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We’ve pointed out before how Facebook and Twitter face the same kind of problem that the mainstream media industry is struggling with — namely, finding enough advertising revenue to make up for the fact that they are essentially giving away their content (or in the case of Facebook and Twitter, giving away a platform for users to publish their own content). A recent piece in the Columbia Journalism Review argues that Facebook is much more likely to make this ad model work than a newspaper, but why is that the case? One reason is that the social network knows a lot more about its readers than any traditional media outlet does, and as the media business continues to evolve, that knowledge — and the larger bond that a newspaper or any other media entity can create with its readers — is increasingly important.

Ryan Chittum’s piece in the CJR takes issue with a recent Washington Post story on Facebook for a number of reasons, including the fact that he doesn’t think the paper really understands the social network or its finances. But he also finds it ironic that the newspaper — one of the few major metropolitan media outlets that hasn’t implemented a paywall, primarily because of chairman Donald Graham’s opposition to the idea — is castigating Facebook for pinning all its hopes on a free platform that is monetized by advertising, when that’s exactly the same model that the Washington Post is built on (Chittum recently catalogued some of the Post’s financial woes in a separate piece for the Columbia Journalism Review). As he puts it:

There’s all kinds of irony about the Washington Post slapping a company for a ‘give-it-away-free approach’ that has hurt share prices… But mostly it’s that the WaPo, instead of looking in the mirror, uses an extremely profitable company to frame a story about how hard it is to make money without charging on the Internet.

Does a paywall help you get to know your readers?

As Chittum notes, Facebook is currently making billions of dollars in advertising revenue (although that still isn’t enough to make many investors happy, considering the fact that the company has close to a billion users, and the social network continues to struggle with low engagement rates for its ads and skepticism on the part of advertisers). But why is Facebook profiting from this kind of model while newspapers like the Washington Post and New York Times continue to see ad revenues decline? One big reason, apart from the sheer size of the Facebook user base, is that users spend orders of magnitude more time on Facebook than they do at the average newspaper website or even with the average newspaper mobile app.

In a recent post about the news industry and metrics around journalism, media developer Stijn Debrouwere made a good point about how the media business tends to look at its users, by comparing it to the early days of both Twitter and Facebook. As he describes it, in the early days of Twitter the company was concerned about how few users they had, while Facebook paid more attention to the amount of time and the levels of engagement it was getting from its users, rather than the sheer number. The lesson to be learned, Debrouwere says, is that:

“Optimizing for retention is what allowed Facebook to become what it is today. The news industry is like early Twitter when we should be like early Facebook.”

So how do you optimize for retention? I’ve argued in the past that simply throwing up a paywall around all (or even most) of your content is no way to encourage a relationship with your readers, unless you want them to see you as simply an impersonal transaction. Instead, why not try to figure out what your readers or users are really interested in and then find a way to give it to them in a way that is appealing to them — so appealing that they might even volunteer to pay for it? This is the idea behind what former Washington Post managing editor Raju Narisetti and media analyst Jeff Jarvis have both called a “reverse paywall.” Instead of just hitting readers with a “pay me or else” notice, you offer them rewards — doesn’t that sound like a better foundation for a relationship?

Get to know them, and then sell them things

In a post at the Nieman Journalism Lab about the New York Times, digital-content veteran Rex Sorgatz outlines some of the things that the newspaper could do to build more of a membership approach — or what I’ve called a “velvet rope” approach — to its business rather than relying solely on the blunt instrument of a paywall. Whether it’s ebooks or live events or discounts on venues like the Museum of Modern Art, there are all kinds of ways the paper could get to know its readers and what they like, and then find ways of charging them for it. Newspapers like the Times of London are already doing this, and The Guardian seems to be moving in that direction as well (and we know that the NYT has looked into it before as well).

The best part of this model is that it doesn’t just try to replace advertising revenue with a paywall or subscription revenue — getting to know your readers and their interests better can also help a newspaper or any other media entity target advertising better. One of the reasons why advertisers are so enamored of Facebook and other social networks is that they can target specific niche groups or demographics or locations within the broader market, like expectant mothers or high-spending seniors. What do newspapers know about their readers? In most cases, very little, other than the vague generalities that phone surveys produce.

The sooner newspapers start to think about their users as partners with whom they have a mutually beneficial relationship — rather than as an undifferentiated mass of wallets who hit the paywall at some random moment and then get out their credit cards — the better off they will be.

Post and thumbnail images courtesy of Flickr users Montecruz Foto and Giuseppe Bognnani



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