“News should be free!” — “Don’t annoy me with ad banners!” — ”Cookies are evil!” — ”Subscribing to news is way too expensive and brings no value!”
Users often don’t want to hear about how producing content costs money.
It is clear, in the content economy, that the established way of how creators make money is broken. Legislators and consumers actively fight targeted advertising and the narrative that any content on the web should be free stands in conflict with content creators who want to get paid for their work. So, how can consumers pay less, and creators make money?
Ads and Subs — The Creator’s Bread and Butter
In the last two decades, we have been living in the digital advertising bubble. The ad placement process has become corrupted, and intermediaries have multiplied, each taking a cut from users’ initial ad budget. Advertisers pay a lot of money with no- to little results. Consumers feel interrupted, overwhelmed, stalked by digital ads, and have privacy concerns. It’s only getting more annoying and intrusive. The market is overcrowded and has started to shrink as people started using ad blockers. According to the Global Ad-Blocking Behavior report from Global Web Index, 47% of Internet users use ad blockers. Internet World Stats states that there are almost 5 billion Internet users. So, the combined numbers suggest that an estimated 2 billion Internet users are now blocking ads worldwide. That’s about the same number of conventional followers of Christianity. This could be the largest boycott in human history. We must recognize that the ad model alone is more fragile than it seems, and it’s only a matter of time WHEN and not IF this bubble is going to burst.
In the subscription mode rules have tightened and require loyal fans. Content providers are paid poorly for their content, and consumers are often left wasting a lot of time on low-quality content. Subscribers simply can’t get the most value out of all online services that they subscribe to. E.g., if you are a Netflix user, you had an issue when you wanted to watch the Game of Thrones series. In order to do that, you had to pay the monthly subscription fees for another streaming service — HBO. You were only interested in that specific content but ended up paying for the whole monthly subscription. This is probably a recurring issue and not only among video streaming services.
Reports show that publishers with a strong subscription model have been able to better overcome the Covid crisis than publishers who rely on an advertising business model. Still, research finds that only about 5% of a publisher’s digital audience will pay for a full subscription. The question remains — how can publishers monetize the other 95%?
What about Micropayments?
Micropayments seem to be the obvious alternative to ads and subscriptions. A huge portion of users block ads and/or reject subscriptions because they don’t see the value they get for the price. How come we don’t sell an individual article for a micropayment of a few cents to those users who are interested in this particular article but not the subscription? It looks like a great way to sell more content but there is a reason why this strategy is discarded by the majority of publishers.
James Ball wrote an interesting analysis about this approach in Columbia Journalism Review. The article reflects on the actual value of a subscription for the publisher. A subscription usually comes with a recurring payment plan and hides the cost of individual publications. This way revenue can be planned, and efforts can be balanced as needed. Introducing a choice to pay for a specific article would win some users who are not willing to pay for the subscription but also lose subscriptions from users who convert from subscription to micropayment. The newly won one-time payments are great but the costs from the lost subscriptions would outweigh the wins by far. James Ball estimates that several hundred micropayments are required to make up for a single lost subscription.
Of course, this hypothetical example alone doesn’t disprove the viability of a business model. In 2014 a startup named Blendle saw the potential in micropayments and created the “iTunes for Journalism”. Blendle is a digital news platform that aggregates articles from a variety of newspapers and magazines and sells them on a pay-per-article basis. They raised millions of dollars in investments from Axel Springer, New York Times, and Nikkei. In 2019 Blendle changed its strategy and pivoted from micropayments to the classic subscription model. The reason for this move was their inability of generating enough revenue. Subscriptions provide a more stable income and it showed that premium users are way more active if they do not have to evaluate the risk of picking a bad article before clicking and buying.
Micropayments outside of journalism
It would be wrong to assume that micropayments don’t work in general. In gaming, streaming and mobile apps micro payments became a huge deal and are successfully used for years. Experts even argue that the “Freemium” model might be the best business model for certain digital products. Here the core product is free to use and the user uses micropayments for purchasing add-ons to increase the experience of the product. In-app purchases alone accounted for 60 billion USD in 2019 and are projected to double in 2020.
Of course, the comparison is not fair because a gamer who pays for items in his favorite game already knows what he gets beforehand and donations for streamers are paid after a job well done. Paying for an article before you read it will often be a source for frustration because the user could feel compelled to weigh what he read against the price he paid and even though our guts tell us that a price should give us a certain number of words or pictures, the efforts spent in quality journalism and the actual price of a specific article can’t really be calculated.
So micropayments are a valid monetization strategy for certain formats, but they are not universally applicable for any type of content.
Another monetization strategy is revenue sharing as we all know from Spotify or Apple Music. From the user’s perspective this is just another subscription but in this case it is a subscription for “The Global Market of Music and Podcasts” (or at least a large portion of it). Not every artist is available through these services but the quantity of content the users get for their money is gigantic and most users are satisfied with this one subscription that fulfills all their music and podcast needs.
Content creators criticize this model for not paying enough money to the artists, but the overwhelming mass of content and users in the segment of streaming services compared to one-time purchases is so huge that for many creators the question is whether they can afford NOT to be on Spotify.
In these pro-rata systems, the streaming service pays out a share of the collected money based on the overall time an artist’s content is played. On the one hand, this system is great because the users don’t need to care about the distribution of their money, on the other hand, it is unfair because power-users basically control the distribution of the funds.
Is revenue sharing a viable solution for journalists? This is difficult to answer because it has not been done yet or at least not on a large scale. Web monetization pioneer Coil is adapting the revenue sharing model to create this new possibility for content monetization. It gives instant access to dozens of content providers with only one subscription. Any subscription service can adopt or switch to Web Monetization and allow users to access content based on a “pay while using” model. So, you only pay a small number of fees for the content you are using in real-time, capped through a fixed monthly subscription. This business model doesn’t rely on advertising, collecting user data, or attention. But is it profitable for the publishers? Right now, it is not. With only a limited number of subscribers, the funds to be distributed are very small and so the expected revenue for content creators is minimal and subscribers will only invest in this kind of service if enough monetized content is available.
Evidence shows that Web Monetization will not replace ads or subscriptions but it creates options for additional real-time income through alternative content formats. As the freemium market in apps demonstrates, there is huge potential for onboarding users with a core product and upgrading their experience with micropayments but how far this model is applicable to journalistic content still needs to be researched.
This is where the new Web Monetization technology comes to play. In-app purchases are coupled to their respective app platform while Web Monetization works with standard browsers on the web. With this new tool-set, we can now research new forms of monetization on journalistic content.
Proposed Web Monetization Infrastructure
To solve the difficult problem of revenue sharing among content creators, the Web Platform Incubator Community Group (WICG) is preparing a proposal for a new W3C standard, called ‘Web Monetization’. The idea is simple: While the user consumes the monetized content, a continuous stream of micropayments is being made to the content’s owner. When the user leaves, the payments stop.
This summary is an oversimplification but it illustrates the goal of this technology. For the idea to work a list of requirements must be met and therefore some compromises are necessary.
Basic requirements for this architecture are frictionless user-experience and guaranteed privacy. Ideally, the user does not have to worry or care about when or how the payments are transferred in the background. It is important to notice that this type of payment differs from regular e-commerce transactions where larger sums are being transferred in a single transaction. With Web Monetization, we transfer fractions of Cents (or other currencies) per time-unit in rapid succession.
Web Monetization defines 5 roles:
- Web Monetization receiver (content creator’s wallet)
- Web Monetization sender (user’s wallet)
- Web page on which the content is hosted
- User-agent (user’s web browser)
- Receipt verifier (service for documenting received payments)
Interledger Protocol and Payment Pointers
One of the essential components is the protocol which is used to transfer money from wallet to wallet. The Interledger Protocol (ILP) allows absolute flexibility, e.g. exchange payments that are even smaller than the supported payment sizes of the wallets or real-time payment clearing. Within the protocol, funds might be transferred directly or through a chain of intermediate nodes, with a direct settlement or a set of settlements.
The receiving payment account is identified by a so-called payment pointer. Its structure can be resolved to a unique resource and safely shared. On the monetized website the payment pointer is declared within a meta-tag and read through a browser or browser plug-in.
But it is not only the monetary aspect that needs to be handled. Another critical requirement is privacy. If we simply pay for the websites we visit, these payments will create a trail about the user’s browsing history which must not happen (by European law). This problem is not trivial to solve because at least the wallet requires to know where to transfer the funds to and therefore collect exactly this private information.
Coil designed a workaround which hides the identities of user and websites by using an intermediary instead of direct transfer. A wallet that supports ILP, generates an anonymized alias on demand which is relayed to the WM sender. The WM sender now knows the wallet provider of the WM receiver but not the specific account. The WM receiver on the other hand receives payment not directly from the WM sender but through the intermediary, so the sender can’t be determined via the incoming payments. Privacy is given through the intermediary and the aliases. Unless someone can access all data from all parties, it is impossible to reconstruct the user’s browser history. Because of this, only those wallets can be used that support this feature.
Our first experiment was simply using Coil and the Coil browser-plugin. For receiving money we only needed to place our payment pointer in a meta-tag. Our wallet will now receive “something” from the Coil members, stumbling over this site. “Something” is the amount that will be dispatched by Coil based on their algorithm. There is no direct transfer from wallet to wallet. The browser reports a stream of data to Coil who is then transferring a stream of funds to the receiver’s wallet. With the small size of the Coil network and the commission Coil takes, revenue will be minimal right at the current point in time but receiving “something” where we received “nothing” before proves at least how it should work.
Our second experiment touched the role of the WM sender. We implemented an experimental browser extension, named “Generic Web Monetizer”. We used it to transfer funds from test-wallet to test-wallet while the user was reading the articles on our website. As previously stated, this is not how Web Monetization works, but it demonstrated that both ends of the stream can be implemented fairly easy. This is of course just the tip of the iceberg because we ignored the interledger part of the interledger protocol and skipped the actual infrastructure. Our goal for this iteration was to peek into streaming funds and the requirements for Web Monetization.
Where do we go from here?
From the perspective of journalistic content, Web Monetization won’t disrupt the way content is monetized today. This being said, the web constantly evolves and what is true today might not be true tomorrow. New infrastructures, habits, tools, trends keep emerging and influence content creation, formats, and distribution. Today's news websites found their sweet spot with subscriptions and ads but our user-base changes over time. A huge portion of news-related content is consumed through feeds like Google, Facebook, or even Tiktok, and users, especially from younger generations, embrace this. Adaptation of Web Monetization by these platforms would have a huge impact on fund distribution. Platform providers have the users, infrastructure, and reach. Imagine Facebook or Google would include a wallet in their platform and take over the role as WM sender. This would create a major shift in the monetization landscape and a big incentive for creators to participate in such a network. Until then it remains an experiment.
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