Sunday, May 24, 2009

But would anyone pay?

I've been promoting this idea of actually paying for content, like a really good news article, after you read it, as only then do you know that it's worth paying for, and I think a natural issue with the idea is, would the average person pay?

And I think the simple answer is, no. But this idea is not for average people.

I call it Pay Back Value, and it's simply acting on the web like one would at a high end restaurant--you consume first, then you pay.

However, there are two types of people in the world: those who would pay without threat of punishment, and those who would run out of restaurants without paying all the time if there were no such threat.

The ease of distribution on the Internet means that you can market to the first set, and not worry as much about the second as unlike with a restaurant where the food has a higher reproduction cost, on the Internet, there is little cost in reproduction (production costs remain high!!!) so limited loss from the theft!

Electronic distribution and reproduction is cheap--buying, preparing and cooking food is not.

Still you can get a herd problem where even people who want to pay, feel stupid about paying if there is a perception that no one else is paying or that most are not, so the idea actually gives you the ability to identify people who deliberately steal value, and credit cards can help explain how it works.

You get a credit card, right? But what if you have no intention of ever paying?

When will the credit card company know?

Ans. When they send that first bill and you don't pay it.

What if you pay part of it, or pay for a while just to build up credit and then quit paying?

Isn't that reason for credit card companies to never issue credit cards?

What are they thinking!!!

Similarly to credit cards, you let people sign up for something that gives them content without them incurring upfront cost, on the expectation that they will pay for what they value, and if they don't pay, you find out after some time, like a couple of months.

Then you can stop giving them the content.

I like using the New York Times as an example, as last time I checked they have people sign up now to see articles on the Web, but you can see them for free with no ability to pay later.

Say they institute this concept. People can PBV--pay back value. Like there's a PBV button on the bottom of the page after the news article or column, you can hit that button and pay a dime or something, or if it didn't seem worth it to you, move on.

No payment, no penalty.

Hypothetically as I have no idea what the numbers would be (but psychologists should be interested!!!) they find that 20% of their users pay back more value than if they bought the physical paper and do this month after month, 40% pay back regularly--I know I said above the average would not pay but these are Times readers!!! I'm assuming a higher class of people--and 10% pay intermittently, while 30% do not pay at all.

At their discretion they can block members of the 30% who do not pay from their site, for instance, if someone is reading article after article, day after day, and giving nothing in return, they might simply cut that user off.

Also they can look at the content people across the board are clicking on and buying or not buying, and using regularly paying users as a benchmark for the real value of the paper--kind of a mark to market with content--get an accounting of their losses from theft of content without paying.

For the first time, they can get a real monetary number compiling losses, and have the ability to weed out people who will not pay, and they can reward that top 20% who regularly pay, so most importantly, they regain the ability to reward their best customers.

Quite simply, only then does the Times become a business again.

Free is not a business model.

I have no doubt that paying later will eventually dominate the Web as it's how we do most of our buying in the real world. We rarely if ever pay upfront without being able to thoroughly check for quality.

So the remarkable thing is that the Internet is backwards!!! It's not that the Internet was so advanced that money doesn't work any more.

It's that it's a laggard to how people actually do most of their buying in the real world.

James Harris
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