still a wasted opportunity to sufficiently monetise the majority of publishers’ audience segments. “It completely leaves the mass market high and dry,” he argues.
Sajeeda Merali, CEO of the Professional Publishers Association (PPA), agrees with the principle of establishing a micropayment option for consumers, noting to The Media Leader, “People consume media in numerous ways now and the publishing industry (especially specialist interest media) know it’s imperative they evolve their payment models for paid content in line with consumer needs.
“Some people will never be a subscriber and just want one article at a very specific time. They might, however, come back several times a year for a particular article or access to the site at a particular time. Publishers want to make sure they don’t miss revenue opportunities and know the process needs to be seamless, user friendly and fair.”
Young points out that a further problem with the subscription market is that it tends to slow down. “As you exhaust your willing customers, the customers get harder to acquire,” he says. “Many publishers have hit this plateau.”
Apprehension about the levelling off of subscriber growth has caused many publishers to offer more promotional deals, including price cuts, to entice new customers. As Young warned in a recent op-ed for The Media Leader, while this may improve subscriber numbers, it can also cannibalise subscription revenues as subscribers take advantage of deals. As he described, The Telegraph, though it hit a 1 million subscriber milestone this summer, saw a drop in average revenue per reader.
DeGroote is more optimistic about The Telegraph, assuming the overall trend of subscription revenue is in an upward trajectory regardless of short-term dips, and about broadsheets’ businesses in general. But he is concerned for publishers operating “freemium” ad-supported models, such as the The Mirror or Mail, the latter of which has signalled it wants to expand its non-hard news coverage, podcasting and short-form video footprint to shore up its position in the market.
A spokesperson for Reach declined to comment on whether the company is currently looking to develop or adopt a micropayment model, though they noted it has experimented with them in recent years. A spokesperson for Mail Metro Media declined to comment.
Axate’s clients are currently limited to relatively smaller publications, including the National World-owned Yorkshire Post, the Maidenhead Advertiser, and celebrity gossip site Popbitch. National World has previously signalled it would be rolling out additional papers on Axate; its other flagship titles include The Scotsman and Belfast’s The News Letter.
‘Waiting for somebody to prove the business case’
“I do think micropayments offer a solution to the problem of unmetered apps. That is, how you monetise stories on mobile devices,” says DeGroote.
But he couches his optimism about micropayments, adding, “It must be said that the evidence is not that strong.”
“In a way, we’re waiting for somebody to prove the business case,” he says. “But conceptually they make sense.”
Micropayments may be something of a tough sell to audiences, who have been used to the “all you can consume” buffet-style payment model associated with streaming services. Paying on a per-article basis, for example, is not a currently established norm, and it’s unclear whether readers would take to it in large numbers.
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Axate’s payment model is to allow users to periodically add funds to a wallet which can then be spent automatically to access articles on its various partners’ websites. Publishers can set different prices to access individual articles or set costs on a weekly basis. For readers who click on a bevy of articles, Axate typically recommends publishers decrease the price of, say, the fifth article read compared to the first, to encourage loyal readership.
The experience is designed to be seamless and consumer-friendly, and most users, who perhaps aren’t voracious digital news consumers, could throw a small sum, for example £10, in at a time, lasting them weeks or months.
“We’re all used to Oyster Cards, so culturally, for consumers, I don’t think micropayments is a big deal anymore,” says DeGroote.
But many publishers may be anxious to install such a solution. “I think it boils down to publishers not being confident enough in their own systems… they’re paranoid that their IT systems won’t work,” DeGroote suggests, noting how many publishers have underinvested in creating robust back-ends, leading to websites that are outdated, bloated, and not altogether user friendly.
There’s also a game of chicken going on. Risk-averse publishers all want to see someone else incorporate a micropayment model successfully first before they feel comfortable jumping in, implies DeGroote. “If someone could give them a failsafe solution, they would implement micropayments now,” he says.
A similar anxiety occurred with paywalls in the first place. Though it was clear digital revenues were not making up for a loss in print revenues throughout the 00s, it took until 2010 for The Times to become the first major UK publisher to throw up a paywall and force its users to subscribe to access content. At the time, there was concern over whether and to what extent paywalls would work. Would too many users exploit loopholes to get around paywalls? Would it make financial sense to reduce readership if it meant retaining loyal, paying readers? But the model proved successful, and now it’s the norm.
Producing consumer-oriented products
Could the same someday be said of micropayments?
“Micropayments, if implemented successfully, could be a reasonable revenue stream for a lot of publishers,” says DeGroote. “It’s not going to be a make or break, but it’s about having two or three fresh options in terms of revenue.”
Merali tells The Media Leader that “being able to accept micropayments at any time is a key strategy many are looking at implementing.”
Young argues that micropayments could be a win for publishers and consumers alike, as Axate is working to create something of a digital newsstand among its partners. “If you walk into a shop that only sells one thing [in this case, news], and you happen to want it, that’s great. If you walk into a shop that sells hundreds of things, several of which you want, even better.”
Such a storefront analogy could make it easier for a consumer to part with their money, he argues; it makes the browsing experience more “delightful,” as opposed to forcing consumers to pick and choose which newsbrands they want to keep separate subscriptions to. And it could re-democratise a news industry which has locked information of public interest away from those who cannot afford it.
Plus, for Young, the intangible benefits of retaking power back from search and social are priceless. He adds, “The advertising incentives in the online advertising market lead you to produce products that very often are not very consumer oriented.”