Nieman Foundation at Harvard
Tony Haile learned a lot of things about news during his seven years building Chartbeat, the analytics platform used in newsrooms worldwide. One of them: “Attempts to get this industry to work together have been slow at best.” Amen to that, one of the biggest hurdles to innovation over the last two decades.
Will Scroll, which will launch next year, succeed? Haile is the first to tell you it’s a crapshoot: “We’ll see. It’s either going to be a massive success or a massive failure.”
The publishing world certainly knows it needs a new shot of revenue, and hopes Scroll might be on to something with its monthly ad-free $5 subscription to “premium news” across many different news sites. But under the surface of Scroll resides a set of ideas about news publishing in the late 2010s. Whether Scroll ultimately succeeds or not, Haile is tackling vital questions about publishers and their readers, about experience and payment. Chief among them: Many top news organizations have done a decent job getting their most dedicated readers to pay for a digital subscription. But how can that next tier of customer — people who read and value your work, but whose news consumption goes across many different sites and who are unwilling to pay for a dozen subscriptions — be made to pay too?
He and I had a couple conversations recently about Scroll and how it fits into today’s news landscape. Here’s a lightly edited transcript.
This is the good thing about having all that Chartbeat data as well. I know that, for every single site that I can think of, the majority come once a week and read one story. It’s that kind of Pareto curve. That means that you can get a certain amount of money out of that top percentage, but I’m not sure how much that translates down and how far you can grow it. Maybe you can grow it to 5 percent of your audience.
So can I build a kind of high-information, low-friction product before you have to become a super fan? That’s kind of how I’m thinking about it.
But Netflix came out of nowhere, essentially, and established a new habit of 50 million people in the U.S. subscribing.
It’s not binary, as it is in cable. If I’m a casual fan and I want the USA Network, then the only way I get that is by signing up for cable. Even if I only want to watch it for like one episode a month, the only way can get access to any kind of content is signing up for the bundle.
The same thing with newspapers. It was binary: You either had it or you didn’t. By having metered models, casual fans get zero value from any kind of all-access pass — because they never even see a paywall in this context.
The audience that is viable for a bundle or an all-access pass is the sliver of the New York Times audience who is also hitting the paywall on The Washington Post and also hitting the paywall on The Atlantic.
It’s a far smaller percentage of audiences who actually find value. That’s why none of these things have really worked. And the things that people have even tried have been built as separate apps. None of those things ever get to scale because they sit outside discovery paths. Yeah, that combination of the economics of bundling plus the way in which we discover content and meter content makes any kind of all-access pass basically nonviable, at least to scale.
But the big sites want people to get frustrated and pay and then forget about it, versus them thinking like, “Oh, I can give them 10 cents every time I go over the limit.” It’s like a gym membership.
If you’re a publication, it makes no economic sense for you to do that. If you try to do it in the Blendle pathway, which is again separated into an app, then you still have these problems.
You have an information paradox: the value of the information before you read it is unquantifiable, and the value of information after you’ve read it is zero, because you’ve already read it.
Then just the cognitive friction of it all, so you’re just replacing one form of cognitive friction with another, and that doesn’t really tend to work. That’s why I love Alex [Klöpping, CEO of Blendle]. I think he’s a great, very smart kid, but Blendle is struggling, even in its home market.
[Note: Klopping disputes that it’s struggling in the Netherlands. “We beat our own quarterly revenue record last quarter, and did the same the quarter before,” he told me last week. “We’re at 1.5 million registered accounts in the Netherlands (the Netherlands has 16 million inhabitants). Fifteen percent of those users pay with micropayments. We have 34 publishing partners in the Netherlands that together have 140 titles on the platform.”]
Then, the interesting thing for me was to look at ad-blocking not so much as a problem with publishing, but as more of a consumer signal. In TV, that was what you had — you had increasing ad loads, which led to the consumer signal that was TiVo, and then led to the consumer signal that is Netflix. Music had similar kinds of frustrations, leading to SiriusXM, torrents, LimeWire, and that stuff, then leading to Spotify.
In media, you’ve had increasing ad load, increasing frustration, consumer signals, and ad-blocking leading to…what? So, the question for me was: Is there an orthogonal way to get direct consumer revenue? Not from access, but from experience.
Is there a group of people who will pay in general for an ad-free experience across X number of sites, or whatever? I kind of started with that, and there’s a few problems that you have to try and solve for. Because there’s a whole ton of corpses in this particular graveyard.
You don’t have to X out the ad, you don’t have to wait for the preroll, whatever. That was what I was interested in. In general, when people have looked at this in the past, they’ve said, “I’m going to create this amazing app. It’s going to be a beautiful app, it’s going to be kind of Flipboard-esque — and all you have to do to use it is change everything about how you discover content.”
There is someone who isn’t a Scroll user and isn’t a Times subscriber. They get ads on 10 articles.
There is someone who is not a Scroll subscriber, but is a Times subscriber — they get ads on unlimited articles.
There is someone who is a Scroll user, but not a Times subscriber — so they get an ad-free experience on NYTimes.com, but then after 10 articles, they hit the paywall.
Then there is someone who is a Scroll user and a New York Times subscriber, and they get unlimited articles, ad-free. Those are the four quadrants that you can possibly be.
There are two things going on there: One is access, so you get more than 10 articles. The other one is experience.
The other key thing when you’re looking at this model is the thing that got people in trouble in the past has been this desire to try and merge the two. They’ve tried to do access and experience. When you try to do that, when you try to merge The New York Times’ subscription revenues as well as their advertising revenues, that’s where the economics start to really break down. We’re avoiding all of that. The New York Times, the subscription basically exists almost in an alternate universe to our ad-free experience in that context. Does that all make sense?
By doing that — having the two distinct brands — we can kind of connect messaging for those two different sets. It’s like — I like to use airline analogies — no one confuses TSA Pre✓ with business class.
You want to try and deliver an experience. The experience has to be where the consumers are, because if you’re going to ask any of them to pay, that’s like the one hard thing you can ask them, and you can’t ask any other hard things.
Then we had to look at how you do it. So no matter where they’re coming from, whether they’re coming from Facebook, email newsletters, blah blah blah, they get beautiful, fast speed. That means integrating into the sites.
Then the other side of it: How the hell do you make the money work? One problem is the actual general price itself, where at the bottom end, you’ve got to be able to distribute enough cash, at an industry level which can beat the opportunity cost of ad revenue. Publishers have to make more money from this than they would have from advertising. Which, thankfully, is increasingly easy to do.
Which means that if I wanted to do a 70/30 split, my minimum viable price is like $3.60 or so. That’s my minimum, and then I had to look at what consumers were willing to pay. Did a bunch of stuff around that.
Generally, the optimal price point of that acquisition is around $5. So that’s good, because it gives me a $3.50 pool — gives me like a 40 percent lift across that. [That’s the $3.50 in reader revenue compared to the $2.50 in ad revenue.]
So one of the fun things that we’ve been trying to work out — and have worked out, thank god — is basically how the hell we can say to consumers, “Here’s one flat $5 payment a month. In return for that, across the top X sites on the web, you never have to get annoyed ever again.”
What I’m trying to think about in some ways is that kind of middle of the funnel.
Those two things do not work in concert with each other. So the thing that I’m interested in is: “Can I take, at the network level, a kind of a broad group of people and convert them?” So, like, we get it: “You don’t know where you’re going to be reading next week, because you get your news through Facebook, you get your news through Twitter. You don’t even necessarily know the site that you’re on right now. But you know the experience that you want when you get there.”
You don’t want to have to click away popups, you don’t want to have to deal with Outbrain or Taboola shit.
For $5 a month, Scroll can offer a more engaging experience on the site. It means the users are more engaged, especially those further down the funnel. And then, because I already have registration information and payment credentials, at that point where they hit a paywall for whomever, The New York Times, the Star Tribune, The Washington Post, it can then be one click to get them through and get them signed up.
These are the things that I’m kind of interested in and playing around with right now. What’s the group of people who will pay for experience in the way that people will pay for premium Spotify, pay for ad-free Pandora and Twitch and Hulu and YouTube Red and so forth? Is there a viable network to be created there?
How does that one make more money on a per-user basis for each publisher, so that they know they’re not losing any money, and how does it help improve that kind of subscription down to like the access part?
We can be casual fans across a network. That means there’s a much, much broader audience as we go. If we were to apply standard kind of premium models, which is like 10, 15 percent of an audience converts — when there’s 10, 15 percent of a network audience, you can get quite large. So that’s how I think about market size. The vast majority of people are still going to be ad-supported, still going to be going down the free options. But can you get 15, 20 percent of people to pay for ad-free?
To give you the Spotify example, about 50 percent of the people who convert to pay for Spotify do so just to get rid of ads. What, they’ve got like 40, 50 million people now? [Spotify reached 60 million subscribers in July, up 10 million from March.]
The whole point here has been get beyond the super fans and be able to find some way to directly monetize casual fans. Because there are a lot more casual fans than there are super fans.
On ad-free, the interesting thing for me, once we go beyond that, is what can you build when you no longer have to make a real-time call to the ad server to show someone something. It makes audio versions of articles super easy. It makes offline really easy. It does all kinds of fun things that you can do.
But to begin with, the very first thing it should do is remove pain. Right now, you can do that by removing just the friction of people’s lives.
I don’t actually think people have a problem with ads. They have a problem with friction. If we can get the friction out of the way so that someone, when they go to the web, it’s fast, it’s beautiful, they’re not distracted, they just get to read the things they wanted to read — if we can do that while also making more money for publishers, then that’s kind of a web worth fighting for, I think.
But if they are a Scroll user, it says: Don’t load any of the ads. Don’t load any of the Outbrain or Taboola. Then what we do is we track the behavior of that user on the page, and that helps us to distribute the revenue to The Washington Post, in this context, that would make them more money than they would have made from advertisements.
So the way that we’re doing it is that there’s a 70 percent split. Fifty percent of the gross is done on share of attention. So the more engaging your content, the more money you make. I didn’t want to do any kind of model that would prioritize or encourage clickbait or any kind of crap. By doing it on a kind of share of time spent, you have, generally, the kind of more premium content catching more engagement — and also video is more expensive on the ad side.
But yeah, I’ve got to try and persuade enough publishers that the model works and that they should be innovating in this kind of way to make it real. I’ve been super lucky thus far, and we’ve had a tremendous amount of support and help, but it’s still the big challenge. With all of these things, in general, attempts to get this industry to work together have been slow at best.
Yeah, I’m kind of fascinated by it, though, because it does show something, which is like basically with that top 2 percent or so, if you just give them a reason to give you money — or an opportunity even, not even a reason, an opportunity to give them money — you can probably get money from them.”
