Groupon... And The Difference Between Idea & Execution

Why Every News Site Should Focus On Being First Class All The Time

from the business-class-my-ass dept

Fri, May 6th 2011 5:31pm — Mike Masnick

Capitalist Lion Tamer was the first of a few of you to point out the rather interesting analysis by Oliver Reichenstein about the idea of creating a "Business Class" freemium operation for news. The basis of the post was a discussion Oliver had with a media exec about paywalls, in which Oliver came out against them and explained his reasoning (which we agree with) and the exec countered with the "business class" analogy, leading Oliver to rethink his position a bit:

He asked me what I think about pay walls. I told him what I always say: The main currency of news sites is attention and not dollars and that I believe that it is his job, as a publisher, to turn that attention into money to keep the attention machine running. He nodded and made the following, astonishing statement:
I can�t see pay walls working out either. But we need to do something before we lose all of our current subscribers. Sure. It�s a tough business environment, but� But the flight industry is a tough environment too, and they found ways. So tell me: Why do people fly Business Class? In the end, an airplane brings me to the same place regardless of whether I fly Economy or Business Class and the massive price-increase I pay doesn�t compare the difference in value.
He asked whether I knew of a way to apply this logic to online news. What would a Business Class news site look like?
People pay for Business Class because they don�t want to be tortured in Economy. They get faster lanes at the terror check. They get an extra glass of champagne. The stewards are more attentive. They get off the plane more quickly. They get the feeling of a higher social status.
And he added that he wished that there was a way to lead each reader through the business class to Economy again and again to show him what he misses.

It's an interesting idea, and Oliver runs with it, and he plays around with the idea of what a "Business Class" version of the news would be, and comes up with a design that does away with ads and presents the information related to the article in a much nicer manner:

Click on Oliver's original article to see a much larger version of the graphic, as well as the rest of his discussion on it. While I was thinking about this post Mathew Ingram beat me to the punch (as happens way too often) and wrote up an insightful post about this story as well, pointing out that some third parties, like Flipboard and Zite, could represent the kind of "Business Class" for news that Oliver and this exec covet. However, he also points out that the metaphor of airline travel to news consumption doesn't really work:

One of the big issues with the �business class� metaphor, however (like the �iTunes for news� analogies that were popular not so long ago), is that news simply isn�t like air travel at all, in some pretty important ways. To take just one example, you can only fly one airline at a time, and you can only go to one destination at a time. The rise of RSS readers, and more recently, Twitter and other social-reading tools such as Flipboard, Zite and Tweetmag allows people to read multiple sources at a time, and that is one thing that the IA design approach doesn�t really take into account.

I actually think Mathew's understating the problem with the "Business Class" for news concept. Thinking of things that way runs into all of the same problems that I think many "Freemium" models run into for online services: specifically, if you're basing your business model on creating a "class" of services that annoys your users quite a bit that they're forced to "upgrade" to the less annoying option, you have to be pretty damn sure that they can't just go and find the less annoying version next door. Or in the next thousand doors.

In the airline world, you have limited choice and limited competition. And, even then, the rise of airlines like JetBlue and Virgin America in the US have really been based around the idea of making coach class not seem quite so awful, and passengers have flocked to both airlines because of it. But that's still a limited market. Open it up to a nearly unlimited market, and you've got a problem if you're focusing on "business classing" the news. When you do that, you are really opening up a massive opportunity for someone else to offer a First Class (not just Business Class) experience to everyone without the paywall... all while you're wasting energy trying to make sure the Coach Class sucks enough to get people to pay to upgrade. Instead of paying to upgrade, they're more likely to jump to the other guy's (free) First Class option, leaving you with a lot of wasted effort on trying to make your Coach Class suck.

The incentives are all wrong.

The opportunity, in the competitive market, is not to focus on offering a class that sucks to get people to sign up for a better class. It's to make the best class all around, and continue to improve it to keep your community as happy and loyal as possible... and then build a business model on top of that.

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Filed Under: business class, business models, journalism, paywall

16 Comments

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Joseph Kranak (profile), 6 May 2011 @ 6:15pm

How to get users to pay
He's right that if you want to get users to pay, you're going to have to offer them something more, and it has to be something they can't easily just get somewhere else. The idea that they could have a premium version of, say, the NY Times that people would pay for is not impossible, it's really hard to see how they'd do it. It'd have to be something really amazing. It doesn't have to rely to on annoying the free users, since you'd just keep the newspaper as it is for the free users. But still, how you'd make a premium version so amazing people would willingly pay money for it is unclear, and there might be better ways to get people to pay (you've got skilled researchers, writers, editors and photographers on your staff. Use them for something. I don't know what. Use them to write books, sell photos, sell services. I don't know.)
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Anonymous Coward, 6 May 2011 @ 6:26pm

This makes a lot of sense. You can't fence your potential members in because they have the freedom of choice. If your offer of service or goods isn't the best possible experience while receiving what your business is offering, the competition is intense.

It's not a sellers market, it's a buyers. If you demand too much for your goods, someone else is liable to fix that for you with selling under your price range. Such is the problem with file sharing and to hear it, the industry can not compete with free. They've treated their market base like crap and the results is that many have left the traditional for other means.

News is news and many offer it. It's not like you have the only news service on the internet. If it ain't damn special then it's not what you should be putting barriers up to try and milk it for money. You focus on what can not be bought elsewhere.

I'll tell you right up front. You make a barrier for me that I can find pretty much the equivalent without the barrier, I'm an ex-visitor at your location. My time is worth more to me than your problems. Make my visit to your site suck, I'm good with that. You got one less set of eyes to draw attention to. Your business problems aren't my problems and I won't pay to just be the cure no matter how valuable you might think your little corner of the internet is.

Further, I don't care if you agree or not. I didn't inherit your business nor your bills and I have absolutely no loyalty to your brand without good reason. If your only reason is make money but you don't offer much for it, I'm not interested.
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Nicedoggy, 6 May 2011 @ 6:59pm

Kickstarter for news with exclusive access to how the story is going along is no good?

Maybe people would pay to follow the development of stories, it is easy to find any story online, it is hard to get someone who keep you informed of the latests news and developments.

In this sense you create a following and that fallowing generates traffic to your ads by pointing to your stories.
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AW, 6 May 2011 @ 9:03pm

It's destination over information
Listen, he's got it right when he says people want business class because it's not economy. It's the difference between an iPhone and a cell phone. If you want to bring readers in make your site about destination not information. We have so much information available now, that it's hard to cull it out. On Google reader I can have all the information I want, but lets be honest, it's not that pretty without mods and it's a bit of a clunky interface especially when you could do so much more. You want to draw people in, give them clean, neat and make everything seem like it's fluid and alive on the page, without making it obtrusive. Apple does this very well on it's devices. Start there then be more, allow people to get YOUR news and THEIR feeds. They come to your site because you've got the news they need, the stories they want and the ability to share them easily with their friends. Give them first access to special in depth reports and for crying out loud get a good editor to spell check these articles. Follow this and you can build a place people don't have to go, but a destination where people WANT to go and can't get elsewhere.
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Ken Taylor (profile), 7 May 2011 @ 4:25am

Why cling to a defuunct business model "the newspaper"
The real problem here runs deeper than how to present a viable newspaper format online. The question should be "is there a better way to present news?".
The newspaper model was built in the days of newsprint when the limitation to the amount of copy and advertising available, plus the barriers to competition, naturally set up scarcity and a very effective way to sell the news (and advertising).
Online what made a 'newspaper' effective does not exist. Also thanks to Google internet users have discovered that they can find more about the things that interest them by visiting other specialist subject sites. No physical limits on newsprint and minimal barriers to competition now mean that the newspaper model is only there to give people a quick view of what is happening in areas that interest them - who wants to pay for a table of contents every day when most of what it contains is not of interest? What people want is deeper information about the news that interests them. What is happening now is the growth of sites that cover one subject area, where there is community of interested expert and amateurs and good quality content available. Hopping across 20-30 sites is not a problem now it if allows you to find quality content on the subjects that interest you. An example? People come to techdirt.com for useful insights to copyright law and other associated matters!!
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Old Fool (profile), 7 May 2011 @ 6:07am

I hate ads
whenever I change page and am waiting those (ok, trivial) seconds and look down to see why, it invariably says 'Waiting for adclick/adserver/ad(whatever).com, I'm wasting my life to watch an ad for something I have utterly no interest in.

So YES I would pay to get rid of that blight on my life, advertisements.
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Irate Pirate, 7 May 2011 @ 8:04am

Re: I hate ads

So YES I would pay to get rid of that blight on my life, advertisements.
Or use addons like NoScript and Adblock Plus. How long will it take before someone comes up with an addon that makes the free version of a site look like the business class version? Not long I'd wager, and there would be nothing a site could do about it either, though I'm sure some would try.
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Seth Long (profile), 7 May 2011 @ 8:29am

When it works
"if you're basing your business model on creating a "class" of services that annoys your users quite a bit that they're forced to "upgrade" to the less annoying option, you have to be pretty damn sure that they can't just go and find the less annoying version next door. Or in the next thousand doors."

Which is exactly why some paywalls DO work - when the source provides targeted niche content or is the sole provider of content for that category. They may not provide great user experiences but if they do meet specific business goals, then they are successful. (witness: WSJ, FT).
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Anonymous Coward, 7 May 2011 @ 8:38am

One of the inherent problems the newspapers face doesn't have to do with how the news is served nor how good or bad they do at it.

If I wait for the news to show up at my doorstep, it's already a day old. A slow news day is likely to be older.

I find that often what I read on the net shows up sometimes days later in the press. It's no longer hot news to anyone with internet access.

This won't be solved by better packaging, it's sure not going to be solved by putting barriers between that news and it's potential visitors.
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Andrew (profile), 7 May 2011 @ 1:36pm

The opportunity, in the competitive market, is not to focus on offering a class that sucks to get people to sign up for a better class. It's to make the best class all around, and continue to improve it to keep your community as happy and loyal as possible... and then build a business model on top of that.

But isn't this exactly what Oliver Reichenstein is saying? He argues that newspapers look the way they do because that's how the design team was able to marry up competing requirements for content, sharing and advertising, and this means "[l]oud distracting banners, cheap stock picture material, sloppy typography, a lot of useless comment noise, machine generated reading tips, no human service, and a claustrophobic information design." This may not be a great solution for readers, but it may be the best compromise for newspapers.

Adding a paid business class service removes the need to generate income through adverts and probably reduces the need to get more pageviews through "machine generated reading tips" too. Remove those requirements from the spec and the design team would come up with something much closer to the business class mockup.

While there's certainly an incentive in the short term to make the standard site suck to encourage upgrading, it's likely it will be suboptimal for the reader even if the paper creates the best experience it can, based on the competing requirements for audience, revenue, sharing, etc. it faces. (I'm not saying that newspapers are actually doing this right now, but let's assume they are or will try to.) But change the requirements to a paid business class model and the best possible experience suddenly becomes a lot better for those readers.

Perhaps...?
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Anonymous Coward, 8 May 2011 @ 6:44am

Re: I hate ads
This is 2011 and that you aren't aware of ad-blocking in every major browser is just sad.
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FuzzyDuck, 9 May 2011 @ 12:06am

Don't think it's that wrong
Basically a free news service always needs to be supported by advertisement, so a paid service should at the very least be ad-free. As long as you focus on delivering something extra to the paid service that you cannot deliver to the free service it's fine. Like ad-free viewing. In fact I think all newspapers should offer a paid ad-free version, but then one that is affordable (in the 1$ per month range). It's something I'd do for a number of sites I read a lot - like Techdirt for instance (which I flattr regularly already).
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IanVisits, 9 May 2011 @ 3:02am

Backwards
The opening premise that a news publication's primary role is to deliver news and then seek to monitise it, is backwards to how most successful news publications think about their company.

The business model is to generate revenues by means of advertising sales, subscriptions, whatever.

In order to gain advertisers, they need readers of a specific market value, and in order to attract the readers, they spend money on producing content to be read.

The journalism is not the primary purpose of the publication, that's a cost associated with securing the primary purpose - which is advertising sales, subscription sales etc.

The moment a news publication thinks publishing news is its primary function, is the day it starts to go bust.
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AMusingFool (profile), 9 May 2011 @ 11:41am

analogy failure
The big problem with the "business class" analogy is that almost no one pays for business class for themselves. The people flying business class are almost all there because their company is paying, or because they have frequent flyer miles.
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TimothyAWiseman (profile), 9 May 2011 @ 3:49pm

You seem to be quite against the idea, but this seems to be precisely what ArsTechnica is doing ( http://arstechnica.com/subscriptions/ ) and it seems to be working out relatively well for them, and at least conceptually I would say it makes sense to me.
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grumpy (profile), 11 May 2011 @ 1:51pm

And Scott Adams once again demonstrates that Dilbert is documentary, not fiction...

http://www.dilbert.com/strips/comic/2011-05-11/

Couldn't have said it better myself.
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