The notion that information wants to be free is absurd when the delivery mechanism is making a fortune and the creators are getting what amounts to zilch. – Peter Osnos, “Will Google Save the News?“
In order to focus their attention on big institutional content deals, publishers have traditionally relied on third-party service providers (agents and the like) to conduct business with individual end-users. However, with institutional budgets in decline, content providers are turning their attention to consumer markets as a potential source of business growth. Asserting themselves in the consumer space will require a new type of sales and marketing acumen and visibility into consumer behavior, which recognizes and responds to the many new ways that consumers are seeking to interact with vendors and each other in online environments.
The longstanding business equation in B2B publishing has been:
Quality Content + Brand Recognition + Operational Efficiency + Institutional Usage = Market Share/Financial Success
Publishers have negotiated big deals, but have largely let consumers fend for themselves. This strategy will not fly in consumer markets, where visibility and demand are the primary drivers of revenue, and where methods for marketing to consumers have changed dramatically. The best approach for publishers wishing to enter the consumer marketplace is to take a step back, free themselves from preconceptions of what their business is about, and take a look at what is really working in the consumer Web. Only through entrepreneurial thinking will they have a shot at success in consumer content markets.
Where the Money Is and Content Should Be
Consumers tend to be more willing to spend for services that meet an interest or demand than for non-interactive content, which, according to a survey from Viximo represented only 18% of 2009 virtual commerce spending. Even media darlings like the Huffington Post have extremely modest per capita revenues because they have failed to break out of the advertising-supported model for delivering flat content. According to a recent article in Newsweek, HuffPo will generate $30 million in advertising this year from its nearly ~24 million unique monthly visitors and is only recently profitable.
By contrast, from an article in this week’s Washington Post:
More than 200 million people play social games every month. . . . The business opportunity is enormous, even though playing the games is free. Users can buy add-ons and move through game levels faster by spending a dollar here, 50 cents there on what amount to nothing more than virtual objects on a screen. Analysts predict more than $835 million in such transactions this year. . . . The games can be played across platforms — if you’re away from your computer and your wheat needs to be harvested, you can do the work on your iPhone. A simple text message tells you when it’s time.
Are publishers in denial that consumers want and will pay for better, more targeted, and more relevant services? Is this simply an unaccustomed way of thinking about customer needs at an individual level?
The new status quo is that consumers are constantly inundated with free content but are rapidly flocking to demand-based, interactive services and are making freemium purchases in that context. Content providers can meet this reality head-on by wrapping content in value-added service layers that address consumer needs and support collaboration (sounds simple). Then, the remaining challenge to anticipate and overcome is the transaction.
What It Takes for Consumers to Pay
Consumers will pay for content services only if demand-based purchasing can be made convenient and seamless enough. In Asia, micro-commerce and phone payments have been broadly implemented. Companies like Facebook, Google, Zong, TwitPay, and Flattr are making progress in this direction, and the U.S. consumer market is ripe for a ubiquitous, demand-driven micro-purchasing system (or iTunes model) that spans devices, platforms, products, and services.
Currently, this only exists in the online gaming space.
According to Flattr, whose system for monetizing online content across websites is explained in this YouTube video:
Micropayments are the Holy Grail of online exchange. Being able to pay for the content you like, even if it’s a small sum, makes a huge difference.
For further encouragement that micropayments can amount to something substantial, one can look to Zynga, which raised more than $1.5-million for relief to Haiti in January from players of their Farmville game.
Provided that micropayment capabilities continue to develop, there will be new opportunities for publishers and others to monetize content-related services online versus simply delivering flat content. This may sound like a minor distinction. In fact, there will be far-reaching business implications that require a strategic and operational re-orientation.
Despite these challenges, there is a real need for publishers to think outside their traditional roles and participate in developments in the e-commerce and virtual services sectors.
Publishers pursuing a growth curve may discover that good things come in virtual packages. Those who can’t make the conceptual leap may find themselves in the back seat of a car moving at Web-speed with consumer service companies at the wheel.