Guest Columns Revenue

How innovative technology could further the potential for micropayments

Micropayments hold a tantalisingly simple and practical solution for the crisis faced by the news publishing industry today. The only thing that’s been preventing them so far is that there hasn’t been innovative enough technology – and an informed enough business model – to unlock their potential.

The challenge news publishers are facing today is – simply put – that they aren’t generating enough revenue to support their journalism. Decreasing revenue has seen cut backs in newsrooms, a net loss of jobs and has had a particularly devastating effect on local newspapers.

This isn’t a new problem: the news industry has been in decline for the last two decades. The growth of the Internet and mass digitalisation of news has led to a decline in print sales, and an increasing reliance on digital advertising as news’ primary source of income. But digital advertising has proved to be an unsustainable sole source of income for publishers: while the market continues to grow, advertising revenue for publishers is falling year on year.

This can be in part attributed to the digital duopoly that Google and Facebook hold over digital advertising sales, which saw the two giants take around 80% of total global online advertising spend last year. An unstable reliance on social media platforms for exposure also plays its part; changes to platform algorithms earlier this year have been blamed for reducing traffic to news sites. Other threats to publishers’ revenue include the increasing use of ad-blockers online and changes to data laws reducing the ability to target ads.

Many publications have turned to subscriptions to supplement advertising revenue, some with real success. But converting more than a few percent of audience to a subscription has proven difficult, even for the most successful titles. A recent study by the Lenfest Institute has revealed that the majority of news publishers’ readership is formed by one-time and occasional readers, with regular readers making up only 3-6% of readership. Research by Monday Note’s Matt Lindsay places that rate at a similar 7%.

Subscriptions pose a number of barriers to that casual majority of readers. People now tend to source their news fluidly across a range of publications and platforms; an ongoing financial commitment to a particular title goes against the grain of those consumption habits. Even those who are inclined to pay can’t always afford a full subscription for every product they use, or don’t want to pay a full subscription for something they only partially use.

These barriers could explain why subscriptions haven’t been as successful as publishers had hoped. Sign up rates remain low for most publishers, and churn rates can be high – and costly.

But the future of the news industry doesn’t have to be as bleak as its current state. There’s an opportunity here to fix it, if we learn from our mistakes.

We need a business model that equally meets the needs of consumers and publishers, and doesn’t rely on second-party platforms for its income. We need to think innovatively about how to build a system that works better in the long term: one that will grow, rather than limit, the market.

Publishers need a sustainable, effective way to generate revenue direct from their consumers. Consumers need to be able to access whatever content they want to, at a price they find acceptable, without the need to make commitments they aren’t ready to make. New micropayment systems coming onto the market offer that solution to both readers and publishers alike.

The term ‘micropayment’ has taken on a certain set of negative connotations in the publishing industry. It’s not enough to support high-quality journalism, people claim. But micropayments are just payments, dressed up in a daunting buzzword – it wasn’t deemed a ‘micropayment’ when people were handing over 25p in a shop for a printed newspaper. It’s also a far more positive rhetoric than ‘paywall’, which suggests a daunting barrier to potential customers.

And, as Esther Kezia Thorpe points out in a recent WNIP feature, micropayments don’t have to be so micro. They just have to be the right price, one that is appropriate for the product. With the next generation of micropayment systems, publishers decide how much to charge. They’re given full control over their product, and aren’t subject to imposed rules that don’t suit them – as they often are with aggregator and bundled systems.

Bundled and aggregator systems – a ‘Spotify for news’ – could actually place more limits on the industry than a direct (micro)payment system. Even if we leave aside the fundamental problem that the economic life and investment cycle of news is completely different to music and other media, it simply isn’t an ambitious or profitable enough business model.

With a bundled system, there will always be an upper limit on potential revenue for publishers: the number of subscribers, multiplied by the maximum amount you can charge them. In a world where users are increasingly willing to part with small amounts of money for media they value, every time they spend some the market will get a little bit bigger.

Agate’s system, as just one example of this next generation of micropayment solutions, works because it reflects the needs of readers and publishers.  Users don’t need to commit to regular payments: they pay per article they read. To make sure it doesn’t become more expensive than a subscription, readers can only ever pay a maximum amount in a certain period for a given product. After that, they’re given unlimited access for the rest of the time period.

It works for publishers, not only because they’re given a way to monetise that casual majority of readers, but because it encourages engagement with their product. Giving readers unlimited access after a certain spend encourages casual readers to establish a deeper relationship with the product, rather than with individual pieces of content. Some of those readers will become more likely to upgrade and become subscribers; but those who don’t will still generate significant revenue opportunities.

If we can make content pay, we can re-establish the vital link between popularity and revenue that once made publishing such a profitable business. And when popularity pays, the incentives for readers and publishers align: publishers are encouraged to produce premium content that people will pay for, and readers become more willing to pay for that high-quality content. The market, in response, will only expand.

Dominic Young, CEO of Agate



Photo by Walid Amghar on Unsplash

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