How to Build a Paywall
Former Wall Street Journal reporter Jessica Lessin got some attention when she left the newspaper six months ago to start a new online news venture, and this week she launched the project, known as the Information: a subscription-only technology and business news service that costs $399 a year and has no free content or “leaks” in its paywall. The hardness of the wall and the price surprised many—given the experiences of some other new-media outlets that tried and failed with a hard paywall model—but Lessin said in an interview she is convinced she can build a sustainable business based on that approach.
“People talk about this type of paywall is good or bad, but it really depends on the content. If you look at what Paul Carr [of NSFW] is doing, it’s great, but I think he would agree that no one is going to spend $400 a year on it—the only type of content you’re going to pay that much money for is content that helps you in your business. All the different paywall experiences are very different because the content is different and the market they are going after is different.”
Lessin said she decided to leave the Journal and start her own publication because she saw an opportunity to go after a specific market she felt wasn’t really being served by the paper—primarily insiders working in the tech industry and related businesses, such as venture capital. To help nail down the audience she was aiming for, she said she identified half a dozen actual people who became archetypes for her ideal reader: product managers at Dropbox, vice presidents at Apple (AAPL), sales managers at Oracle (ORCL), etc.
Figuring out the prospective audience naturally led to the business model the Information would end up pursuing, Lessin said. Since many of the professionals she wanted to target were accustomed to paying for information—provided it helped them with their business or enabled them to profit in some way—from a variety of sources such as Bloomberg, the Journal, and other publications, she figured a subscription model would be a good fit, despite the risks of being a new entity.
While the $399-a-year price tag might seem high, the former WSJ writer said she felt comfortable that for the audience of business professionals she wanted to attract, “paying as much as you pay for parking in San Francisco, or for the cost of two Uber taxi rides,” wouldn’t be a huge barrier.
“We know the audience we want to go after—they’re professionals inside and outside of tech, an audience that pays for information that’s going to make them smarter and give them an edge and to be ahead of the curve, and many of them already expense information like that. And we knew that we wanted that kind of audience from the get-go.”
Lessin pointed out that the audience or market that a media outlet is focused on also helps determine what stories they cover and how, and that this was one of the driving forces behind her desire to leave the Journal. When she was writing an Apple earnings story, she said, “was I writing that for an executive who worked at Apple, or a hedge-fund trader, or a kid who wanted to know what to download? Those are all very different stories.”
When it comes to attracting new readers—something other new-media startups, such as Matter and NSFW, have said was a difficult problem with a hard paywall and led indirectly to the failure of their attempts at running one—Lessin said the service has a $39-a-month plan that amounts to a trial program and that she expects aggregation by such sites as Business Insider (which has promised to do exactly that with her content) would play an important role in getting the Information’s name out to new subscribers.
“What would happen pretty consistently at the Journal was that if there was news, someone would aggregate it and then link back to us, and I think that’s an important part of the ecosystem—and if people see a consistent number of articles linked back to us, that might pique their interest. I don’t think those summaries are going to cannibalize our existing audience too much, because I don’t think those are really our core users right now.”
Lessin said she studied a lot of other publications, both in tech and business and outside of it, to zero in on the model she wanted to follow—outlets such as Grant’s Interest Rate Observer, a controlled-circulation newsletter that focuses on financial issues. “If you’re outside of finance, you’ve never heard of it, but if you work in finance, you just say Grant’s and people’s eyes light up,” Lessin said. “You don’t go for what’s happening minute by minute; you read it to get smarter.”
The Information was also inspired by subscription research products, Lessin said—including our own Gigaom Research arm—as well as premium products such as Politico’s Pro version, which costs several thousand dollars a year, or Seeking Alpha (which makes certain content available for free after a specific amount of time). Lessin also mentioned the tight bond with an audience that Dan Primack has created with his Term Sheet at Fortune, although that is free.
Business Insider suggested that the Information could charge 1,800 to 2,000 people and wind up with a fairly successful business that served a small audience. So I asked Lessin whether she would be satisfied being a small but profitable outlet: She said she wanted to be “an important media business for decades to come, but our way to do that is by finding a sustainable model for doing the kind of stuff we want to do, and I think having a fairly small number of important, intelligent, influential subscribers is the way to do that.”
Lessin added that she wants eventually to add some form of comments and other features for subscribers that help to build community on the site, the way other niche-topic sites such as Techdirt and Talking Points Memo have, but for the moment she is focused on getting the content right and appealing to the right audience, rather than trying a lot of different variations on business models.
“I talked to a lot of companies that manage metered paywalls when we were looking at going down that path, but it all came back to the fact that there are many different tactics for maximizing revenue and audience at different points, and many of those make sense for different businesses at different times. But the most important thing is that a paywall works if it has the kind of content that works with it, and finding that balance is the important thing.”
As I said in the post I wrote giving Lessin some free advice about her new venture, regardless whether we agree with her model or not, she deserves credit for trying something new, and I wish her all the best. I might have chosen to structure it differently, but if she has assessed her market correctly and the need she fills for those readers, there’s a good chance she will do just fine.
Also from Gigaom:
What Microsoft and CIOs Have in Common: They’re Stuck in the Past (subscription required)