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April 20, 2023

Micropayments for news: With the right tech, revenue model could still take off

Micropayments are the revenue solution that won't go away. But can they ever work for news?

By Aisha Majid

Micropayments have long been touted as a solution to the revenue challenges faced by the news industry in the internet age, but have never taken off.

“Both [the ad-supported and subscription] models are under pressure,” believes Dominic Young, a former News UK executive and founder of micropayments platform Axate.

Free, advertising-supported journalism intended to chase clicks and therefore ad revenue has downgraded the news experience, he says.

Subscriptions, a widespread reader revenue model, are working but only for a handful of publishers, while even success stories such as the Washington Post are starting to lose subscribers.

Generally, a conversion rate of a website’s audience of a few per cent is considered healthy. For Young that represents a huge opportunity.

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“There’s no model that serves the middle market at all in terms of the mass market of people who used to pay for news but no longer do because they don’t want to subscribe. And there’s increasing dissatisfaction amongst consumers with ad-funded sites. So I think there’s a big, big opportunity sitting there in the middle,” he says.

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“There are more people in the market willing to pay than willing to subscribe and that’s where casual payments come in. It’s more about aligning the payment with the real life behaviour of users, which is actually quite a casual, frequent and spontaneous interaction with a whole variety of news brands, not just one or two.”

Celebrity gossip newsletter and website Popbitch started trialling micropayments in 2018, signing up 3,000 readers within the first year of launch.

While the publisher has since mostly moved away from the use of micropayments for single articles, a pay-as-you-go approach to news aligns better with how audiences use the internet, says Camilla Wright, Popbitch’s founder.

“I don’t see a particularly good way forward without micropayments because I think that’s how people use the internet by kind of grazing and going from site to site,” she says.

One concern is that subscription-based models increasingly make news a product for those who can pay for it. Almost half of news leaders (47%) surveyed by the Reuters Institute at the end of 2021 said they worried that subscription models risked leaving behind less wealthy or less educated audiences.

“I’ve always really liked the idea of having a product that’s open to anybody who wants it,” says Wright. “And if you set micropayments at the right level, it doesn’t really price out anyone who wants to read [your content].”

Wright had been hopeful that more publishers would sign up to use micropayments alongside Popbitch.

Take-up has so far, however, been low among news publishers. Just 6% of news leaders surveyed by the Reuters Institute said micropayments were likely to be important or very important for their company in 2023.

Some initial adopters have also moved away from the idea for now. Dutch online news platform Blendle, one of the better-known experiments in micropayments, shifted away from casual payments in favour of selling subscriptions. The New European, which put in place a micro-paywall that charged readers 10p for premium articles, dropped casual payments in favour of membership. Reach experimented with and then took away micropayments for its Examiner Live site in 2020.

Making small payments just for the news you want to read, on the face of it, makes sense. But why has the model not been adopted more widely?

Technology: lack of a standard payments protocol for online news

The gaming industry is sometimes touted as an example of how micropayments can work. Gaming and news, however, do not have much in common, says Joseph Teasdale of media analysts Enders.

While the economics of gaming is supported by a small fraction of heavy users that will spend hundreds of dollars per month on in-game currency, “you’re not going to find someone who’s spending $1,000 a month on news articles,” he says.

Crucially, mobile gaming also benefits from universal payments technology built into Android phones and iPhones that make in-game purchases easy. There’s no universal solution on the internet that is popular in all markets.

While companies like Axate and other micropayments platforms are solving some of the technological hurdles, a widespread solution is still elusive.

“It will probably take quite a large shift to to make the micropayments model viable for more media. You want a standard payments protocol that enables very small payments that everyone was using all the time and for it to be low friction, highly familiar and for it to be a kind of approved model,” says Teasdale.

‘Dilutive’ to subscriptions strategies

Subscription publishers also worry that by making it easier for people to be less committed readers might take them up on that option, eroding years of work in building up their subscription businesses.

“They see it as dilutive to their strategy. [Many] big publishers now have a really clear course strategy around subscriptions,” says Teasdale.

Even though research shows that a few big publishers benefit from the lion’s share of all subscribers, many publishers, says Wright, tend to think that “their subscription is a subscription that everyone’s going to want”.

“You don’t want to take the chance of cannibalising it with people who want to spend 50p twice a week,” she says.

While most casual payments are set quite low, articles would need to be priced higher to work for subscription publishers, says Teasdale. Readers on the other hand prefer to pay less.

“People do like the idea of paying a small amount to read an article but when they say a small amount they mean pennies. Whereas when you talk to a publisher they tend to think, ‘well, if we can get someone to pay £2 to read this article, then that’s a reasonable alternative to bringing them on a subscriber. That gap is a bit of a problem for the model,” he says.

Young, however, believes that subscriptions and casual payments can be complementary.

“This isn’t an either or relationship. This is about acknowledging there are customers in the market for whom your current model doesn’t work even if your product does. And they’re the ones who ought to be the next lowest hanging fruit,” says Young.

Casual payments: a way to move readers to subscribe?

“[Casual payments] works very nicely with subscriptions because it provides a an easy way for people to sample without having to do massive discounting,” he adds.

The Maidenhead Advertiser, which uses Axate’s technology on its website, allows readers the option of paying 40p for a day’s access to the site or £2 for a month.

Independent local news site Cornwall Reports, another Axate user, also offers readers the chance to buy an article on a one-off basis or to use Axate’s technology to subscribe for £3.50 a month.

While Cornwall Reports founder Graham Smith says that casual payments can work when the site has a strong exclusive article, they are ultimately more useful in helping funnel readers towards subscribing.

“Far more of the flow is from people who started off as 20 pence-an-article subscribers, but found that they were spending more than the minimum subscription that way,” says Smith. “You don’t need to buy that many articles before you’re spending more than that and so it’s it’s much better value to be a subscriber.”

“It’s probably one of my most powerful recruiting agents for getting new subscribers,” he adds.

While Cornwall Reports only has minimal overheads, the economics of micropayments do not stack up as a standalone model even for the micro-sized publisher. Only a tiny fraction of its readership who happen to be interested in niche areas such as Cornwall’s health service or the police force sign up to read articles on a pay-as-you-go basis, says Smith.

“If anything the trend is has been away from micropayments within all the money that Axate actually gives to Cornwall reports,” he says.

Wright too sees the potential for increasing the share of turnover coming from premium newsletter subscription services delivered through Axate.

Casual payments platforms, believes Young, have potential among local and niche publishers who would otherwise struggle to sell a subscription to a product that is unlikely to be anyone’s main news product, but he does not discount the possibility of big name subscription publishers turning to micropayments.

“If you can create ways of publishers experimenting with things that don’t require them to change course but are clearly additional to and experimental then it’s a lot easier to get over that kind of cultural inertia than exists,” he says.

Axate has currently signed up 15 publications across 12 publishers and says it is in discussions with a number of subscription publishers in the UK, US and Europe. Among Axate’s customers is National World title the Yorkshire Post and the publisher says it will be rolling out its platform on some of its titles in the future.

“The legacy media industry is quite sheep-like. If one big name did it, everybody would. But without that it’s just been smaller sites that have tried it,” says Wright. “We’d love to be able to use micropayments but because nobody else is using it so we don’t use it much now either.”

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