Is there value in an online paywall?

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Tuesday, 27 July 2010

Since the web was born, there has been a push to make money from it. The two most common ways of making money are via selling advertising space on web pages, or collecting fees from users directly. For content-driven sites, this means withholding content until users pay a fee: putting up a paywall. Is there value in this approach?

For commercial websites which are focussed on providing high-value content, there is a need to make money from that content. With advertising, you need a lot of eyeballs (visitors) to earn any decent revenue: website owners are likely recoup only a few cents per thousand visitors. On the flipside, charging directly for content that is placed behind a paywall means a fixed amount of revenue per user, and a lot higher than a few cents. So why not set up a paywall?

For information that is of general use to consumers or small business, there is a very high chance that if a visitor is not able to directly access your information, they will just use a search engine such as Google to find the equivalent information on another site (whether the quality is equivalent is of course subjective).

Online, the difference between $0.00 and $0.05 is far greater than the difference between $0.01 and $1.00. It is only if the value of the information is very high, and users can see that the information is high in value before committing to spending, that any money will change hands. This is especially the case where users think they can get the equivalent information free. And when you don't have people paying to view your content, you end up with no one but the authors looking at the content, but you have absolutely zero revenue flowing from it.

There are some instances where users will pay money for content behind paywall. Usually it is for content from well-known publishers, where the content is known to have a high economic value in and of itself, for example the Wall Street Journal. Where more News Limited websites recently put up a registration wall, and then later a paywall, visitation dropped dramatically at each step.

In many contexts, the same goes for forcing users to register before they can read content. While registering does not give rise to quite the same degree of resistance as paying, since it still involves handing something over to the content-provider (in this case, your personal details).

While the notion of putting up a paywall does seem initially attractive to content producers, it is important not to be lured into a strategy that brings with it neither popularity nor revenue. For some websites, a paywall (or registration wall) will work, but for many, it will create more problems than it solves.

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