Behind the Paywall: The Shift of Monetisation Strategies

In the ever-evolving landscape of news and media, the journey from the early days of free online news content to the AI subscription models of today tells a compelling story of adaptation and innovation. This article dives into this journey, exploring the shifts that have reshaped how news is consumed and monetised in the digital era. 

Brick-by-brick: The rise of the paywall 

Free content in the early days of the internet 

With the rise of the internet and personal computers in the early 1990s, newspapers started publishing their content online free of charge. Readers, attracted by the ease and accessibility of online news, gradually shifted away from traditional print media. This transition had a significant consequence: it contributed to a decline in the sales of physical newspapers, leading to a noticeable dip in revenue for many publishers. They would have to search for a way to monetise their content online. 

The advertisement model: Traffic, clickbait, and revenue generation 

Many publishers in the early 2000s thought the answer to the monetisation puzzle was to focus on website traffic and advertising. This model relied heavily on attracting as many visitors as possible to news websites, as more traffic translated into higher advertising revenue. This approach, however, had an unintended side effect — the rise of clickbait. Some content veered towards sensationalism in the pursuit of clicks, potentially compromising journalistic integrity. This model highlighted a critical question for the news industry: balancing the need for revenue with the ethical responsibilities of journalism. 

The subscription model: The proliferation of paywalls

In response to the limitations of the advertisement model, the industry saw a shift towards direct reader revenue through subscription models. This approach focuses squarely on the reader, asking them to pay for the content and benefits they wish to access. This era has given birth to a variety of paywall strategies, including: 

  • Hard Paywalls: Offering no free content, requiring a subscription for access. 
  • Metered Paywalls: Allowing a certain number of free articles before requiring a subscription. 
  • Freemium Models: Providing a mix of free and premium (paid) content. 
  • Dynamic Paywalls: Tailoring access based on reader behaviour and other metrics. 
  • Time-Based Paywalls: Offering temporary access to content for a limited period. 

Interestingly, not all publishers have adopted the paywall strategy. For instance, The Guardian operates on a donation-based model, relying on the voluntary financial support of its readers.  

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Do Paywalls Work? Understanding Their Impact on the News Industry 

The last section showed how subscription-based revenue models have become dominant in the past decade, with paywalls playing a crucial role in this transition. In 2024, paywalls remain critical, as evidenced by news companies focusing more than ever on boosting their subscription income in the year ahead (see graph). But does this strategy work for everyone? Let’s delve into the effectiveness of paywalls and who benefits from them the most. 

The trade-off: Lower advertising revenue vs. increased subscription income 

The implementation of paywalls comes with a notable trade-off. On the one hand, paywalls tend to reduce website traffic, as some readers are deterred by the need to pay. This decrease in traffic can lead to lower advertising revenues, a concern for many publishers. On the other hand, for many news outlets, the subscription revenue generated through paywalls compensates for this loss.  

Of course, the trade-off is not as reductionist or mutually exclusive as advertising versus subscription revenue. Newspaper publishers have always relied on a mix of both: income would be collected both from the reader buying the physical product and through the advertising within it. The question is, instead, what proportion of each, alongside other revenue streams, should be the primary driver of revenue for any given publisher. For example, Gannett, a major US publisher, modified the number of articles behind a paywall to increase the proportion of ad revenue.  

This said, there has been a significant shift in the importance publishers place on subscriptions as revenue streams across the industry. Subscription revenue has seen a notable increase as an area of focus for publishers, rising 6 points since 2020. In contrast, reliance on display and native advertising has decreased by 9 and 15 points, respectively. This shift indicates a growing consensus in the industry: the future of news may lie in direct engagement with readers and their willingness to pay for quality content. 

Which publishers stand to benefit from adding a paywall? 

The effectiveness of paywalls is particularly evident in larger, more established newspapers and those that specialise in niche content. These organisations often have a loyal readership willing to pay for high-quality, specialised content. By leveraging paywalls, these newspapers can secure a steady revenue stream, allowing them to maintain or even enhance the quality of their journalism. This relative independence from the need to create content for the masses also empowers them to produce content that is interesting and aligns more closely with the interests of their readership. 

However, adding paywalls is not a winning strategy for all publishers. For instance, in 2015, the Sun, a British tabloid, removed its paywall after a two-year trial, relying instead on an advertising strategy. Even publishers like Time have removed their paywall after a 12-year run to try and attract a wider audience.  

Additionally, for smaller local newspapers, especially those already struggling financially, adopting a paywall can be challenging. These publications often lack the brand recognition or unique content to convince readers to pay for access. Furthermore, local papers face additional hurdles in countries with a solid state-owned media presence (such as the BBC in the UK or CBC in Canada). The comprehensive and often freely available news coverage from these state-owned entities makes it even harder for local outlets to justify a paywall when readers can find free, reliable content elsewhere, even though the local coverage is not as comprehensive.  

The Future of the Subscription Model: Dynamic Paywalls and Personalised Strategies 

The future of the subscription model in the news industry is being reshaped by the advent of dynamic paywalls and the increasing use of AI. These technological advancements are set to create a more tailored and engaging experience for users while enhancing the effectiveness of subscription strategies for publishers. 

Embracing dynamic paywalls 

Dynamic paywalls represent a significant shift from traditional, one-size-fits-all models. Configured by machine learning algorithms, these paywalls can adapt to individual user behaviours and preferences, offering a personalised experience that static paywalls cannot match. They can segment users, predict behaviours, and analyse content to determine conversion potential, thus allowing for a more nuanced approach to reader engagement and subscription conversion. Swiss publisher the Neue Zürcher Zeitung uses such a system to analyse factors like reading history and newsletter engagement, gaining detailed insights into each visitor's habits. In 2019, they reported that it helped increase their subscription rate by fivefold.   

AI's Role in Personalisation and Retention of Subscribers 

Beyond dynamic paywalls, AI is crucial in personalising subscription offers and improving retention rates. AI-driven systems can suggest tailored subscription packages by analysing individual user data, thereby increasing the chances of conversion. For instance, Corriere della Sera leverages AI to offer personalised subscription options, catering to its users' unique interests and preferences

Moreover, AI is instrumental in predicting which users are at risk of churning. Our own tool, Readers@Risk achieves this and enables news outlets to proactively address these risks with targeted interventions. This approach is beneficial for retaining current subscribers and ensures a consistent revenue stream by preventing potential losses. 

Where to go from here?  

The journey of monetising news in the digital era is multifaceted and ongoing. Embracing innovation, understanding your audience, and maintaining journalistic integrity are key to navigating this landscape successfully. Whether through paywalls, dynamic pricing, or other emerging models, the goal remains the same: to provide valuable, accessible content to ensure the news industry's sustainability. 


Sarah Cool-Fergus

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