Are We Ready to Play With Pay? The Content Value Reproposition

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Free Digital Content Is More Than a Habit

Many publishers like to regret the "misstep" of letting their content run free for the first 15 years of the internet, which established "bad habits" they now hope to reverse with pay walls and limited exposure on search engines. They miss the point, say defenders of the free model. The internet has changed most fundamentals of media, from content distribution to scarcity, discovery and even brand value. Traditional media made their ad models work because they controlled both the supply and distribution of content around a limited set of brands. Sponsors paid dearly to be a part of it, and consumers had only a handful of options. The internet is an infinite inventory of content with no barriers.

"Google is the oxygen of the internet," says Patrick Keane, CEO of associated content and the former head of ad sales at Google. News Corp. and AP have threatened to remove their content from search engine indexing or to put it behind sub walls, which Keane sees as pure folly. "There is no real scarcity, and trying to create scarcity through subscriptions or non-indexing is choking off your oxygen supply." People will pay, but they will pay through the tariff of sponsorships. "I have been doing this for 15 years, and I think advertising will be the opportunity to sustain these franchises."

Users still value "quality brands," media moguls counter. However, some digital publishers argue that even there the web has changed us. Keane's massive content engine aggregates 300,000 contributors to pump 2 million pieces of niche content into the search-driven ecosystem, and it rewarded him with 20 million monthly uniques. "They are now more comfortable with brands they aren't familiar with," Keane says. The audience's relationship to content has changed with the internet. The "quality" moniker big media once enjoyed is eroding as people see search engines lead them to "good enough" alternatives.

Quality isn't what it used to be. Why pay for classifieds when craigslist is free, asks Nick Veneris, CEO of Xomba, a user-generated content provider that has 3,500 users creating content expressly designed to get picked up in search engines. "The public is more interested in ‘free' and effective than something that might be more appealing to the eye," he argues. And anyway, users can see that much of the branded media providers are themselves reusing wire services and the reporting of others. "Maybe the failure lies in journalism more than it does in free content."

Like many defenders of the free content ecosystem, Veneris says that if big media want to raise the pay wall and pull content from search, fine-bring it. "I would love for everyone to go to paid content. That gives us more market share. It pushes our content use up higher in search." In just 2 years, Xomba has fed 73,000 articles into the web. "When someone posts an article it gets into Google in 15 minutes," he says. And the AdSense ads that run along the landing pages are split between Xomba and the author. "We can give it away and still make a profit. Newspapers and traditional media will fail at charging for online content."

In some measure, recent statistics bear out these claims about user comfort with free. A Harris/AdWeek poll of 2,000 U.S. users found that only 23% would be willing to pay to read a daily newspaper online. A 2009 Outsell survey finds that 75% would look for a free alternative if their local news provider restricted access to subscribers. Only 6% said they would pay for online-only access. And there really is not much reason to believe that the ad/paid revenue mix is going to change, says Anthea Stratigos, co-founder of content consultancy Outsell. Like enterprises, household spending on content is fairly static. Digital is not the villain here. "Consumers have been buying magazines and books for years but have been accustomed to low prices, subsidized by advertising or qualified circulation and libraries. If you look at a bar chart of paid versus ad-funded content from 2000 to 2010, it is about the same. I don't believe we will see a shift."

Of course, others within the traditional media simply do not agree that brand value, control of distribution, and reader discrimination have gone away or even that the user-generated content models of Keane and Veneris are themselves sustainable. "I think the novelty will wear off," says Clare Hart, former EVP of Dow Jones Enterprise Media Group, who spoke to us before leaving the company in early 2009. "The blogger who is making $4,000 a year is not going to be able to continue," and free alternatives do not keep people from paying for quality. "Look at water," she says. "People pay for bottled water."

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