2. Review of search methodology
The aim of this thesis is to find out the features of existing paid models in online news which are already operating successfully. I will also try to measure their effectiveness/importance by various criteria, both objective such as existing financial and quantitative data, and also more partly-objective, such as different expert opinions.
The research will be developed in three main parts:
- Review of types of content which can be monetized, where people show some willingness to pay money (or are already paying)
- As related to the previous chapter, analysis of the personality drivers and its importance while consumers conduct online purchase
- Analysis of existing successful models, their features and their effectiveness in terms of empirical results
For the sake of development of this three-pillar structure, the information will be obtained through various sources such as existing literature – researches, articles, blogs, expert opinions and the consulting project ran by me and my classmates during our practice project.
2.1. Sources for identifying online-chargeable content and consumers personality drivers
The biggest contribution for the author in understanding of this issue were insights from consulting project workshop conducted by the ESMT Practice Project of which the author was a team member in the late 2009. During this project, besides analyzing already available literature regarding topic, the team interviewed different kind of experts and also ran a representative survey among 300 German online readers to understand the areas where customers showed some willingness to pay. According to the results, there are not many areas which can be monetized, but only:
- Deeper analysis of specific articles as an addition to the more general one
- Old archives; plus specific interest areas of some readers
- Local news
- Online sports events
The point is almost completely shared by Mathias Döphner, the CEO of German media company Axel Springer, who held a discussion around the topic at Monaco Media Forum 2009: “There are not many areas where people are willing to pay money: 1) This is finance, which is related to power; 2) Plus sports or games 3) Regional environments, people around you; 4) And then we are coming to two existential areas: sex and crime, or love and death. “
“These are areas where people are generally interested in and why should that change in digital business?” – asks Döphner rhetoric question.
The CEO of Axel Springer also commented the fact that currently most news online is free and called this fact a “structural mistake” which has to be corrected step by step. According to Döphner there is not need of revolution, once most appropriate rules and procedures in legislation already exist. They just need some moderation and then execution. Continuing on the issue Döphner summed up with the hope that in the long run, for hundreds of years, people are willing to pay for things they are interested in. “Commodity news will be for free, but special information, added value services, exclusive information should be charged”.
Currently, there are already obvious movements in the industry towards fixing the “structural mistakes” Mr Döphner talked about. This will be discussed more detailed in chapter 3.2, named “challenges”.
2.2. Personality drivers of consumers to purchase online
Understanding and analyzing consumer drivers while conducting online purchase, is critical for building prominent, profitable business model. However until today there is no perfect study in the area which could claim on being perfect in identifying and analyzing of all motivators which make consumers to pay money online, and what’s more important, all researchers would agree on that claim of this study.
One of the best researches in this field conducted by Wang et al claims that the main factors which affect consumers’ willingness to pay money online and are positively correlated with the one, are consumers’ perceived convenience, essentiality, added-value and service quality. However another research on the same topic e.g. from Choi, Lee and Soriano focuses on following factors: perceived consequences after purchase of product, easiness of use of internet, social factors such as environment around person, satisfaction of the reader after purchase and existing alternative sources to get the same particular information. As we see on this example two group academics have completely different approach and beliefs towards one topic.
These two researches are clear evidence how diverse is different researchers’ approaches to the issue. To all of these factors I looked also form the prospective of researches which are dedicated to analyzing a bit broader field – consumers’ purchasing drivers in whole online market rather than only in online media. In these researches, some of above mentioned factors are considered to be important but others are doubted.
It’s hard for someone to persist himself not to criticize some of the factors mentioned above, e.g. the word “perceived” is already very dubious and at the same time very subjective, however very important one. As Barkhi, Belanger and Hocks claim in their “model of the determinants of purchasing from virtual stores”, the notion perceived/perception has already enormous importance itself, as it defines consumer’s later attitude towards whole online purchase procedure.
To continue analysis, factor such as social community is neglected in Bosnjiak’s research, where he referring to Senecal’s 2005 research claims that recommendation’s made from close community make decision making process more complex but it does not affect final choice of consumer.
Regarding service-quality we can say that, the word quality itself already induces some confusion because it’s pretty subjective notion. For different people quality might mean different things. For some people service-quality might mean the urgent delivery of hottest news and the exclusivity of this information, whereas for another person the quality of service might be associated with deeper analysis of the article or the easiness of ways to pay money online.
Such an arguing can continue further, but what is more important, arguable are not only factors on which researchers build their different models, but also some general statements which are made by them. For example, the work of Wang et al claim the business model is sustainable if revenue-generating method is accepted by majority of the potential customers. However despite all the respect towards the authors and research itself, such a claim can easily become a reason of discussions, because still, the success of any model depends on the ideal proportion of ad revenues and online subscription revenues and for different newspapers the ideal conversion rate of readers to paid customers might be different. Even this research itself contradicts to its statement when brings an example of Wall Street Journal Online and Hoovers Online telling that they managed to make e-content portal profitable by only 10% of conversion rate. While conducting our consulting project, we also got results that some high circulated newspapers would make their portals profitable even by 3% conversion ratio. Further more, Milwaukee Journal-Sentinel, has only 0,8% conversion rate of subscribers on its niche site for hardcore Green Bay Packers fans, making revenues of 600,000 USD annually. In other words, depending on the content offered by particular newspaper, and the number and type of readers they have, the effective proportion of online content and ad revenues should be found. More analysis should be conducted to understand the price of lost customers’ amount versus converted ones and the ideal balance of subscription revenues versus lost ad revenues. To this issue has dedicated his discussion Jeff Jarvis, on the blog-web BuzzMachine.
Jeff Jarvis is an American Journalist, former television critic, editor, publisher and columnist. Among the companies he has been working are: New York Daily News, San Francisco Examiner, New York Times Company, MediaGuardian – a supplement of British newspaper The Guardian. Besides he is an associate professor at the City University of New York’s Graduate School of Journalism directing its new media program. He is also creator of weblog BuzzMachine.
Jeff Jarvis in his article about paid content published on Weblog BuzzMachine is more persuasive about the complexity of the issue and based on his vast experience highlights for the readers how many different factors should be taken in consideration for identifying one or another model for particular newspaper. For those who will catch in Jeff Jarvis’ approach some “sense and consciousness” will become clear that based only on the analysis of psychological traits of people and their purchasing drivers, it will not be easy to find an ideal model, and that the issue needs rather practical approach. Findings of Jeff Jarvis will be discussed more detailed in the 5.1 chapter named “Expert opinions and Conclusions”.
Before moving to the following chapter, we should conclude the started topic and mention that there is still needed some research in the area of personal motivators for online purchase, in order we could claim by 100% confidence that we are using the best model for identifying the online paid model.
2.3. Discussed models and criteria for their comparison
Once we are analyzing the existing models, the criteria for assessment of one or another method is the time of their existence and their results shown throughout their lifetime. Besides looking at the thematic differences in the features of the models both in Business to Business (B2B) and Business to Consumer (B2C) models, we will look at their financial results, their generated income through online sales and he dynamics in online subscription amount.
The biggest attention the author paid was to the models of Financial Times and Wall Street Journal as the most successful financial players in B2C business. In addition, the author took a look at Bloomberg and Reuters as successful players of B2B model. New York Times was an interesting case for the author because it is a case, when after first unsuccessful trial, they are going to try monetizing online content already second time. Taking in consideration their prior experience it should be important to track which model they will choose for the second attempt.
Finally, the author took a quick look at some other examples of successful and unsuccessful attempts of monetizing online content so far.
Information was gathered from reviews of their websites as well as from articles about these news-providers, and various expert opinions about their models.
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