All Posts Tagged With: "free"

Almost forgot to plug my latest Editor & Publisher Online column here: “Readers Want to Pay for News Online — So Let Them.”

It’s a summary of the growing number of solutions to allow online users to voluntarily financially support the websites and blogs they visit, or like, or individual stories (and other content). A growing number of Internet entrepreneurs have concluded that asking people to pay for web content rather than demanding them to do so; utilizing networks to make voluntary support of many online publishers easy; and making the barriers or “mental transactions” extremely low to contribute is more promising than competing plans to put price tags or subscription walls on online news. They’re using not only technology, but also leveraging the power of social networking and psychological techniques like “social proof” to encourage contributions.

A lot of traditional media people are skeptical that any scheme to make money on the web by just “asking,” a la National Public Radio or Public Broadcasting Service outlets’ fund drives, can work. A couple of my friends who I’d put in the “digital media guru” category have even expressed dismay that I think the voluntary schemes have a chance at creating revenues streams that amount to more than a trickle.

Because the services I write about in the column are so new, or aren’t yet launched, there’s no track record to cite. We need some publishers to take this model seriously and experiment with these new services, adding optional contributions by online users to their other revenue streams. (Advertising of course will remain dominant for many or most websites, especially news sites, though I can envision some popular, quality blogs making more from reader contributions.)

The knee-jerk rejection of the voluntary model that I’m encountering so much of reminds me of a few years ago when Craigslist really started to boom and chip away at newspapers’ classifieds revenue. Most newspaper publishers and classifieds managers back then dismissed Craigslist as a threat, and even as Craig Newmark and his small team were making paid newspaper classifieds evaporate with their offer of free web ads, the newspaper executives ignored him. Many had not even heard of Craig Newmark, and if they knew what he was doing, they considered him a pesky fly and not a mortal threat.

I hope my traditional-media colleagues will read my column and take it seriously. Otherwise, it will be the bloggers and online entrepreneurs who implement the voluntary solutions first, and they’ll pocket the money as old-media entities bypass yet another opportunity because it falls outside their comfort zone.

My friend Pete Welter passed along some fascinating research about consumer behavior when it comes to free vs. paid products and services. There are some lessons for the newspaper industry as it debates things like micropayments vs. free news content on the web, and how it will handle charging for news (or not) on mobile devices.

“I’ve been reading Predictably Irrational by behavioral economist Dan Ariely — I’m really enjoying his stuff lately — and he has an interesting chapter on the psychological weight of ‘free’ vs. ‘not free’ that would seem to play into the whole micropayment vs. free discussion in the newspaper industry.

“The essence is that FREE is a category unto itself — not just 5 cents less than a nickel, but a very distinct and powerful category when people make economic decisions.

“A few experiements/examples he cites:

1. “At a table in a grocery store, they have an offer to let you buy a single chocolate: either one Lindt truffle (high end chocolate) for 15 cents, or one Hershey’s kiss for 1 cent. 73% choose the Lindt, and 27% choose the Kiss. Now, reduce the price of each by a penny to 14 cents for the Lindt and free for the Hershey’s Kiss. The result: 69% for the Kiss, and 31% for the Lindt.
2. “Given an offer of either a free $10 Amazon gift certificate, or a $20 gift certificate that would cost you $7 — overwhelmingly people will take the $10 certificate even though economic sense says otherwise.
3. “When introduced, Amazon’s Super Saver shipping (free shipping over for orders over a certain dollar amount) caused a rise in order sizes worldwide, except France. Why France? Because for whatever reason, their Super Saver was a 20-cent shipping cost and not free. When they changed it to free, they fell in line with the increased sales of the rest of the world.

“So, if this data holds for journalism, people will be very willing to take the free news even at reduced quality over paying even a few cents for high-quality journalism.”

Ariely also has a blog, and it’s going on my RSS reader. Fascinating stuff. His latest post talks about an experiment at a gas station convenience store, where customers received a $1-off coupon as they filled up. Some coupons had a $6 minimum purchase to get the $1 discount; others had a minimum purchase of $2 for the discount; average store sales had been $4. Result: The $6 minimum-purchase dollar-off coupon raised the average store purchase total to over $4, while the $2-minimum coupons lowered the average amount spent per customer to be below $4.

Before newspapers go too much further on schemes to charge for news content, publishers may want to consult with Ariely or conduct some behavioral economics research.

Here’s a video of Ariely speaking at Google. Be sure to take a look at 27:50 where he talks about an experiment with pricing for The Economist’s print edition and website.