Google may have the solution that lets news companies charge online

By September 10, 2009Business models, Content, News

From Nieman:

Google is developing a micropayment platform that will be “available to both Google and non-Google properties within the next year,” according to a document the company submitted to the Newspaper Association of America. The system, an extension of Google Checkout, would be a new and unexpected option for the news industry as it considers how to charge for content online.

….The revelation comes in an eight-page response to the NAA’s request for paid-content proposals…..

In the document, which you can download here, Google outlines its “vision of a premium content ecosystem” that includes subscriptions across multiple news sites, syndication on third-party sites, accessibility to search, and various payment options, including small fees for access to individual pieces of content (known as micropayments).

I recently wrote that news companies should look for revenue streams beyond charging for their content and if I was running a news startup today that is what I would do, as I think that micropayments and subscriptions are going to be very difficult to pull off.

This Google scheme has a better chance than most though, and will offer hope to companies like News International who need to find a way to charge for their content online or their market will shrink and their revenues will decline.  It is the possibility of subscribing across multiple sites that I think gives them a chance.  An offer which allowed everybody a limited number of free articles across say the FT, NYT, WSJ, the Guardian and another half dozen top news sites but insisted on a low priced paid subscription for heavy users is one that might fly.  (As you may know the FT uses this model.) 

Multi-site subscriptions could happen with or without Google, but I feel that despite Google’s difficult history in this space a solution with them in the middle has more chance of success than a cartel of news companies acting on their own.

I still believe that micropayments will not be the answer.  In addition to Clay Shirky’s arguments on the topic, which I summarised here, I would now add Chris Anderson’s point that the mental effort required from a purchaser to decide to make a micro-purchase is out of proportion with the financial benefit to the seller.

Reblog this post [with Zemanta]
  • MarkStrefford

    Nic, I'm also not convinced about the approach to micro-payments. As per Clay Shirky’s comments, the banks are killing this right now in terms of cost per transaction. I think there are ways around the inertia of “is it worth paying for”, but this will probably mean giving some things away free to start with, or at least offering money back guarantees. These 2 approaches are something the internet marketing world has provided for a very long time.

  • chrispadfield

    One of the biggest advantages to Google handling this is that “premium” content will still be indexable and not behind the paid wall. The FT sort of gets round this now by letting google spiders index all it's content; which makes it pretty easy to break the paywall if you want.

    I am not convinced by the mental effort agument. If you a) trust a content publisher and b) like the title of an article – it takes no mental effort to decide if it is worth paying $0.10. People make these sort of micro payments all the time (every time you phone someone or send a text message for those on PAYG phones for example). The success of the app stores is another validating micro payments.

    The key is that it takes almost no energy/time to make the micropayment (one of the reasons App Store has been such a success) Any need to redirect to a 3rd party and the cost in time is likely to exceed the cost to actually purchase the content.

  • Hmm… You’re going to think I work for Rupert Murdoch if I keep banging on about this but…

    1. News by micropayments might not be the best, or indeed audience acceptable, approach. Assuming that loyalty translates on the Internet (you did see I said assuming) from the offline world, then what's to say that traditional demographic segments of newspaper readers won't, as a matter or course, slowly but surely 'migrate' online? For example, as the balance tips from absorbing news by paper based (analogue) means to online (digital) means, what's to say that a user will not pay a subscription for access to the news service online, just as they pay for their preferred paper (or magazine) in the shop or dropped through the door? Looking at it like this, it doesn't seem such a big ask from where I am sitting.

    Also notice I said news ‘service’ rather than news ‘paper’ online. As you rightly infer, it won't just be a duplication of the offline content – online, but also other non-linear alert services and feeds across multiple platforms and devices.

    2. If you assume that micropayment is a viable approach for individual articles or segments of news on a per-click or time base, then why isn't this viable? Humans are basically simple and predictable animals. Given a decent micropayment mechanism, I don't think it's too much of a stretch of the imagination to believe that psychology dictates that if a user is compelled to want something and the price is low enough per unit – then they're going to click – especially as users have a propensity to go with the natural immediate gratification urge – not focussing on the fact that lots of clicks of little amounts of money eventually ads up to a decent financial contribution to the new provider/s of their choice.

    Finally I am a great admirer of Chris Anderson, and have read ‘Free’. If you look at Rupert Murdoch’s WSJ they are simply following Chris’ advice by giving some content and services away for free in an effort to attract usage and loyalty, with a view to charging for other content.

    The jury is out as far as I am concerned as to what will and won’t work in terms of paid for news services. But I will reaffirm what I have written before – you’ve got to admire Murdoch’s guts and we should all be thanking him for creating this living laboratory for us to watch this experiment with interest and on his time and money.

  • Hi Nic,

    Clay Shirky's (very valid) objections to micropayments revolved around his concept of the associated 'mental transaction cost' – in other words an endless stream of tiny payment decisions which very rapidly add up to a major cost in terms of time and annoyance.

    But not all micropayment systems involve a conscious usage decision. Take SMS, for example. I don't believe sending an SMS involves a mental transaction cost, mainly because the unit cost is so low. There is certainly no payment dialogue – which is key.

    I have proposed a usage-based micro-billing concept with the following motto: one decision, one bill, very small payments. If you are interested, you can read about it here: http://lmframework.com/blog/2009/07/kamikaze-ma

    Cheers

  • Thanks for the comment Chris. Time will tell on the 'mental effort' argument and I think the only thing we can say for sure now is that we don't know how it will play out for news. The key difference between news and your examples is that typical user behaviour is to browse ten, or twenty, or thirty articles before reading one. The mental effort in deciding if the one in front of you is likely enough to be interesting to be worth paying for is therefore different to the situations where you have a better idea of what you will get.

    Nic Brisbourne, Partner DFJ Esprit

  • chrispadfield

    Agreed Nick, I think two points worth making; the type of companies that can use micropayments (clearly there is going to still be lots of free news) are the higher quality publications. I have a good idea about whether I am going to read an article on the ft or economist or new scientisit by reading the title. I might be being elitist here and perhaps celebrity news can support micropayments; but I doubt it.

    The second thing is that the quality of content will have to increase. Publications will (hopefully) stop bothering creating filler content because they won't monetarise it as well.

    I am sure new tools will build up around this as well; something like reddit.com or digg.com becomes hugely more useful when only those that have paid for the content are the ones that can rate up or down content. Publications that put pay walls behind mediocre (or misleading) content will soon loose.

    I would hope that most paid content adopts subscription models as well; of the osyter card type. Once you have bought enough micropayments to equal the cost of a monthly subscription, you automatically upgrade to full subscription access. And subscriptions that cover mutliple content sources would be even better.

  • Rob – most of the (admittedly limited) evidence so far has shown that page views plummet when charging is introduced, at least when there is competition, and my gut is that micropayments will urk people. On both counts though the jury is still out, as you say.

  • Some good thoughts here. tks

  • On this particular point: the way online news providers such as New Media Age get around this is by giving the first paragraph of content for free with a note below stating that to read the remainder of the article you need to subscribe to the online news service (which you get free when you buy the analogue subscription BTW). It doesn't take a great leap to simply insert a similar message to indicate that to read the remainder of the article the user has to make a micropayment. So they get a bit of the news for free for making the mental effort and a real insentive to pay for the rest. I bet this also has quite a good conversation rate, but I'm sure they keep this data close to their chests.

  • Chris Wilkins

    In response to what Rob Wilmot said about why hasn't this been done, it is simply because the technology has not been developed. Sure, there have been lots of suggestions about how to go about this. And saying “why don't you just charge 1c, or whatever cents, per page” is thousands of times easier than doing it. Yes, if it was the answer, it would be happening assuming someone had actually developed all the software to make this possible.

    And, of course, also get around all the other problems with this; don't go bust with the transcation costs, made a program that many organisations can get involved in, and made it painless to customers.

    I think micropayments is a great way to go. But all the “gotchas” haven't been nutted out as yet, in my opinion, for what it's worth.

  • Chris Wilkins

    In response to what Rob Wilmot said about why hasn't this been done, it is simply because the technology has not been developed. Sure, there have been lots of suggestions about how to go about this. And saying “why don't you just charge 1c, or whatever cents, per page” is thousands of times easier than doing it. Yes, if it was the answer, it would be happening assuming someone had actually developed all the software to make this possible.

    And, of course, also get around all the other problems with this; don't go bust with the transcation costs, made a program that many organisations can get involved in, and made it painless to customers.

    I think micropayments is a great way to go. But all the “gotchas” haven't been nutted out as yet, in my opinion, for what it's worth.