Big hopes for small payments

As old media searches for new monetization options, a big publisher tries a tactic written off for dead

A big publisher tries a tactic written off for dead

Clay Shirky is one of the most revered and respected thinkers on the impact of the web on culture and media. He’s also a very vocal critic of micropayments—one-time payments for individual pieces of web content. Why? Because consumers don’t like them, he says. “Small payment systems don’t survive contact with online markets because we express our hatred of small payments by switching to alternatives,” he reiterated in a much-cited 2009 blogpost. “Such systems solve no problem the user has, and offer no service we want.”

The stigma around micropayments is so strong that few publishers have been willing to try them. But as it becomes clearer that legacy media need new ways to monetize online content, alternatives to the paywall – which consumers don’t have much love for either—are growing in appeal. At least one big player thinks Shirky is wrong and it’s time to give micropayments another shot.

In August, men’s magazine Esquire started charging readers $1.99 for “The Prophet,” contributing editor Luke Dittrich’s 10,000-word deep-dive on Dr. Eben Alexander, the neurosurgeon who says he visited heaven in a 2008 near-death experience. Upon hitting the page on the magazine’s website, readers see a brief note from editor-in-chief David Granger explaining that “great journalism – and the months that go into creating it—isn’t free.” For those who agree to pay the $1.99, a clean, custom-designed, mobile-optimized, ad-free reading experience awaits.

“It really needed to be a story that we thought was worthwhile, was great reporting and took a lot of time,” says articles editor Tyler Cabot. “We think it’s the kind of content that people should be paying for.”

After two months of the experiment, Cabot says Esquire is pleased with the results, both in terms of lessons learned and paying customers. Around 2.1% of everyone who’s landed on the page has chosen to pay. Because it’s new, it’s hard to contextualize that number. But for very rough reference, The New York Times, with 29 million unique visitors per month and 738,000 paying subscribers, has a conversion rate of around 2.5%.

At least provisionally, Esquire hasn’t found micropayments to be the disaster media analysts predicted. Of course, a decade ago buying a piece of content for under $5 wasn’t really feasible. E-commerce was in its infancy and transactional costs ate up a lot of revenue.

Back then, “if I wanted to sell something for $2 directly from my website, that involved an IT project and months of planning,” says David Restrepo, chief strategy officer at Tinypass, the e-commerce platform that Esquire uses. The expense of building a payment system used to mean publishers either had to charge for lump subscriptions to make it worth the investment or sell through online stores like Amazon.

Tinypass is one of the companies determined to change that, by providing plug-and-play development solutions that publishers can use to accept secure payments from readers, either for access to specific content like articles or media downloads, or for monthly subscriptions. Using Tinypass, small independent sites like Andrew Sullivan’s The Dish can profitably charge readers as little as $1.99 per month for access, and they can get direct access to customer data. For Esquire, the technology makes it possible to sell articles to readers without sacrificing revenue to Amazon to get it packaged as a special interest e-book. It also means Esquire could run its own ads on the page, if it felt its readers would okay it.

For now, most of Tinypass’ 200 clients have chosen the subscription approach, with an average charge of $9 per month. But Restrepo, like many digital natives, envisions a mixed-revenue future where publishers pursue a variety of monetization strategies at once. One creative strategy he suggested for longform publishers like Esquire or the New Yorker is to make micropayments count as credit towards a monthly subscription: once you buy five $2 articles, you get a free $10 subscription for the rest of the month. Of course that strategy presupposes that users will save their credit card information with Esquire so they won’t have to enter it every time they buy another article—like buying apps on the Google Play Store, or songs on iTunes.

For Cabot, having the content live on Esquire.com was a dream come true. “We could control it in every way,” he says.

With an on-site payment system, Esquire didn’t have to use the notoriously limited e-book developer formats to design the reading experience; direct access to traffic and conversion data was another big plus.

There were downsides, too, like not having access to Amazon’s massive promotional infrastructure – its display ads, retargeting, customer ratings and recommendation engines. One thing that became clear was how much consumer reviews and aggregate ratings encourage new visitors to convert, a mechanism Esquire hopes to integrate into future attempts.

And there are going to be future attempts. “We were very happy we did it,” Cabot says. “This is our sense of where things are going. But anybody who tells you exactly how it’s going to work out isn’t quite sure themselves.”

This story originally appeared in the Oct. 21 issue of Marketing, now available on newsstands and to our subscribers (who can read it on their iPads, by the way).

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