News Online – The Seven Percent Solution

Michael Hedges March 17, 2010 Follow on Twitter

There is an obsession among news gatherers and news sellers: how to share in the digital dividend. The Web has twisted every convenient business model. Tasty theories dry up when salted.

Just seven percent of American Web users are willing to pay for news online, says the Pew Research Center’s Project for Excellence in Journalism report. The rest when finding a pay-wall go elsewhere. It is, frankly, just what we’ve always known. Prying money out of somebody’s pocket requires skill.

The Pew Center’s annual report, released this week (March 15), travels down the path of common knowledge. All ad-supported and most subscription-based media suffers from the redistribution of traditional revenue streams. American newspapers, once rolling in money, are cutting back everything but executive compensation. Only cable TV has kept the customers satisfied.

American online news users appreciate ads that make access free. They just don’t click through, which is the pay-day for most websites. The report notes online ad revenues falling last year, for the first time. Perhaps the ad people have noticed the value they’re getting.

An interesting analogy (not original to me and I cannot now find the source) for online news and potential business models separates Web users - many being news users - into three groups. It isn’t perfect but it illustrates the relationship between consumers and value. It’s a water-based analogy, good for fluid dynamics.

Surfers are, always have been, always will be, the biggest set of Web users. The expression “surf the Web” was spot on. Surfers don’t even know where they are. It doesn’t matter. They just keep moving. That is the value they find from the Web, motion. Pareto’s Law still rules: it’s about 80%.

Snorklers are different; more curious but inclined to just blow bubbles. These would be the Twitter addicts. Bright shiny objects – and celebrity headlines – attract them. All they want is something to talk about.

All kitted out and ready to pay are the scuba divers. These Web users are ready for depth. They want to swim with the big fish. In the most classic sense, they understand that knowledge is power and plan to use it.

Are there business models for these three Web consumers? If this little analogy holds up, it’s a different business model for each type. Surfers are hard to charge for online news or anything else. Click-through ads just slow them down. Directly, there’s not much chance getting them to pay for anything other than faster broadband. Snorklers can be attracted to certain sites, particularly those with high brand value. Think of all those folks who carry around a copy of the Financial Times so everybody sees they’re carrying around a copy of the Financial Times. They’ve read the headlines but there’s no ink on their fingers. There’s money in hubris.

Ready to pay for what they want are the scuba divers. They both know what they want and are quite curious. They’ll like to be teased; oh, just a little more, please. This is the seven percent solution.

Comparing the American media market with any other is at most risky, inane at least. Consumer trends do follow leaders but online news is still in its infancy. And, too, consumer web behavior has only begun to form patterns. Some of them could actually support a business model.

See also in ftm Knowledge

Television News - Bright Lights, Big Coverage

The global reach of television news has never been greater. The digital age has expanded that reach to satellite channels and the Web but it has also forced television news to mature. This ftm Knowledge file shows the gains and the pains. 74 pages PDF (December 2010)