Stephen D. Hassett

Content wants to be free? Too bad content, it's not your choice.

Rather than reasserting ownership in the face of possible extinction, many content owners, especially newspapers, wrestle with subscription models but fear that users, who view the content as free, won't pay. Many have observed that publishers have conditioned users to think the content is free. The New York Times exemplifies this struggle as it announced a complicated pay wall for frequent visitors.

Bad business models are often build upon false assumptions. Case in point: free content. Ad-supported content is not free; advertisers are paying for the expected time each viewer spends watching a commercial or looking at a print or online ad. The audience is paying with their time.

Before DVRs, or at least VCRs, TV ads were unavoidable. Radio spots still are. Online pre-roll video ads are like going back to 1990s before DVRs and VCRs had any impact. No wonder they are so valuable. They guarantee delivery of a slice of viewer time.

Consider the math. At a $50 CPM for a 30 second pre-roll, an advertiser is paying for each of those 1,000 viewers' time at a rate of five cents for each 30 seconds, or $6 per hour. In other words, viewers are yielding their time at less than minimum wage! This inefficiency creates opportunity to improve the monetization of premium content.

I think the reason many users are reluctant to pay for content is that the cost for not paying is too low. Most online ads are so passive the audience is not aware an exchange is taking place. The antidote to poorly monetized content, particularly from valuable sources such as the online versions of newspapers and magazines, can be found in a two-pronged approach. First, adopt the approach for online static content that is already in place for video by significantly increasing the use of intrusive, even uninterruptable, video ads and with increased frequency.

Intrusive ads enable the second prong -- offering a pay-model as a benefit. Allow users to opt out of the intrusive ads in exchange for paying a subscription fee. Let's say a user values his or her time at $60 per hour and visits a publisher's site every other day. With 30 seconds of ads per visit, that works out to 7.5 minutes per month or $7.50. Even at a $50 CPM the advertiser is only paying 75 cents for the user's time. Given this, a $3 or $4 per month subscription would seem like a bargain to the loyal user and a boon to the publisher. For a large site such as The New York Times, with valuable content and more than 15 million unique visitors per month, a 10% take on a $3 monthly subscription generates an incremental $54 million in annual revenue.

In the end, the audience benefits by ensuring the publisher can continue to create high-value content, and rather being frustrated with a content meter, they are empowered to choose between paying with wallet or paying with time.

ABOUT THE AUTHOR

Steve Hassett is an independent consultant specializing in new venture strategy, development and execution for web and mobile businesses. Previously he was VP-international and emerging businesses at the Weather Channel, founder of a web and mobile software company, and a management consultant.