Digital Publishing: After Years of Tinkering with Paywalls, Publishers are Creating the Right Funnel to Find Digital Subscribers

Just 10 percent of your readers could make or break your company’s digital future.

That’s the opinion of Ken Doctor, the media analyst who has been breaking down the “Newsonomics” of our industry for years. Doctor is referring to the fact that a small number of digital news readers—between 2 and 12 percent—drive 50 percent of the traffic at every major media website. Consider that your news organization’s core audience, the readers that come back to your company’s journalism day after day.

Which brings me to paywalls.

It’s a subject everyone in journalism has probably had some experience with over the last few years, and for good reason. As print revenues continue their constant decline and digital advertising rates stagnate, more and more newsrooms are shunning the free internet and returning to the idea of paywalls as a way to generate sustainable digital revenue to support their newsroom operations.

In the last few months, the Denver Post and the New York Daily News are among the latest to put up a metered paywall that forces digital readers to purchase a subscription once they read a certain number of articles. So has the tech magazine Wired, something that was on the top of editor-in-chief Nick Thompson’s to-do list when he took over after seven years as editor for the paywalled NewYorker.com.

“We don’t know exactly how the web will develop, which platforms will become big, but we do know that having a direct monetary relationship with you readers is one way to insure that you have a stable financial future,” Thompson told Nieman Lab.

Thompson’s point is important, considering newsrooms relying on digital ads exclusively have largely been at the mercy of Facebook’s changing priorities and Google’s shifting search algorithm. Having to rely on two tech giants with their own money-making initiatives isn’t a great place to be if the goal is to find a sustainable way to fund an organization’s news gathering capabilities.

It’s no secret to anyone working in journalism that the most successful newspaper company to implement a paywall has been the New York Times. Erected in 2011, the Times online subscription business stands at more than 2.2 million paying readers, with an additional 400,000 or so paying for the newspaper’s standalone crossword and cooking apps. Combined with online ad sales, the company’s digital revenue grew 30 percent to $578 million last year, which according to Times chief executive Mark Thompson accounts for 60 percent of the company’s overall revenues.

Both the Wall Street Journal and the Washington Post have also had tremendous success selling digital subscriptions, both clearing the 1 million digital subscription hurdle. As far as regional newspapers, the Los Angeles Times leads the way with over 100,000 digital subscriptions sold, followed by the Boston Globe and the Minneapolis Star-Tribune. And according to the Media Insight Project, 37 percent of young adults between the ages of 18 and 34 are among those paying to subscribe to one or more news source.

It’s important to note that there are significant differences from one paywall to the next. Some companies, such as Tronc, have a company-wide policy that applies to all its newspapers. Others, like Gannett and Berkshire Hathaway, favor a more individualized approach based on the market.

The factor for the particular mix of any metered paywall is determined by what has become known as the funnel. Basically, at the top, where the funnel is the widest, you have all the digital readers that visit your website and look at free articles. At the bottom of the funnel are the individuals who have ponied up the money to purchase a digital subscription. So the goal of what the Economist dubbed a “funnel mathematician” is to get more readers into the funnel to convert them into paying customers.

In essence, it’s the art of getting as many of those core users Doctor mentioned above to pay for your journalism. In a piece written for Traffic, the magazine of paywall provider Piano Media, Doctor estimates that just a little less than 2 percent of the New York Times’ 100 million or so monthly U.S. unique visitors are actually paying for digital subscriptions. At the Post, it’s about 1 percent. At the Los Angeles Times, it’s just a third of a percentage point.

Obviously, there are a number of factors media companies can tinker with to enable the maximum number of subscriptions. How many free articles do you give away before making a reader pay? Do you allow a so-called “side-door” to be open to traffic from Google and social media websites? Do you ask for the subscription to kick in if readers return to the same columnist or appear to follow a particular writer’s byline?

At the Miami Herald, readers are allowed to view six free articles before hitting the paywall, but there are exceptions for users who reach the site through search or click through on social media websites like Facebook or Twitter. But at the Boston Globe, the paywall has no unlimited exceptions, meaning regardless how an individual found a story, non-subscribers can only read two metered articles per month before having to pony up for a subscriptions.

“We have to figure out our own path,” Peter Doucette, the Globe’s chief consumer revenue officer, recently told the Columbia Journalism Review. “We might not be able to apply the same model as the national and international publishers, because we don’t have the scale.”

So how much are publishers pulling in on average from digital subscriptions? $2.31 per week ($10 per month), according to a new report from the American Press Institute. That’s actually a slight decline from a 2016 API report that found the average price for a digital newspaper subscription was $3.11 per week, though it was higher than a 2012 report published the Reynolds Journalism Institute that pegged the media cost at $1.05 per week.

There were certainly some outliers. The Boston Globe earns as much as $27.72 a month, second in cost to only the Wall Street Journal. The Globe’s funnel works like this—get readers to sign up for a $0.99 a month introductory rate before raising the price to about $0.60 a day. Then, after a full year, raise the price to $0.99 a day.

There’s little rhyme or reason to pricing, other than most publishers cited market testing as the most important factor in determining their digital-only subscription cost structure. But one interesting finding in the API report is that companies charging a special introductory rate were more successful in pushing readers down the funnel into full paying subscribers than organizations that offered a free test period.

Another interesting finding across all media companies appears to be the importance of newsletters, which act to boost engagement and help move news readers through the funnel into paying customers. According to Doucette, at least 77 percent of the newspaper’s digital subscribers receive at least one newsletter.

The key is understanding who your organization’s core readers are, and what the proper mix of content and paywall tinkering is most likely to move them through the funnel and into paying digital subscribers. It’s that 10 percent your company needs to know, should have emails for and need to keep happy. Your future jobs depend on it.

Rob Tornoe is a cartoonist and columnist for Editor and Publisher, where he writes about trends in digital media. He is also a digital editor for Philly.com. Reach him at robtornoe@gmail.com.