aimm News

By Rory Maguire, Managing Director, AIME

What is a Paywall and what are Hard and Soft Paywalls?

A paywall is a system that prevents Internet users from accessing digital content without paying for the content.

The content purchase can be via an App store such as Google Play and iTunes, via a credit card or stored value account such as Paysafe card, or via a mobile phone account using Charge to Mobile facilities. The latter is very popular with smart phone users.

There are both “hard” and “soft” paywalls in use.

“Hard” paywalls allow virtually no access to content without payment.

“Soft” paywalls use some content to entice the consumer and allow them to preview the quality of the content before asking for payment for premium type access or more detailed information. Some digital book sellers give away a first chapter free.

Newspapers such as the Times and the Sun in the UK have been implementing paywalls on their websites to increase their revenue.

Revenue has been diminishing due to a decline in print purchasing as the UK population consumes more content digitally through tablets and ereaders.

Publishers that have had a sophisticated online presence for some time have relied on advertising to fund the free content. Over the past two years, these publishers have seen a decline in advertising revenues due to the restricted screen space on smartphones and the reduced propensity of tablet users to respond to advertising.

Some publishers are also finding that their paywalls can be used to increase the number of print subscribers through increased subscribers and linked offers where the consumer cost of the print version and digital version combined is lower than the online or print version alone. Increasing print circulation also increases ad revenue, so the payback from this tactic is significant as print advertising generates five times the revenue than online advertising.

To generate subscribers and paywall revenue, digital content providers must create higher quality, innovation at become more attractive than their “free” content competitors.

Some people question the loss of democratic access to information via paid for content, but in order to fund the journalistic resources needed to generate the content in the first place, some payment has to be made. The Guardian online and the Times online are two opposite ends of the spectrum in their policies of free access versus paid for access to content.

What Paywall?

How do providers implement a paywall and how do they decide whether the paywall should be hard or soft.

The Times and the Sun have demonstrated that having a loyal following and  creating a Brand that consumers engage with, allows the risk of a hard paywall. Both publications suffered from a massive decline in online readership when implementing a hard paywall, but a significant increase in revenue.

Other publications, that may not have a loyal following but may be found when consumers are researching, such as “What Camera”, when buying a camera or “Which” when buying a washing machine would benefit from a soft paywall. Provide enough information for the consumer to be satisfied that their purchase is worth it and then sell the premium access.

Some publishers may benefit from a hard paywall, but for single pieces of content instead of a regular subscription. This strategy may be dependent on brand recognition instead of content previews to convince the consumer to part with cash.

A new Paywall strategy is being discussed called a “Porous Paywall”. This strategy relies on developing consumer data, via access to the publisher site to establish intelligence on the consumer and improve advertising revenues. The intelligence can be accumulated on several visits with free content as the attraction. During this time, the consumer profiling becomes increasingly important to advertisers. At the stage that the consumer wishes to continue beyond the limited free access, the paywall requests content fees. A savvy consumer may reset their cookies and continue to access for free, but the profile has already been built and the consumer value established.

What payment method?

Dependant on the cost of the digital content, will a consumer get out their credit card and punch in 6 separate pieces of information taking 180 characters on a mobile device or while on the train with an iPad? For values around £1, probably not. Other payment forms such as Paypal and Amazon which utilise stored account details, give a lower friction but reduced payments as they are acting as intermediaries to the card companies.

Stored value cards such as Paysafecard enable the unbanked to convert cash to e-money and utilise this online. This reduces spontaneity but alongside other payment technologies is a viable option for population coverage.

Most Paywalls in place in the UK have not considered the mobile users account. This is virtually frictionless for the consumer and ideally suited to micropayments. The payout rate is again reduced as the mobile network has to collect the debt from its consumers, but services that implemented Charge to Mobile as it is now known alongside their current credit card based solutions have seen a 60% increase in transactions.

By Rory Maguire, Managing Director, AIME

AIME represented its Members this week at the largest event on the mobile, online and physical gaming industry calendar at ICE Gaming 2014 .

The event saw thousands of visitors from across the entire value chain of gaming (gambling,  casinos, betting etc) come together to see the latest and greatest in a wide variety of new gaming products, technology and its support industries.

AIME Sponsor Members TxtNation and Paysafecard  had their own stands and were also represented at AIME’s stand together with our other Sponsor Members ITV, IMImobile, Velti, OpenMarket, ImpulsePay and Oxygen8.

With many gaming merchants in attendance looking for new opportunities, AIME produced a white paper for the event, discussing Charge to Mobile billing and how this can be utilised to attract consumers to gaming providers products. Promoting Charge to Mobile and bringing new opportunities for business to AIME members is a fundamental objective of AIME’s Charge to Mobile working group, which meets 6 times a year.

AIME met with gaming operators who had not yet fully considered integrating Charge to Mobile into their mobile and tablet based products, yet were aware and impressed by the opportunities for fresh, improved and easy acquisition of consumers made possible by the low friction billing facility.

 

There’s no denying the Premium Rate Services (PRS) market has had a difficult year. Unlike previous economic blips, the sector has not been recession proof, as the sustained pressure on the consumer’s cost of living has altered consumer attitudes towards small value spending, whilst the growing prevalence of free content and over 130 rival payment types is forcing provider to demonstrate more value.

During 2012, the UK Mobile market grew by 4% and Payforit 19%, whilst fixed line services saw a 14% decline.  Regulatory hardening in recent months has also injected a new market risk and the resulting market paralysis that followed the regulatory response to rogue affiliates is likely to show sharp market decline when 2013 revenues are reported.

On a wider European level, EU regulation has introduced new threats to the markets of all member states, with examples of such threats clear in the proposed redraft of the Payment Services Directive (PSD). According to market analysis, this will cut PRS sector revenues in half as early as summer 2014, unless providers join forces behind the AIME campaign to convince a majority of EU member states to vote the proposal down.

Despite this difficult backdrop there are prospects on the horizon. OpenMarket has been key in driving growth of 17% in the Charity sector, whilst providers IMI and Velti have been at the forefront in driving growth of 152% in the ‘other entertainment’ services vertical. Mobile personalisation also remains a growth sector with a 7% growth reported in the most recent market research.

Elsewhere in Europe, PRS markets have sought to evolve to provide billing for quasi-physical goods, tapping into the consumer requirement for low friction purchasing of everyday necessities, such as travel tickets, toll roads, vending and parking.  In Sweden, PRS has enabled bus drivers to dispense with carrying cash, reducing the incident and risk of robbery while reducing boarding queues. In Eire, PRS also proved a more convenient method than that of physical cash, with Oxygen 8’s joint venture with O2 providing 10,000 daily toll road users with the option of a charge to mobile bill payment channel. Without the current threat of PSD, this success could be repeated in the UK.

PRS still holds all the cards when it comes to customer acquisition, with some mobile gambling providers reporting conversion rates of up to 70%, far higher than any rival payment types on offer. The mobile gambling market itself is a behemoth, with mobile-billed revenues exceeding growth of 50% on last years’ figures, as new markets such as mobile in-play sports betting begin to swell. 29% of user now access betting services via smartphones, providing a fertile ground for sector leaders txtNation, backed by a strong suite of international connections, to provide the global coverage that gambling operators increasingly require.

The continuing challenge for PRS remains in tapping the $100B potential of this worldwide market, as gambling operators are habitual in moving consumers on to debit or credit card for future deposits and wins. For this to change, improvements to mobile payout rates, know-your-customer verification capabilities, and cross-network account crediting capabilities need to be discussed and developed.

In much a similar fashion, the Publishing market presents a growing opportunity for PRS billing. With digital circulation increasing by around 275% and online advertising securing only a fifth of the revenues achievable from a similar print based campaign, there has been a resurgent interest in publisher paywalls.  The success of the Financial Times’ to bill directly for online content has this year led publications such as the Telegraph and The Sun’s to introduce paywalls.

Results have reportedly been mixed with The Sun, whose payment consultant (we are told) omitted to advise them to introduce a charge to mobile payment route, causing a sharp decline in circulation, contrasting with the other publications who have echoed the Financial Times success. Executed correctly, charge to mobile is well placed to cater for main and niche digital publications, high quality editorial analysis or customized content delivery in the form of subscriptions or pay per page billing.

Thinking outside the box to pair services naturally accessed on mobile devices with a streamlined consumer payment experience is now imperative for success, as innovators Impulsepay have demonstrated through the use of the Payforit Scheme to open up new niche verticals such as WiFi access on Virgin trains, and premium access features on leading room site website, Sparerooms.com.

With the imminent launch of Payforit 4.1 due to bring a seamless charge to mobile billing experience to the exploding Gaming App market (worth $70 billion worldwide), this could well be the next success story.

There is work underway to stabilise the market, continue collective discussions with mobile networks and open discussions with App Stores, regulators; and market players in different verticals. The full degree of success relies upon all providers joining AIME; strengthening the collective industry voice and speeding up the pace of change. This support is not about philanthropy; members stand to gain and it can be no accident that the leading industry successes are being driven by AIME members.