Forget Micropayments — Here’s a Far Better Idea for Monetizing Content

By: Steve Outing

As Douglas Adams famously wrote, Don’t Panic.

You’re not listening, I can tell. Many people in the newspaper industry are already in full-fledged panic mode, and one of the recent responses has been a wave of calls to resurrect an online publishing business model that has not yet worked: micropayments.

Time magazine has even offered a cover story titled “How to Save Your Newspaper,” by journalism all-star Walter Isaacson, singing the praises of news publishers getting paid for their online content at last, and touting micropayments as the best option. No More Free News! Another industry lion, Steven Brill, has similar advice for The New York Times and other newspapers.

Isaacson writes: “Under a micropayment system, a newspaper might decide to charge a nickel for an article or a dime for that day’s full edition or $2 for a month’s worth of Web access. Some surfers would balk, but I suspect most would merrily click through if it were cheap and easy enough.” Brill: “Beyond being a gamble worth taking because of the potentially significant payoff, there is no realistic alternative to charging for quality content that anyone has presented.”

Ugh. This approach hasn’t worked. It won’t work. Is completely counter to the nature of the Internet. It will hasten newspapers’ death spiral.

If the newspaper industry takes Isaacson’s advice, then anyone who still works at newspapers should panic!

There is a better way for online publishers to get people to pay for their content — and of the many recent articles about how the newspaper industry can get people to start paying for their content (since online advertising alone doesn’t bring in enough money to support large newsrooms), I’ve yet to see any suggestions like a model that I learned about recently from a California start-up venture called Kachingle. I’m not sure if this company has the answer to save newspapers, but if Kachingle succeeds, it’ll make a lot of digital publishers (from bloggers to newspapers to Time magazine) a lot of money.

You have every reason to be skeptical that a company that hasn’t even released its product commercially — just a preview edition is available for viewing now — has the solution that no one else has figured out yet: how to get Internet users to pay for content. But when I learned about it from founder Cynthia Typaldos recently, her idea clicked for me. Could this be the missing link? I hear about a lot of new companies and ideas in my work, but seldom do I get tipped off to something in the works that I sense will be a game-changer.

Now, I have no connection with Kachingle, which I feel is worth noting because the last couple paragraphs are pretty enthusiastic about the company. I don’t know if Kachingle will be the company that becomes the giant of online content payments; a lot depends on the execution, and the inevitable competition. But I do believe that the patented model Kachingle represents can work, and that it will allow online publishers to earn money from users paying for content.

Paradigm shift

To start with, publishers have to get over the idea that they are going to get paid directly by the user. For the vast majority of a news publisher’s content, there can be no barriers before an article asking the user if he wants to pay a penny or a nickel, or buy a $2 monthly subscription, to read on.

The user must be given the option of whether to pay for a Web site’s content (by financially supporting the site), or read it for free. I’m betting this one will be a tough pill to swallow for many industry executives with traditional media mindsets, but it’s critical because it fits the culture, indeed the nature, of the Internet. Traditional micropayment schemes for online news content — “pay up or go elsewhere” — fight it, and thus are doomed to fail, in my view.

Newspaper executives also have to grasp the notion that few publishers will be able to get very many people to pay for their content specifically. The Wall Street Journal Online can do it, because many of its paid online subscribers are businesspeople who can charge the subscription bill to their expense accounts. Most other newspapers will only be able to charge online users directly for truly premium content that is not replicated somewhere else — for example, e-books and other high-value content that’s not typical newspaper fare.

Newspapers probably can charge for some multi-platform personalized news and information services, if they’re good enough and useful enough. But that’s not charging for the content (the news), it’s charging for the valuable service of individual customization.

Also perhaps hard to accept (but you have to): The online news consumer samples many brands, from the New York Times to Joe’s Blog. Most online users visit many Web sites on a typical day, bouncing around the world of free content. They’ll have a few media brands and bloggers that they visit regularly, but they also encounter new ones frequently, via the serendipitous link spotted when reading something from a known media brand, to the recommendation of a friend on Facebook or Twitter or e-mail. Your once-powerful newspaper brand doesn’t mean as much as it used to, and to get paid for newspaper content online, it must become part of a giant pool of content that’s financially supported en masse.

Think of it this way and you’ll understand the core concept behind Kachingle: Just as online users currently pay an Internet provider $30 or more a month for their computers to access the Internet, and perhaps a monthly fee for all the music they want from a service like Rhapsody, they’ll also pay a monthly fee for all the news and blog content on the Web. Only the last fee is voluntary, and it will be up to publishers to educate the public on the importance of paying for content online. (National Public Radio has been doing this for itself for decades. Now commercial news publishers and bloggers need to do it to benefit all of them, not just one entity.)

The next important point to grasp about the Kachingle model is that it allows individuals to financially support the online content providers that they like best. So if a newspaper wants to get paid for its content when a Web site visitor clicks through to one of its articles, it should ask that the visitor support the site via Kachingle.

Kachingle specifics

I’ve explained some of the concepts — now let’s get to the specifics, best understood in list form.

The Web user experience:

* As you read news sites and blogs all over the Web, you’ll start to see sites with Kachingle “medallions.”
* You’ll join Kachingle by registering (the sites you visit will probably encourage you to), and you’ll agree to pay a monthly fee to support valuable online content from publishers and bloggers you like.
* When the service starts in beta, the monthly default fee will be $5, but ultimately you’ll be able to set whatever amount you wish. You might decide that all the content you read on media sites and blogs for “free” is worth $1 a month because that’s all you can afford, or perhaps you can give $100 a month. It’s your decision, in the same way you decide how much you give to National Public Radio stations during their regular pledge drives.
* You can ignore Kachingle’s plea for you to pay a monthly fee for online news and blog content, just as you can choose to send nothing to the NPR station but still listen to it. You will be able to see any free content on any site that has a Kachingle medallion.
* If you are a paying Kachingle account holder, you’ll sign in once per device (PC, laptop, smart phone) and be remembered. So anytime you visit a site that uses Kachingle, the Kachingle medallion will recognize you.
* As a Kachingle account holder, when you visit, say, NYTimes.com, the Kachingle medallion on its pages will ask if you’d like to support the site. If you do, you’ll click the support button on the medallion, which means that some of the monthly fee you pay Kachingle will go to NYTimes.com. That site will always remember that you support it, but the medallion will allow you to rescind support with one click.
* You’ll see Kachingle medallions on lots of sites (in theory). Click to support the ones you like, or don’t, as you visit them. You may end up with, say, three newspaper Web sites, one magazine site, and 30 blogs that you want to support; at each of those you would have clicked the Kachingle support button once.
* Now what happens is that Kachingle tracks your Web site and blog visits over the month. If you visited NYTimes.com 30 times, Editorandpublisher.com 10 times, and the blog SteveOuting.com 10 times (but none of the other sites that you support), then NYTimes.com would get 60% of your monthly Kachingle fee, and Editorandpublisher.com and my blog would get 20% each. In other words, the money you spend on your monthly Kachingle account is allotted by how often you visit the sites you support, rather than every site you support getting an even split of your money. (You may click to support a blog, but then never return to it; that blog won’t get any of your money other than for the initial visit.)
* Kachingle doesn’t change the current Web experience. Most content remains free, and you can view it as always with no barriers or mental transaction costs.

The publisher experience:

* Any publisher can join Kachingle for free. You can be an individual blogger with 100 readers, or NYTimes.com.
* Participating publishers put a Kachingle “medallion” (or more than one) on their Web sites, typically in a right or left column and highly visible. (Simple: Sign up as a Kachingle publisher and add a code snippet to your site’s template.)
* As people visit your site who are already Kachingle users, they will see a ?Support? button on the Kachingle medallion. If they like your site or blog and want to contribute some of their monthly Kachingle fee to it, they’ll click ?Support.?
* Initially, Kachingle will count an individual user visiting your site as one point, even if he reads 10 stories in a session. The supported blog that’s visited by the same user who only clicks on a single page also gets logged as one point. A more sophisticated tracking system that would split funds among publishers based on page counts rather than site visits is possible in the future, according to Typaldos. She says Kachingle wants to start with a very simple system for the user to get them used to what is a new concept: voluntarily paying for online content. But as the service evolves, the company will create new algorithms that Kachinglers will be able to choose. For example, a user might prefer to have her money split based on number of pages viewed, rather than the simpler split between sites visited. A Kachingler might request that 80% of his money goes to news sites and 20% goes to blogs. There are lots of possibilities, but Kachingle with start with a simple fixed model.

* While Kachingle might appear to favor bloggers who have limited content over giant news Web sites with lots of content, Typaldos says one option for the larger sites is to use multiple Kachingle medallions. For example, NYTimes.com if it had a single medallion would only get credited 1 point per day for every visitor. But it could use different medallions on each of its many blogs and perhaps earn more. The trade-off would be in simplicity for the consumer. In the latter scenario, a Kachingler would choose to support (or become a fan of) different blogs within the site, rather than clicking a Kachingle medallion just once to initiate financial support for NYTimes.com as a whole.
* All the monthly user fees (or contributions) collected by Kachingle are dispersed to participating publishers based on Kachingle account holders’ Web activity on sites that they support. Kachingle will take 20% of the fees to support its business.
* Publishers will promote Kachingle in different ways, depending on how aggressive they want to be. Some might have nothing but a Kachingle medallion and hope that their site visitors will support their site if they are already Kachingle account holders. Others may choose to be more assertive and use a pop-up box requesting that site users sign up for Kachingle and support the site. (Kachingle will have such a pop-up available in the future.) Of course, the latter choice may annoy and/or turn away some Web site visitors, so the decision on how aggressively you want to ask for support is one you’ll want to take seriously. Kachingle is offering marketing advice to participating publishers.
* The publisher’s site will not change in any way other than the added Kachingle medallion. Anyone can read the content, just as before, whether they are a Kachingle account holder or not, and whether they support your site via Kachingle or not.

As you can see, other than the initial effort of signing up for Kachingle and thus deciding to financially support online content, there is no mental transaction cost to the online user in visiting a news site or blog. Click, read, share any content as you’ve always done with no barriers in the way. The only mental effort expended is one time per Web site: Do I financially Support this site or not? If I support it, I make one click.

If you’d like to understand more about the problem with any content system having “mental transaction costs,” read this 2003 article by Clay Shirky, in which he makes a solid argument why microtransactions for Internet content cannot work, and explains why so many micropayment companies — going back to the mid 1990s — have failed. (In response to the recent wave of calls to resurrect the micropayment model for online content, Shirky recently wrote this blog post slapping down the arguments of its proponents.)

Publishers need to educate, market

The power of the system is in its many participants. Typaldos emphasizes that it will be important for any participating publisher to urge their users to sign up for a Kachingle account ($5 a month as things start up), and educate and persuade them of the importance that they (voluntarily) pay for online content. The trick — and this is the part that traditional-thinking publishers will have trouble accepting — is that you are not just asking users to support your content, you are asking them to support all the news and blog content online.

But if this bothers you, think about it for a minute. When you get your users to sign up for Kachingle and start paying for content, you’re helping lots of other Web publishers. And as all those other Web publishers and bloggers encourage their users to sign up for Kachingle, they are helping your site earn more money. Call it the power of the commons. The winners are the blogs and Web sites with the best content and that attract the most visitors and fans. Newspaper sites can win at that game, right?

Also, there’s the social networking aspect of the Kachingle service, which will use Facebook and Twitter, for instance, to spread the word. Let’s take an example in which I?m a paying Kachingler and I click the medallion on Editorandpublisher.com to support it. Assuming I’ve approved this in my privacy settings, Kachingle will note that “Steve Outing just became a financial supporter of Editorandpublisher.com via Kachingle” (or wording along those lines) and post it to my Twitter feed and my Facebook news feed, for my followers and friends to see and be influenced by it.

The Google factor

The new wave of micropayment promoters — while genuine in their desire to save the jobs of journalists and stop the decline in the quality of journalism resulting from newspaper layoffs, cutbacks and bankruptcies — is actually suggesting something that will dig an even deeper hole for the newspaper industry.

A significant problem with micropayments is that it walls off content and makes it difficult to share with others and spread it around the Web. If I like an article and promote it in one of my Twitter posts, many of the people will not read it if they encounter a pay demand even for 5 cents; it’s a barrier that will turn many away, especially if to get to the article the prospective user first has to sign up for some content payment network account. If I’ve paid 5 cents to read an article and want to promote it to my social network friends or followers, will the URL that I share even work? Perhaps not if the publisher hasn’t set up the system to account for that. Internet users from other countries may not be able to access the content at all because they can’t sign up for the micropayment system.

And of course there’s Google, and the various news and blog search services. Will they index your content if it’s behind a micropayment pay wall? If Google can’t point people to your content, you may as well not be on the Web. And you’re out of business.

You have an answer, now run with it

Recently, New York Times executive editor Bill Keller wrote in his column some answers from readers about why NYTimes.com doesn’t charge for its content. (You’ll recall its TimesSelect paid-content experiment with Op-Ed columnists and archives put on a subscription plan, which failed to bring in enough revenue so was scrapped for a return to free content, more readers and more ad dollars.) Keller said he favors the general idea of Times online content being paid for by consumers who value it, but leaves an open mind about what approach to take.

Keller commented on the Walter Isaacson Time cover story I mentioned at the beginning of this column: “Walter doesn’t really grapple with the main puzzle of a pay model: how to keep it from stifling traffic, especially search-driven traffic, so much that online advertisers go away. I’m not saying that problem is insoluble. Just that, as far as I know, no one has solved it yet.”

I think that Keller and other newspaper editors, struggling to survive a nasty downturn in print revenues and unable to find a way to adequately replace them on the digital publishing side, would approve of the Kachingle approach. That is, if they can get their minds past the hurdle of the payment for their content being voluntary, and that their content payment is mixed up in the big pile of money with all sorts of publishers, down to the pajama blogger. Otherwise, the Kachingle approach addresses Keller’s concerns about stifled traffic, search engines and fleeing advertisers.

Though Typaldos of Kachingle rejects the notion of her model being like NPR fund-raising and describes it differently, I still see elements of it because publishers are asking and not demanding money to support their content-creation efforts, and the online user controls the price paid. In the aforementioned Keller column, he also wrote this:

“We had a lunch with a group of reporters and editors this week, where conversation ranged across various pay options. In that group, the favorite idea — especially among younger and more Web-centric staffers — was a voluntary pay model. Imagine a digital version of the NPR membership drive, which allows you to be a reader for free, but invites you to be a member/sponsor for a modest fee.”

What Keller suggested there perhaps envisions a system like Kachingle applied just to NYTimes.com. That might work for such a powerful media brand, but most likely it would not work for most regional metro and smaller newspaper Web sites. Another idea is to apply the Kachingle concept just to newspaper sites, or perhaps news sites of all kinds; they’d all have news Kachingle medallions. Bloggers might have their own Kachingle medallions. So as an online user and reader of free content, you might decide to pay $10 a month for online news and $5 a month for blogs — because you believe in supporting online content and recognize that good content will go away without proper financing by online users. All participating news sites would split the pile of Kachingle news money; all participating blogs would split the pile of Kachingle blog money.

Typaldos strongly believes that that’s the wrong approach, because it again puts up barriers to contributing. “Having two systems would be incredibly confusing to users … and not user-centric which is the big paradigm shift that has to happen for this model to work,” she says.

KISS — keep it simple, stupid. Online publishers, including newspaper Web sites, are more likely to convince people to pay a monthly “Internet content fee” if everyone is in it together and there’s one ubiquitous medallion on every content site that an individual visits (which always remembers you). The publishers who make the most money will be those that produce the best content, and thus get the most people to support them via the Kachingle system. That should be to the advantage of newspaper Web sites’ quality content, right?

Typaldos argues it this way: “Every time a blogger signs up a Kachingler, that person is now a potential contributor to every other Kachingle-enabled blog/Web site/service. So as bloggers/Web sites sign up Kachinglers they are tapping into the economics of ?increasing returns.? If NYTimes.com tried to have its own system, it would not benefit from the millions of other Kachinglers that the millions of other Web sites/blogs had signed up. Yes, it’s true, they have to share the dollars of those Kachinglers, but since the distribution is based on daily visits, it doesn’t really matter which site signs them up, just which sites they truly love (and turn on contributing for).”

So now you’ve got it, folks. This may be the model newspapers — not to mention bloggers and all manner of other providers of free content — have been waiting for to receive money for their “free” content. And at least one company has the system built and ready to go today.

Will Kachingle save giant news corporations and supplement online advertising income enough to maintain large buildings and newsroom staffs? Typaldos isn’t willing to make that boast. Though I think that if Google used this same model (and from what Typaldos says about her patent, that would mean a Google acquisition of Kachingle), its size and power could in time get Internet users paying billions of dollars for online content.
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