How to lose the paywall revolution

Bugles blared, banners waved, battle lines were etched into the ground. A diverse coalition of media upstarts and established giants declared their positions to take on — and take down — the biggest player in subscription video content: Netflix. TV apps from Disney, NBCUniversal, Apple and Bloomberg are about to hit the market. Their goals? Claim the streaming content crown and add a sustainable new line of revenue.

This could get ugly.

Like all wars, this one was foreshadowed by a series of smaller, unpublicized skirmishes and battles. Ultimately, we could have seen this coming. For several years, more niche video publishers and article-based content producers have been questioning the status quo of their ad-supported models and experimenting with audience-focused monetization techniques. They’ve been locking their content behind paywalls and getting mixed results on their bottom line.

And if you’re thinking about jumping into the fray and locking your content behind a paywall, here are the four surefire strategies to avoid if you want to capture the potential of paywalls.

Fighting the wrong foe
Let’s say you’ve crunched the numbers and think you can do better dropping advertisers and putting your content behind a paywall. Now you’re in the subscription business and the playing field looks very different. Your competitors are no longer ad-supported content businesses. Instead, you’re jockeying against every single fixed cost in your users’ budgets. Rent, phone plan, gym membership, groceries, the endless line-up of monthly subscription boxes. You’re competing for a slice of your users’ budget pie with all of them. How do you justify your cost? What new tactics will help you grab your share?

There’s no substitute for well-crafted, relevant content, but fighting against all the other subscription services in your customers budget requires new tactics. Free trials to attract a wide swath of users. Time-based and usage-based metering to trigger your paywall. Annual pricing discounts to encourage long-term engagement. Customer referrals to incentivize growth. You’ll need to be nimble with your tactics to find and build your user base, but never confuse who you’re competing against.

Courting the wrong allies
Before you got into the subscription business, your real customers were always advertisers. They want a well-defined demographic target that spends tons of time on your site or app and sure, those user-facing improvements may help. But realistically, you could post so-so content wrapped in a dreadful user experience and still have tons of advertisers pounding on the door if your traffic and engagement statistics add up.

In the subscription business,your user and customer are the same person. Their purchasing decisions (and your revenue) are directly influenced by the quality of your product, not the qualities of the other users. Those product experience improvements are no longer nice-to-haves, they’re requirements.

Picking the wrong battlefield 
Have you ever been to the gym in the first week of January? Lines for equipment. Towel shortages. Full showers. If the gym were like that throughout the year, it would be an untenable user experience. But, by mid-February, a bunch of the optimistic people who bought annual memberships at the beginning of the year stop coming, and the New Year’s resolution crowds subside.

Gym traffic returns to normalcy, while the gym owners keep collecting annual dues from members who rarely, if ever, show up. That’s called “breakage” and it’s built into the gym’s revenue projections. With your new paywall, you’re also in the subscription business. Will you build breakage into your model and use it to your advantage? Are there key moments during the year where you think your sign-ups will spike and you can attract eager, annual members to lock in?

Alternatively, your content and customer base may be better suited to a usage-based subscription, where a customer’s pricing is largely tied to how many videos you view, articles you read, or time you spend on the app. Low subscription fees with additional à la carte pricing has been baked into popular SAAS platforms like Mailchimp and Notion for a while, but are now starting to make their way into content products as well.

Whether you’re optimizing for breakage, usage or some combination, make sure you’re clear what game you’re playing and have the tools in place on your site or app to win.

Tracking the wrong information
Data analytics is, at its heart, about telling a believable story. When you were an ad-supported content business, your most important story was the one you told advertisers and brands. The data you obsessed over was the type that would get them excited: unique visits, page views, time on site and user demographics. Together, the figures and statistics could prove the claim that your site or app was a reliable place to spend ad dollars.

As a subscription-based content business, your operation looks more like a digital product and the most important stories you tell will be to yourself or (if you have them) your investors. Your metrics should reflect that and help guide your ambitions to grow. There’s never going to be a replacement for solid usage stats, but how exactly they got there and what they do once they arrive is increasingly important.

For a product like your new subscription business, you’ll need to focus deeply on your channel strategy to drive new visitors and how much it costs to convert those visitors to customers (customer acquisition cost, or CAC).

You’ll need to measure how quickly they quit your product (churn) and what’s the average revenue you can expect from each subscriber (lifetime value, or LTV). Do they stay on for the year and re-up annually? Do they purchase month-to-month and average less than a full year as a customer? Finally, how enthusiastic are they with the experience (customer satisfaction) and how likely are they to tell their friends about it to boost your growth (net promoter score)?

Now that you’re a product in the subscription business, these figures will help rally your troops and guide your future efforts. You’ll need to make sure you’re keeping track of the right stuff to tell yourself a useful story.