How to design your digital paywall

Limit the number of articles free users can read, but allow them to read from any area or topic they want

Our topic today is a study done on readers of the New York Times that comes out of MIT’s Initiative on the Digital Economy (the one that everyone from Eric Schmidt to Marissa Mayer to Reid Hoffman is part of).

It will be particularly interesting for who works in the publishing or content industry. If you are not a publisher, use this to think outside the box in your own domain.

For example, here’s an idea based on this research that could be tested for a B2B SaaS: in the free version of your SaaS, would it be more effective for paid conversions to give access to all features but put stricter limits on the number of times they can be used?

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Less but broader: How you should design your content paywall

Impacted metrics: Website/app conversions | Customer spending
Channels: Website | App | Freemium | Samples | Content strategy

Recommendation

To maximize revenue of a freemium digital publication, limit the number of articles free users can read, but allow them to read from any area or topic they want.

Effects

  • 31% increase in total subscriptions, leading to more direct revenue.

  • 9.9% less total content consumption, leading to less advertising revenue.

  • Overall strong profit gains.

Why it works

  • Being able to sample all types of topics in a publication allows readers to better understand how willing they are to pay for a publication.

  • Limiting the number of articles free users can read encourages them to start a subscription.

Limitations

  • The effects depend on how much you charge for subscriptions. If you earn less per user with a subscription than you do with ads this won’t work for you (unless you still show ads to subscribed users).

  • The sample consisted of both logged in (free) users and readers that were not logged in (tracked with cookies). However, it does not include readers that blocked cookies (e.g. by navigating with their browser in ‘incognito’ mode). Their effect is unknown.

  • The dataset is from April - October 2013. Since then, attitudes to subscriptions could have changed. Users may be more or less willing to start paid subscriptions (although ‘subscription fatigue’, much talked about, does not yet appear to be a real problem).

  • The study is performed on the New York Times, which has a very strong brand name and is the 3rd largest newspaper in the US by print circulation. Its strong physical presence may have an impact on the willingness of readers to subscribe.

Companies using this

  • In the last decade most major publications have switched to a freemium paywall system (New York Times, El Pais, Corriere della Sera, De Telegraaf, and many others) while a few have tested other models (The Guardian).

  • While many publications test what works best for them, others may be simply following what the competition does and haven’t fully optimized yet.

Study type

Market observation (analysis of a before and after change) of the New York Times, mostly United States (22% of the sample was from outside the US)

Source

Aral, S., & Dhillon, P. (August 2020). Digital Paywall Design: Implications for Content Demand & Subscriptions. Forthcoming, Management Science.

[Link to paper]

Affiliations

MIT Initiative on the Digital Economy, MIT Sloan School of Management

Remember: Because of the groundbreaking nature of this paper, it could be disproven in the future (although this is rare). It also may not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely.


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