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In summary:
- Focus on your audience rather than the paywall model
- Launch, test, learn and iterate
- Measure ARPU as your north star metric
- Be aware of the 80/20 rule: the users that will contribute the most to your ARPU metric will only make up a very small percentage of your overall audience
Sorry to break it to you, but all visitors to your site won't act in the same way…
We're all different, and whilst this may seem obvious, when it comes to converting users into members and subscribers, the theory isn't being put into practice.
Why would a single model work for both fly-by visitors who only come once a month, and your most engaged readers who consume content daily?
The reality is that it does not.
In fact, the optimal strategy is one where audiences are placed at the forefront of your strategy – which makes sense when you remember that we are talking about a ‘reader revenue' model here.
Instead of trying to find the ‘best paywall model', (i.e. hard, metered or freemium) instead, look at your audience, segment them into engagement groups and present each group with an adapted journey that's most likely to convert them into a subscriber in the future.
Focusing on audience over paywalls
We can find plenty of examples of each paywall model being successfully employed by a digital publisher, but the optimal model actually involves putting audiences first. By focusing more on who the visitor to your site is and how engaged they are in your content, you can provide them with a user experience that is the most likely to convert this individual user into a subscriber.
Putting the theory into practice
Firstly, segment your audience into groups based on level of engagement.
Poool's native segmentation divides non-subscribed visitors into four groups — Volatiles, Occasionals, Regulars, and Fans — based on a recency, frequency, and volume score. Recency is the number of days since a user last visited a site, frequency is how often the same individual visits, and volume is the quantity of content consumed and/or the number of actions completed.
We can also add a Members group of de-anonymized audiences who have created a free account but aren't yet subscribed, if this is an option on your site.
Secondly, build adapted journeys for each segment.
I know what you're thinking – it's not as simple as that! How can you know what's best for each group?
Well, you don't. But that's why we encourage the launch, test and learn approach.
- Launch first
Given that conversion is most likely to happen when you find the perfect balance between frustration and engagement (paywalls may be the source of frustration but also the reason a user converts), you can employ a ‘softer' model for less engaged audiences and a ‘harder' one for your more engaged users:
For volatiles, we'd recommended forgetting paywalls for now and simply aiming to increase engagement through softer forms of conversion. A newsletter wall, for instance, is hugely valuable, asking a user to sign up to your newsletter in exchange for access to content. This allows for content discovery onsite and additional content consumption offsite (via email).
Once regularly returning to your site, these users become Occassionals and then Regulars, where you can focus on de-anonymization through a registration wall to convert them to members. This not only increases engagement but also improves their experience on your site (thanks to a personalized account space, additional features etc), and allows you to collect first-party data as well as increase ad revenue through targeting.
A registered user is also highly more likely to subscribe in the future, as proven by our research.
Alternatively, you could go straight into trying to convert these users into paying subscribers. In this instance, it's recommended to employ a softer paywall model, such as a metered wall, to allow for content discovery and engagement to counterbalance the frustration.
Fans, your most engaged non-members or subscribers, will be less frustrated when presented with a harder paywall model so this approach may prove optimal for conversion rates. However, we would still recommend encouraging registration as a soft conversion step prior to presenting a paywall, making them 2 to 10x more likely to subscribe.
The New York Times, for instance, presents visitors with a registration wall first, giving them access to an article for free, before fully blocking with a paywall. Registration also allows you to make the most of onboarding journeys to increase engagement, such as by encouraging users to sign up your newsletter and make the most of UX features including saving content for later or following topics/authors.
- Test and learn, continuously
A/B testing is your best friend for optimizing conversion rates, allowing you to compare the performance of two different walls or user journeys in each audience group and eventually employ the one that converts the most users.
You could, for instance, trial a registration then paywall journey compared to one that involves just the paywall, just like ELLE magazine.
What does this mean for your KPIs?
Moving the focus from paywalls to your audience also means a change in how you measure success. Given that readers are now at the heart of your reader revenue strategy (now it makes sense!), you should move from tracking overall user-to-subscriber conversion rates to instead measure ARPU.
Why move away from conversion rates as a KPI? Because this metric was originally designed for the e-commerce industry, where the buying process is a lot more about impulsive decisions. However, for publishers, engagement prior to the paywall is essential for conversion! This means that focus should instead be moved to increasing ARPU, moving users through an engagement journey towards subscription.
ARPU, average revenue per user, can be calculated for each audience segment based on the value of the actions and soft conversion steps completed by your users.
Firstly, give a monetary value to each engagement/soft conversion step. This value may well be fake (like our table below) and not based on real revenue, but the important thing is that you can track ARPU and understand the evolution of a user's value to your business as they move through the tunnel.
For instance:
- Visits more than once a month = $2
- Signs up to your newsletter = $8
- Creates a free account = $101
With ARPU as your north star metric, you'll see the value in all of the little engagement and conversion steps rather than solely focusing on conversion rates, which we now know isn't optimal for a digital publisher's reader revenue strategy.
But, be aware that your ARPU is likely to look like the Pareto principle!
The what?!
The Pareto principle (80/20 rule) states that for many outcomes, 80% of consequences (results) come from just 20% of the causes (efforts). In the context of reader revenue, this means that 80% of your overall ARPU will come from just 20% of your audience.
The data below (real data this time, from a Poool study) shows how volatiles make up the large majority of your audience, which we can pair with the knowledge earlier of the low ARPU value of these users. Fans, however, are highly more valuable but make up a very small percentage of your traffic. This can also be said for registered members and subscribers.
What should you take away from this?
Yep, it's a lot to take in, but this understanding of your audience and engagement strategy prior to the paywall is essential for success in a subscription model.
In short:
- Move away from a rigid, single paywall model to instead focus on your audience
- Build engagement and conversion journeys that are adapted to each segment, seeking to gradually move the user through the funnel towards subscription
- Launch first, test and iterate
- Place ARPU at the heart of everything you do – the value you give to each engagement or conversion step doesn't have to be real, but it will help you to track and optimize your strategy, moving users towards subscription
- Final note: don't underestimate the power of free registration prior to presenting the paywall!
