Micropayments. Day passes. Pay-per-article. In the ongoing pursuit of a sustainable revenue model, a variety of tantalizing new options have emerged claiming to be the best new revenue streams. Do these quick hits really lead to big wins?
We are often asked if BLOX Audience+ supports one-time purchases such as day passes or micropayments. Although day passes can be done, it’s critical to think through the business model and understand the long-term effects that non-renewing subscriptions have on your bottom line.
Examining the reality of micropayments
A closer look at industry insights reveals several compelling reasons why micropayments might not be the magic bullet we’re led to believe.
1. Economic realities:Comprehensive studies on micropayments reveal unfavorable unit economics. Despite the most optimistic assumptions, projections tend to highlight the difficulty of achieving meaningful revenue through this model.
When the Winnipeg Free Press experimented with micropayments in 2015, they found that the model didn't translate into significant financial gains even after three years. Since then, they have opted for an email newsletter sign up instead.
2. Flawed analogy—News vs. music purchases: The concept of micropayments for news content draws an analogy from music purchases. While buying a song once and enjoying it multiple times makes sense, news articles are typically consumed once, making the payment model less appealing to users. This fundamental difference challenges the sustainability of micropayments for news consumption.
3. Blendle's retreat: Blendle, often touted as a micropayment success story, recently exited the micropayments business. Despite a decade-long effort to sell news articles individually, Blendle cited limited demand and failure to turn a profit, despite millions of dollars in investments from The New York Times, Nikkei, and Axel Springer. This case reinforces the notion that micropayments face challenges in a landscape where auto-renewing monthly subscriptions provide a much more stable source of revenue.
Delving into the economics uncovers a crucial lesson: while micropayments and day passes might seem attractive on the surface, auto renewing subscriptions proves to be more effective over time.
To grasp the true impact of these different strategies, it's essential to look beyond short-term metrics. The real value emerges when you look at an extended timeframe and the power of compounding.
Imagine Site A offers a $1 day pass alongside an $8.99 monthly subscription. Over the span of a month, Site A sells 66 Day Passes to 58 distinct users, amassing a total revenue of $66. Notably, five of the individuals purchased multiple Day Passes, or 8.6%.
What would have happened if Site A had instead sold a $1 introductory offer that automatically renewed at $8.99 after 30 days? Even if a conservative 50% of these subscribers opt out before renewal, Site A would still accumulate $319 in revenue during the second month.
The true power of auto renewing subscriptions becomes evident when tracking the revenue trajectory over time. Over a few months, revenue experiences exponential growth. Even if only 33% of initial subscribers are retained after six months, Site A can generate a substantial $4,736 in cumulative revenue from that original cohort.
Example case of an introductory subscription offer that automatically renews after 30 days.
Forging a path to sustainability
While the idea of micropayments holds allure, the evidence presents a compelling case against their effectiveness. The industry insights into the challenges and the experiences of pioneers like Blendle underline the need for caution.
A balanced approach that considers evolving reader expectations and alternative revenue models is imperative. Focus on introductory offers to foster reader loyalty and ensure consistent, growing revenue.
If your long-term goal is growing sustainable digital revenue, it’s critical to focus on strategies and tactics that will compound over time. Watch our recent Trailblazers webinar to learn more.
