Your News Content Is Worth Zero to Digital Consumers

By: Steve Outing OK, yes -- that headline was meant to grab your attention. I don't mean to suggest that ALL news content published online or on mobile devices is worth nothing; a small slice of unique, niche news content can get some people to pay money for it.

But MOST digital news content, I am going to suggest to you, has no monetary value to readers or viewers. Sure, it has value for advertisers, who will pay to get in front of the audience assembled to consume the content. They'll pay extra if you can assemble an audience of similar readers (e.g., cancer patients reading about new research, and a drug company advertising on that Web page).

But consumers paying for news stories online, or on mobile phones, via micro-payments or subscriptions? Not likely. (Bundles? ... Maybe.)

My apps epiphany
I've been a proponent of the idea that non-niche news content is better off being free, supported by advertising and other revenue streams, for some time. The other night, at a meeting of the Rocky Mountain Internet Users Group in Boulder, Colorado, I sat in the audience as two local mobile gurus -- Joe Pezzillo of Push.io and Kevin Cawley, director of mobile applications for Newsgator -- mused about how far mobile devices have come, and what to expect in the future.

What both guys agreed on -- and they disagreed on quite a lot of other things -- is that the mobile market is huge, growing fast, and evolving rapidly. For news publishers, mobile represents big-time opportunity, especially for phone applications.

As Pezzillo, an Internet pioneer who more than a decade ago was creative director of the Apple Electronic Media Lab when it was based in Boulder, talked about the success of the iPhone, I asked him his thoughts on how content publishers might make money from content on mobile devices that's different than on the desktop/laptop Web.

The crux of his answer: "People love apps." (He said a lot more, but those were his most important words of the evening, at least for me.)

Just with the iPhone alone (30 million sold in two years), Apple CEO Steve Jobs boasted last week that 1.8 billion apps had been downloaded. An estimated 13% of the apps downloaded carry a price tag (source: Pinch Media, February 2009; the figure is probably higher today). What started out in the iTunes Apps Store as mostly free apps has evolved: first into a lot of freemium apps (scaled-back free version and a premium version for 99 cents or $1.99); then into a growing number of paid apps with no free version; then prices for paid apps slowing getting higher. (If you watch the slide show on the Pinch Media link you'll understand why phone app advertising is much less desirable to app developers than putting a price tag on their apps.)

So, Pezzillo's simple observation about the success of phone apps points to an important truism about human consumer behavior: Most people seem to prefer to spend money on things they get to "keep." A phone app may not be a physical thing, but it's there on your phone every time you turn it on. It's "yours," even though it's just digital bits.

Think about the newspaper industry's troubles adapting to making money online. For years, publishers had no trouble selling a physical product, the printed paper, containing a package of assorted news, advertising and other stuff. The readers bought a physical object that they got to keep and later throw away or recycle.

But then, along came the Web and many news consumers changed their preference to online (and increasingly mobile, too). Newspaper publishers tried off and on over the years to charge consumers for access to their news content online with subscription fees, but time after time it failed -- from Mercury Center to TimesSelect (The New York Times, 2005-2007).

Why did they fail? There are many reasons, of course, but I believe that perhaps the biggest reason is that when online news consumers were asked to pay for news, many felt that they weren't getting anything, because they received nothing tangible -- just information. And, as we've all been trained during the Web years, most information is free online.

If you buy my line of reasoning, then trying to sell news content on mobile devices will be equally as difficult. Fortunately, mobile phones now have something that people will buy: apps. And mobile is poised to become the next growth area for content publishers.

Do I even need to tell you what to do next, Mr./Ms. News Publisher? Create an iPhone app (followed by apps for Blackberry, Android and Palm Pre) that offers a better news experience than viewing your news Web site on a phone's browser, and offers other valuable features. Charge for it.

Learning from iTunes
Proponents of "charging for news online" sometimes point to Apple's iTunes as evidence that people will pay for digital content. That's certainly true, but a song purchased on iTunes is something you get to keep; it's on your PC and your iPod. And you can play it over and over again.

It's not the same thing as paying to read a digital news story: Read it once and it's gone. I think that at a subconscious level, most of us are more willing to pay for "something" that can be kept than for something that our brains identify as ephemeral (like digital news), even though at a conscious level we may recognize that it has value.

Unless or until we all go through some sort of cultural mind transformation, news publishers expecting to make money from their digital readers will need to figure out how to offer something tangible. A paid mobile phone news app is an excellent example.

Adapt old models that worked
This summer I interviewed a persuasive technology expert, Stanford psychology professor B.J. Fogg, and wrote a column about what I learned from him, mostly regarding how to persuade online users to pay for or voluntarily donate money to pay for online content. There was one thing he told me that, frankly, I didn't really buy at the time. To paraphrase Fogg, it's extremely unlikely that anyone can come up with a totally new idea for a digital business model that hasn't worked before in a similar psychological manner in the physical world.

Got a great, innovative, "unique" idea for how to get people to pay for something (like news online)? It probably won't work unless you can think of a physical-world equivalent or variation that was successful, Fogg told me. "The psychology of it has to match what's worked in the real world. I don't think you can invent a new psychological persuasive system,? he said, because humans are predictable beings.

Example: that "freemium" strategy used by many mobile-phone app developers (offer a free version as well as a paid version that includes more valuable features). That's the same psychological persuasive technique used for decades with free samples. Another: new schemes (like Kachingle and others to persuade online users to voluntarily donate money to their favorite Web sites and blogs by using social pressure and social networks, where your donation or ongoing financial support is announced to your friends network and influences them to donate, too. That uses the same psychological theory that makes a charity auction successful; you see your friends and neighbors bidding, so you are influenced to bid, too.

Is there an equivalent to paying for something ephemeral like digital news that was successful in the old world? The best I can come up with is the diner jukebox, which you used to put a quarter in and got to hear a song -- once. That's not the most successful psychological equivalent.

The point is ...
Non-niche, non-unique digital news has no monetary value to most readers. News providers, if they are to make money directly from consumers in the online and mobile worlds, need to come up with non-ephemeral offerings.

If I knew how to do this and get lots of people to start paying news publishers money, there might be a statue of me in the lobby of the Newseum building by now. Alas, I can merely offer a few ideas that perhaps will get smarter brains than mine working on solving the puzzle.

I think, perhaps, the key to getting paid for news in digital format is that what's being sold is not fleeting. "It" may be digital bits that remain on your device(s); it may be a service that's always available to you (as opposed to news content, which is fleeting).

1. Paid news memberships. I've written about this model recently on E&P Online and here on my personal blog. With a membership to a news organization (or consortium), you get something: a membership card (physical perhaps, or a digital ID to show on your mobile phone) to be used repeatedly to get special privileges (a discount at an advertising restaurant; front-section seats to a Thomas Friedman lecture; access to premium digital content; etc.).


2. Access. As NYTimes.com discovered during its TimesSelect paid-subscription experiment, even the content of rock-star columnists like Friedman, Paul Krugman, Maureen Dowd and others wasn't enough to entice enough people to pay for a TimesSelect Web site subscription to make charging the best revenue option for the Times. So the same thing applies here: A Maureen Dowd column in digital format is not worth paying for to the vast majority of people. It's worth zero dollars to them, because they can find other columnists with similar points of view to read for free. The free alternatives may not be as good, but they're good enough to replace the paid Dowd content because there's a big difference between the price point of zero and even a very low price point. (For more on that point, read Chris Anderson's book, Free: The Future of a Radical Price.

But if we take a hint from Fox News' boorish commentator Bill O'Reilly, perhaps people will pay to get special access to Dowd, Friedman and colleagues. O'Reilly has a paid Premium Membership that among 16 extra benefits includes some special access to O'Reilly, including "preferred e-mail" that gets your message bumped to the front of the line, and a weekly live chat where Premium members get to ask O'Reilly questions. I don't believe that readers should be charged to post comments on a star columnist's content, but higher levels of access could bring in some significant money -- e.g., a Premium membership to NYTimes.com could include weekly live chats with Thomas Friedman, discount tickets and premium seating to his public lectures, member-only invitations to columnist-reader in-person discussions, and extra content from him unavailable to others.

3. Special Web applications for PCs. If apps sell so well on mobile phones (albeit at generally very low prices), can news companies sell applications for the PC that offer consumers an enhanced experience over reading news on a Web site? That might work better than trying to sell news content. Times Reader 2.0 is an example of this; it's downloadable software that comes with a $14.95-a-month subscription fee for the content. The selling point is a better experience than viewing NYTimes.com on a Web browser. While I'm not convinced that a monthly fee is better than a one-time charge for the software, it's the Times Reader software that you get to "keep." This is a model worth more experimentation.

OK, you folks take it from here. What else can news publishers offer on the Web and on mobile devices that people will pay for because it's not as (there's that word, one last time) ephemeral as digital journalism?