Why Paywalls Ultimately Fail

Google announced a new partnership last week with Pandora, the New York Daily News, and several other media companies that could be the death of the paywall model. “Google Consumer Surveys” is a stunningly simple idea. Say you’re surfing the web, and click on a link to a story that would typically be behind a paywall. Rather than pay, you answer a simple marketing question, and as a result are granted access to the article. Google pays the entity five cents for each question answered, which is about $15 per 1,000 pageviews.

I’ve long maintained that paywalls are a terrible idea and do nothing but drive potential readers elsewhere. The ROI of putting your content behind a paywall is far less than charging appropriate advertising rates on your site, or other inventive ideas. Don’t believe me? Ask yourself why newspapers and magazines have sold ads since time began. It’s not because they’re looking for filler. The subscription price has never been sustainable for a magazine or newspaper. Why would that change simply because we’ve moved to a digital model? Take a moment and think about who is clamoring for paywalls. Wall Street Journal. New York Times. Essentially, NEWSPAPERS AND MAGAZINES. I bet if you ask Pete Cashmore about putting Mashable content behind a paywall he’ll laugh you out of the building.

In the new economy, I believe personal information that a company can use to market to a person is far more valuable than the $50 a year you can squeeze out of them for a subscription. A small tidbit about a person may be able to sell them hundreds, maybe even thousands, of dollars worth of product rather than getting $50. Google’s “Consumer Survey” is a creative way to both be paid for each visit and to collect valuable information to sell to readership. This is the beginning of the end for paywalls.

Image: Dennis Crowley via Flickr CC 3.0 

P.S. For a really fun laugh as to why paywalls are ridiculous, visit that flickr stream and look at the first comment.

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  • robelroy

    Not to say you will be wrong, but here is a good counter argument that I have heard- the Australian has reported that it’s paywall paying readers are now spending several hours per week on the site. No other papers have released similar numbers, but if this is true, it presents a possible problem for Google. The paywall payers are the most engaged, the most influential and the wealthiest. If they are sequestered for hours per week behind a paywall, that only leaves the rabble behind. The rabble can fill out as many surveys as they want, they will only be talking about stuff they’ll never buy.

    • That is a fine argument, you’re right, and hours spent on a site is terrific, if you’re selling something other than stuff to read. The problem with it though is that it relies on, likely, a very small amount of the potential audience to keep the paper afloat, since that becomes its primary revenue source. You can spend 24/7 on a newspapers website for the price of $X per month/year, but that, essentially, becomes your primary revenue stream. No charging double or triple for ads that reach a certain amount of impressions after the survey. No premium price for ad space on a hot button story. 
      That is another reason paywalls are not going to survive, long term. They don’t make the publication sustainable. Ad revenue has driven the industry since its inception. The price for a dead-tree paper has always been the frosting on the cake. Just because content is moving online doesn’t mean that won’t hold true.

      • robelroy

        I might also point out that the most successful paywalls are the ones that you have not even heard about. Reuters and Bloomberg have the largest newsrooms in the United States. They specialize in finance but there is nothing that they do not cover in massive depth. You have to pay their subscriptions in order to have access to the information within. Now, you might think that your Reuters or Bloomberg app on your phone, or the website gives you all the news. This is not the case. My sister worked at Reuters for 10 years and two of my friends work for Bloomberg. Many of the most important stories and information are hidden behind their secure servers that you log into and are not searchable by engines. These news services are bundled with the financial product and cost between 12 and 20 thousand dollars per year. Even the stuff that is released on the Bloomberg or Reuters wire is embargoed for hours or days before it is released to the public. This is the kind of detailed exclusive information that the finance guys trade off- Iran, Iraq, Israel conflict (oil), Fukusima (nuclear and energy), etc etc. This is the future of news- walled gardens where the rich get the information first, while the rest read blogs to find out news about “One wierd trick to lose weight”. No…it’s not the future of news. It’s happening right now.

  • What i’m taking away from this article is marketing surveys are a viable revenue stream worth pursuing.

    No doubt conducting readership marketing surveys won’t replace ad revenue. But might augment it.

    I personally earn money by conducting marketing surveys.

    Here is the site where the money is being earned:

    Here is the tool to conduct your own marketing surveys.

    gl. I’d be thrilled to see people getting more involved with marketing surveys and learning about their readership/network rather than earning a few pennies off clicks.

  • Not sure I entirely agree on this. Consumer Reports has had a paywall for years – and no advertisers. It think there’s at least one example of finding value in a niche and getting compensated appropriately.

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  • AugustineThomas

    Their content sucks so no one intelligent will pay for it.

    The NYT and WSJ seem like they’re doing well but they’re not. They traded being important papers of record for those three hundred thousand hardcore leftists and RINOs respectively.

    These are like the people who subscribed to TV Guide or Readers’ Digest. Most of them don’t even care and just do it as a kind of souveneir.

    That seems fine but it’s not a way to build a newspaper that will be respectable in the long term.

    But the quality of journalism in the New York Times is about the same as TV Guide, so it doesn’t bother me if they continue to die!

    I own some of their stock, I’m just hoping some rich leftist will buy them as a prize so I can get a little money back.

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