I once had a professor in media effects theory who would incorporate the full read of the “Digital News Report” into the curriculum of all his classes. It is a roughly 150-page long report by the Reuters Institute for the Study of Journalism disclosing the findings of an annual, international study on news consumption.
The content of the report illustrated a 150 billion dollar industry in great change; Emerging new actors and technologies, changing audience behavior, and fluctuating levels of trust and support in legacy news channels. Taking part in developments like these and their interactions sparked an interest in me, and became the starting point of my master thesis in Interaction Design, at Umeå University.
I teamed up with digital agency Daresay, a company striving to design, build, launch and manage digital products with human beings in mind. In close collaboration with Swedish local daily Västerbottens-Kuriren, we decided to zero in on the models used by news companies to convert unregistered readers to paying subscribers in digital contexts, a topic found to be linked to some frustration in online newsreaders. The project came to explore where the users’ experiences of such models could merge with the business interests of news companies. This article covers some of the insights, experiences, and thoughts from the process of that project.
Amid the booming upsurge of the internet during the 1990s, legacy newspaper companies, like companies in many other industries, rushed to provide their services in this new connected space. The vast majority of them did so by providing free access to their content, thus primarily relying on an advertising revenue model. This remained the online strategy for the plurality of newspapers up until the 2008 financial crisis — the breaking point where most newspapers realized they needed to re-think their business model in the online space.
Not charging for news content has since been considered the ”original sin” of early internet adopters by the likes of industry figures such as media economics expert Alan Mutter. He argues that by providing free content online, news publishers effectively cut the demand of their physical flagship products, i.e., the printed newspapers, and were, therefore, crippling one of their main revenue streams. This has then been said to have given rise to the ’substitution effect’, described by researcher Manuel Goyanes as such:
”Since the majority of online newspapers are for free, in many cases the willingness to pay for information could be much higher than the price of the online newspaper (that is zero), producing, therefore, a clear customer surplus. In this sense, online news has been characterized by a demand curve at the price of zero, whereas if the price increases even by a single cent, demand drops to zero. Because substitutes for online news are available, cross-price elasticity is high, so the free-to-fee switch envisioned by media outlets could cause a drop in quantity because the substitution effect would be triggered.”
As a result several coinciding effects of the recent years such as decreasing circulation of print newspapers, the advent of ad-blockers, news consumption through social media, news avoidance, and the inability of the ad-based model to be the single supporting revenue stream online, solving the challenge of finding new sustainable business models has become imperative for legacy newspapers.
The paywall landscape
By 2013, Digital Content Next, an association counting titles such as The New York Times, The Financial Times and The Guardian reported that 95% of their newspaper and magazine members were having a paid subscription strategy. In realizing such strategies, they, alongside publishers all over the world, have been setting up digital constraints, commonly known as paywalls, requesting a payment before providing access to their content. The format of those paywalls generally fall into two categories — the hard and the soft paywall — but new creative models are starting to emerge as publishers are looking to improve their conversion rates.
The hard paywall
The hard model requires users to have a paid subscription before accessing any content. It has been found to work the best for brands having a strong connection to their readership and who delivers content focused on their key readers’ needs, e. g., finance. British daily The Times is currently using this model and it has been key in the digital success of The Wall Street Journal, who successfully implemented it from 1996 until 2017.
The downside of this model is that new and unsubscribed readers often only get a glimpse of the available content before having to choose between paying for a subscription or not. As a result, the traffic is significantly reduced, further damaging advertising revenue. Several actors implementing this model attempt to counter that effect by offering a free trial period upon registration.
The soft paywall
The soft paywall allows readers to access free content within certain boundaries. The benefit of this model is that unregistered readers can spend more time in the service, generating more traffic leading to increased digital advertising revenue. This model adds variables to be tweaked by publishers as to the amount and kind of content that is free to access, also known as paywall porosity. Two of the more popular soft paywall models are the metered model and the freemium model, also known as the noble model.
The metered model works by allowing readers free access to a fixed number of articles that resets at an arbitrary interval. The New York Times was one of the first actors managing to profit with such a model, garnering 224,000 new digital subscribers over the first three months of putting it up. It is the most effective for brands providing large volumes of content and for brands with strong identities and a focused purpose.
The major short-coming of the metered model is the fact that it is quite easily abused, as tracking unregistered users across different devices is impossible, allowing for unlimited access. There is also a small loss in traffic, Reuters Institute reporting a 5%-15% reduction in the initial months. Furthermore, the reported conversion rates are lower and conversion times are longer compared to other paywall models.
The model that has grown to be the most popular amongst publishers is the freemium model. It allows users to access some free content while putting more valuable content, perceived to convert unregistered readers to subscribers, behind the paywall. It has been proven effective for brands providing unique content and where predictive data techniques are used to decide which content goes behind the wall.
The freemium model is the most effective in terms of conversion rate, however, as it is also locking a considerable amount of content behind the paywall, it has been found to inhibit some traffic.
As technology is progressing in the area of artificial intelligence and machine learning, publishers are starting to apply predictive data techniques to devise dynamic paywalls; a model providing personalized copy, content and pricing tailored to each user based on certain predictor variables. The Wall Street Journal switched from a hard to a data-driven, dynamic paywall in 2017 and their owners, Dow Jones, are now boasting 3 million subscribers. By observing 60 variables such as frequency of access and length of visits, preferred content and favorite device, their model estimates the individual reader’s willingness to pay and proximity to conversion, thus requesting subscription when the probability of them paying is statistically high.
The source of irritation
The reception of these models has been rather frigid, as users seem to generate a great deal of irritation while dealing with them. In terms of the source of that irritation, it could be found by looking at the first of the ten heuristics of user interface design by Jakob Nielsen. It posits that ”The system should always keep users informed about what is going on, through appropriate feedback within reasonable time”.
A common scenario of user interaction with these paywalls is the user clicking on a link to an article from a social medium to an external site, expecting to be able to read the full text. As they reach the external site where the article often is be locked behind a paywall, irritation arises. The system status, i.e. the information that the article would be locked, is not communicated between the social medium and the external news site. Many users then leave the website upon being rejected access to the content. These emerging patterns of ”paywall bouncing” are what the advertising world calls banner blindness — a behavior where users ignore content they perceive to be ads, in this case, the paywall offer.
Be that as it may, this interaction flow could be intentionally designed by the news companies, building on the notion that the more paywalls presented to the readers, the more converting subscribers. However, in my research, this was neither acknowledged by the experts consulted, nor was any scientific findings on this specific subject found. Further, the presence of the banner blindness effect is likely to negate the impression of that theory significantly, as it posits that the offers are not being read in the first place.
Additional to the social media example, the lack of transparency concerning the system status of articles was also identified within some of the news sites employing a paywall model, where article previews appear to lead to a readable article, but instead prompts a paywall when being clicked. The cases avoiding this are either models like the one used by The Telegraph; where the premium content is flagged or by the metered model; where the system status of the article meter is communicated.
(Re)defining a paywall
In an attempt to find common ground between a group of users and the news companies, I aimed the spotlight towards a younger demographic, exploring how 20 to 30-year-olds experience the landscape of online news as it has become augmented with different takes of the above-mentioned pay models. In short, the main sentiment expressed by the participants can be summarized as a quote by Celeste LeCompte in “Predictions for journalism 2019” for Nieman Lab:
“Most people don’t consume news because they want to be more informed about the news; they want to be informed about the news that they’re likely to talk about”.
The participants’ testimonials generally painted a picture of shallow news consumption, sometimes non-existent, with low willingness to pay for content. This is in line with previous research findings on the demographic and, quite obviously, it is in direct conflict with the interests of the news companies. In an attempt to accommodate this conflict of interests, a design proposition was generated that, from the perspective of the news publishers, holds three critical steps in its design:
Step 1: Maximize the incentives to register an account
Most online news services use an “open” design, displaying all news items and then limiting the access of them depending on the current payment plan. Contrary to that, this concept attempts to generate value early on in the interaction process by limiting that openness, instead opting for early user registration for a more binary design, similar to that of Netflix or Spotify — you either have it, or you don’t.
The idea of having more registered users is that you can build a more personalized experience around those individual users, and thus increase the sense of value of the service, hopefully increasing their willingness to pay. Therefore, the early objective of this concept is to get users to register a free account.
However, some content can’t be behind a wall; In the case of Västerbottens-Kuriren, they have a responsibility to convey emergency information concerning their region, such as accidents and fires. Further, as users navigate to an article from a link in an external service, such as Facebook or Twitter, the article should follow the interaction flow, either being available or communicated to be locked, instead of being put behind a wall to increase visibility of the system status. Therefore this concept differs from the binary paywalls seen in Netflix and Spotify, in the sense that there will have to be a possibility to display content in an unregistered state.
Step 2: Convert registered users to paying subscribers
As users have registered their account, the next step is to draw their attention to more sustainable revenue streams. Although it might be the most steady model, due to the wide-spread low willingness to pay for news, a subscription model doesn’t appeal to all users here. Therefore the concept offers alternative payment options, such as micro-transactions and exchanging content for personal information.
A reason for the low willingness to pay brought up by some of the participants of this study was the sense of entrapment relating to paid subscriptions. The Wall Street Journal found that promoting the option to ”cancel online anytime” in their product offerings increased the orders on their digital package subscription by 10%. Therefore, to enforce a positive user experience countering this effect, making the process of canceling a subscription should be made clear and simple.
Step 3: Retain paying subscribers
The final step is to keep the users’ subscriptions active. By this point, the user has registered an account and opted for the most sustainable payment plan as seen from the news companies — a subscription.
A major drawback of the concept is that it limits the preview of content, much like the hard paywall effect. In case the user has no thought of registering an account, the landing page leaves much to be desired in terms of news value.
Further, while managing to clear away the irritation linked to low transparency and poor system status visibility, the concept induced quite some irritation in the fact that users had to create “yet another account on yet another site.” While some users found the registration flow to be smooth and trustworthy, others found it discouraging, and offering registration through social accounts, such as Facebook and Google, didn’t do make it more compelling.
From the perspective of the news publishers, this concept holds three critical steps in its design:
The first step is to maximize the incentives for users to register an account. As per the results of this study, this is a possible source of irritation.
The second step is to convert registered users to paying subscribers to establish a continuous revenue stream. Offering alternative payment methods for content, such as micro-transactions, is likely to appeal to a larger audience as suggested by the participants in this study, but a subscription-first approach is considered to be more sustainable
The third step entails the retaining of users, keeping their subscriptions active. What becomes evident here is that in all three steps, the centerpiece in creating the incentives is the value proposition of online news — the information itself, how it is presented, and how it can be interacted with.
While appealing to altruism or activism might have some effect in converting users in these stages, the offering and its relation to the individual user play a central part in creating the incentives to register, to subscribe and to keep that subscription active.
The challenge of user acquisition and retention of online news readership is complex. There is no silver-bullet as shown by the proceedings of the International News Media Association’s Media Subscriptions Summit, where case studies of 25 individual publishers delivered 25 unique takes on pay models.
Looking towards the future, publishers seem adamant on pursuing the more sustainable business models; in a 2019 survey of 200 editors, CEOs, and digital leaders of the news media industry, Reuters Institute found that 52% expected subscription and membership to be the key priority for the news industry going forward. In terms of the format of such priorities, the industry leaders envision a move away from the metered model towards the freemium, hybrid and dynamic solutions. Although research indicates the willingness to pay for online news is increasing, the subscription model is facing some resistance from a significant group of users. Looking outside the box, at alternative solutions similar to the ones explored in this work, might help create a fruitful relationship with such audiences as well.
A subject quite modestly discussed throughout this article, despite its very central part within this topic, is the role of the content itself. As audience behavior is changing, tailoring the content to accommodate such developments should be a priority of news publishers in finding ways forward. As CEO of digital-native publisher Medium, Ev Williams, puts it:
“There is — and probably always will be — a surplus of free content. But that’s like saying there’s a surplus of free food in the dumpster behind the alley. Some of it may be perfectly good, but most of us would rather pay for something more reliable and convenient if we’re able. And many people will pay a lot for something superior.”
The quote discloses an apt challenge for future research — identifying that “something superior“. What content is worth paying for, and by whom?