Modified News Micropayment Model

At the 11 th Annual International Symposium on Online Journalism in Austin, Texas, Geoffrey Graybeal and I presented our Modified News Micropayment Models to an audience of news professional and academics from around the country and the world.  An extremly constructive discussion ensued at the symposium and has contined since surrounding our model.

The following covers the main points of the discussion.  The first piece is a blog piece written by Robert Rich after an interview with Geof which give a barebones look at our arguments (please see [PDF] for full explanation of the model).  The second blog encompasses the major points of the discussion and our response to those points written by Geoffrey Graybeal.

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Business model ballyhoo: the micropayment idea (by Robert Rich)

The notion of a business model for online journalism, one that is both reasonable and money-making, is a topic that gets tossed around in some form or another every year at the symposium. But now, perhaps more than ever, the issue is at its most relevant, with The New York TImes announcing its planned move to a pay model, and the almost complete certainty that other organizations will follow suit.

That is where Geoffrey Graybeal comes in. Along with co-author Jameson Hayes, Graybeal, a journalism professor and PhD student in the University of Georgia Grady College of Journalism and Mass Communication, is the author of The Case for a Modified News Micropayment Model on the Social Web, a paper that explores the idea of small, per-article payments of perhaps one to five dollars.

“The paper looks at the existing literature, both industry and academic, on the topic in the last 10 to 15 years, and is largely theoretical in the way it analyzes the issue,” Graybeal said. “This idea is nothing new though, when the web first started there was talk of a business model and micropayments and the like.”

The model that Graybeal and Hayes explicitly look at in the paper contains four primary factors that make the idea of micropayments a feasible and attractive idea. The first is the concept of socialization and sharing.

“The idea of socialization and sharing comes from the notion of being a trusted source,” Graybeal said. “On Twitter, I will retweet links and stories from people I follow. A former classmate of mine, when she posts news on Facebook and Twitter, I will look at it, because I know if she puts it up, I will trust it. Now, if organizations start charging for content, how do I know that I should follow a link if I am going to have to pay for it? You trust the people you know and that are in your peer network.”

The second major aspect of the concept is the idea of microearning, in which users can earn credits via things like attracting readers to stories. The catch, however, is that the credits do not necessarily have to be real dollars and cents.

“Look at hotels,” Graybeal said. “They have rewards programs that allow customers to earn points, and news outlets could move to this and retain control over their content. Think of things like Times Tender or Wall Street Journal Bucks.

Next on the list of factors is something that anyone close to the journalism industry recently has heard, the notion of local focus.

“This deals with the idea of the competition factor,” Graybeal said. “The question that says somebody else will have this information for free, so why should I pay for it? With local newspapers and news outlets, that is often the only place that you can get that information. If local stories went to micropayments, there would not be free alternatives. Nobody else is going to that school board meeting. Local news organizations can determine their own sort of currency.”

The final factor is the idea of a centralized banking system, whereby users can convert some of the points they earn into real currency, via things like Google Checkout and PayPal

The paper is sure to be fascinating and should garner plenty of attention at the symposium this year, a factor that is always uplifting for first time attendees like Graybeal.

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Continuing the ISOJ discussion about ‘MNMM’

wanted to use this forum to thank those who commented on the “Modified News Micropayment Model” that me and Jameson Hayes presented today at ISOJ.  I wanted to respond to some questions and issues raised about the model.

Alf Hermida, on reportr.net, ponders “whether this is an approach that is too radical for the news industry.”  Maybe, but time and time again speakers at the session spoke of the need for news organizations to shake up the status quo, to innovate, to invoke sweeping change.  In short, to try radical new approaches.

Hermida also points out that whether consumers are willing to pay for news is a hotly debated topic, to say the least.  I’ve conducted survey research asking whether people are willing to (micro)pay for news, and under what conditions. I’m not alone. Nielsen and WAN have conducted extensive surveys, as have other leading research organizations.  While I advocate solid research studies such as these, I think you have to take these with a grain of salt given they are asked in an environment where free is the norm. If you ask me whether I would prefer to pay for news or get it for free, I’m going to say free every time. But if the news industry forces the issue by putting its content behind a paywall and pay becomes the industry standard, the issue becomes null and void. The question is no longer whether I would pay for news, but under what conditions and whose news I choose to pay for.

Our research also looks at the existing academic literature on how to influence consumer willingness to pay (WTP), which suggests that consumers are more likely to pay once the pricing point has shifted into a “foreign currency.”

Another issue that was raised was the viability of advertising as a sustainable business model.  A student pointed out that Google has been quite successful with its search advertising model.  First, newspapers have historically relied on an impressions-based advertising model, not a search one.  As the publisher of the Dallas Morning News noted, this revenue model is waning.  Secondly, the future of advertising is a social one (advertising on and through social sites), not through search.  Search advertising is flawed in that it does not take into consideration the context of words.  If I write “I hate Florida Gators” in my email, Google’s AdSense software will provide me ads for Florida Gators.  Social advertising provides the necessary context.  Advertisers can send me targeted information about their products that I voluntarily follow on social media sites.

Furthermore, Google makes some of its money off the content it aggregates that newspapers create.  Rupert Murdoch, for one, is quite angry about this. This is one of the reasons news outlets want their content behind pay walls in the first place.  And finally, most newspapers cannot generate enough eyeballs to make search aggregation advertising a fully sustainable business model.

And finally, some Twitter users took exception with my example of paying for ringtones on a phone as an example of why we would be more willing to pay for news on the phone, than online, because we are more naturally conditioned to pay for mobile content.   Some news consumers also pay for mobile news apps now.  Once that new distribution platform is in place and we become accustomed to receiving news content on our smartphones, will we miss it once news companies flip the pay switch?

Time will tell.  Our model is an abstract theoretical model that relies on many existing technologies and factors that already exist on the Social Web.

We hope that a news partner, or partners, will seek to implement our model.  Will it work? We don’t know.  The current system, however, is broken.  We need action.  We need radical change.

Inaction guarantees failure.

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