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Arianna Huffington, founder of The Huffington Post, is a poster child for 'new media'. But a poster child does not an expert make.

On stage at AllThingsDigital's D7 conference, she made one of the most ill-informed comments I've heard in a while: subscriptions are only a good idea for porn sites.

Her exact words:

We absolutely never imagine doing subscriptions. My belief is that unless you’re selling porn, and especially weird porn, I would not go the subscription route.

As someone who derives a good amount of (mostly) passive income month after month running subscription-based websites that have absolutely nothing to do with porn, I find Huffington's comments somewhat amusing. As I think plenty of other people and companies who run profitable subscription services would.

I suspect Huffington's distorted view of subscriptions as a business model is based on the fact that subscriptions are a mixed bag when it comes to the type of commoditized information that's typically available somewhere for free (eg. the news). With this type of content, getting consumers to pay can be difficult if no key differentiators are developed and the value proposition isn't strong enough. In my opinion, love it or hate it, the HuffPo's content falls into the 'commodity' category.

But there are plenty of categories of content that people continue to shell out good money for. From research reports to financial information to diet tips, the only type of content with a compelling enough value proposition isn't porn, as Huffington mistakenly seems to believe.

To rebut Huffington's argument, here are some of the advantages of considering a subscription-based business model for your content venture:

  • The economics are appealing to small and mid-sized websites. Advertising can be a wonderful business model but the size of the advertising market is deceptive when it comes to smaller properties because these properties are excluded from much of the spend. The reason: they're off the radar of major media buyers, meaning they have to rely on ad networks and rep firms to pool and sell their inventory. In my experience, even the best ad networks tend to deliver mediocre results over the long haul as far as money is concerned. So for a smaller site with valuable content, even a few dozen subscribers can easily generate more revenue in a month than advertising over several months.
  • Cashflow is far more predictable. Predicting cash flow is far easier with an established subscription service with some cashflow history.
  • Scaling is easier. When you don't have to serve loads of content to dead-weight users that will never generate more revenue than they create in expenses, scaling becomes a much easier (and typically less-costly) task.
  • Subscription businesses are often more stable. This is especially true in downturns. While a recession can impact subscriber attrition, in most verticals I've seen, this attrition is far lower than the off-the-cliff-style drops you see in the advertising market, especially when you rely on a third-party to sell your inventory. This is simple to explain: Ask yourself a simple question: who has more loyalty to you - somebody who decided to pay you for your content or a media buyer who probably doesn't even explicitly know that he's been buying ads on your site?
  • Metrics are easy. The metrics by which the success of an ad-based business is measured can be more complicated than they seem. Registered users are hard to value and pageviews don't always translate to revenue. Usage metrics could be up, but revenues down. With a subscription service, plotting subscriber growth, subscriber attrition and ROI from marketing efforts is much more straightforward.

Obviously, a subscription business model isn't for everyone but anybody who says that subscriptions are only good for porn is living in 1999 as far as I'm concerned.

Photo credit: eyeliam via Flickr.

Patricio Robles

Published 29 May, 2009 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2392 more posts from this author

Comments (15)

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Ian Tester

Ian Tester, Senior Product Manager at brightsolid online publishing

have to agree - a particularly dumb comment. Tell that to ancestry (our main competitor), meetic and match.com or WGSN.com (my favourite subscription website in the whole world - and far from cheap!). It's like all markets - if you have something of value, people will pay for it.

And the economics of running a subscription site are seriously superior to ad-funded open-access models. I'd not like to be paying YouTube's hosting bill.....certainly not with the cheque from the ads....

over 7 years ago

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Stuart Crowder, Internet Marketing Consultant / Social Media Expert at n/a

I agree the comment is slightly odd, although I can see what she means. Its very hard for subcription based sites to maintain the added benefits which subscription will maintain. From working previously on sites which were subcription based, people would constantly be asking why they have to pay? and what they get which is different? Especially when the service can be used for free to a certain extent and/or produced similarily elseware.

The bonus of having a subscriptions based site would definately be all the things you mentioned but from my past experience it seems to make some really great brand advocates. The users that pay subscriptions regularily, use the site to the full potential and will be involved in all areas. they will write comments, produce content and forums, talk to other users and make use of the service. They are also more likely to talk about the site in a word of mouth marketing way (much as Ian Tester has wrote about WGSN.com above)

I think Arianna Huffington knows her stuff, no matter how odd her comment was!

over 7 years ago

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Nichola Stott

I can understand her comment particularly in context of speaking at D7. Of course it's a sweeping generalisation, but to deliver an impact whilst speaking at such an event, you do need to have a firm concise standpoint. I disagree that subscription models only work for niche porn, although I cannot think of an example sector or site, where a subscription model is more profitable than niche porn. Niche porn sites operating a sub model are generally the most successful (in terms of profit margins, retention rates) examples of sub. business model in operation. It would have been really valuable in this article to see an examination of other online businesses/publishers/content providers who are successfully operating a sub-only, or mixed model. Ian's examples are great!

over 7 years ago

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Jack

Well done for having the balls to point out that this comment from 'web-royalty' is total nonsense.  Now, more than at any point over the last 6-7 years, such a statement is ridiculous. 

If a product is good enough and not (easily and/or legally) available for free somewhere else then people will pay for it.

over 7 years ago

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Tim Callington

I suspect the comments were made with news content in mind and Rupert Murdoch's recent comments about moving his collection of online titles to a subscription model.

In that context the comments make some sense. I think it will become increasingly difficult to justify charging for news content online as there range of open sources available increases.

She's definitely right to keep an eye on the porn industry though - from online payment mechanisms and business models to security - it's where a lot of web and internet innovation happens.

over 7 years ago

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David Eedle

I too was slightly taken aback by this pronouncement, as someone who has built and sold a number of successful subscription content businesses.

I've always said we modelled our subscriptions on the porn business - we launched our first subscription site back in 2000, at a time when the majority of subscriptions WERE porn - I think they pretty much invented online credit card transactions, and especially 30 day credit card trials. Along with recurring subs, multi-level memberships etc. All of which we tried to learn from and use in our own (non) porn businesses. Although my partner did accuse me of doing way to much market research...

I don't know she had News Ltd in mind, it strikes me as one of those off the cuff and ill-conceived comments that slip out of everyone's mouths from time to time.

Your list of advantages is a good synopsis - and are spot on in context of our subscription businesses.

Cheers...David

http://www.NicheContentMillionaire.com

over 7 years ago

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farouk

i do agree with you

when you have information that people need and no one else has it then it makes a lot of sense for somoene to pay for it

about 7 years ago

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jose@b-boomers.com

jose@b-boomers.com

about 7 years ago

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Madison Paige

Subscription models probably wouldn't work for Ms. Huffington. The news business is very different than say, iVillage or any number of subscription-based websites online. I agree with many commenters here that its being done and its successful all over the internet.

I think for people to be willing to pay for content they must feel that:

1) the content is not readily available elsewhere; and/or

2) the benefits of being a subscriber are strong or compelling enough; and/or

3) the subscriber feels a sense of community or connection with site owners and/or

4) subscription price is a good value for the money

As a broadband program producer these are issues are front and center for us because the cost of producing quality content can only be paid for with advertising if one has hundreds of thousands of viewers per show.  On the other hand, if one has a program that viewers value, sustainability can be reached with far lower viewer numbers who value the content and pay a modest fee for a subscription. We've used a combination of unique program delivery and viewer rapport to encourage subscriptions and increased viewership. 

We believe that these issues will be front and center to many online business models in the coming years. Not everything can be offered from free and monetized with ad dollars. That's an unsustainable model.

about 7 years ago

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Idiot

Hahahha

almost 6 years ago

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usamaaghabi@gmail.com

usamaaghabi@gmail.com

almost 6 years ago

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great

great

almost 6 years ago

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Swapnil Kesharwani

need nude girls photos

almost 6 years ago

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Swapnil Kesharwani

I any girl wants to call me for a night you can send an e-mail to swapnil.kesharwani@citi.com. Age is not a criterea money is.

almost 6 years ago

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Adnan pakistan

Look at the american dogs kafirs

over 5 years ago

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