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Despite the fact that many publishers have struggled to transform ad-supported content into profit, many publishers have opted to keep the ad-supported content, and forgo a paywall.

And there's a good reason why: it's entirely unclear to many publishers whether a paywall will be profitable or not, and once a paywall goes up, a publisher's audience will almost certainly drop. For many publishers, ad-supported content and a large audience is still more attractive than paid content and a smaller audience.

Perhaps this is a good thing, but publishers shouldn't be under any illusions when it comes to the cost of ad-supported content. According to a study by the IABUK, "More than 80% of internet users enjoy significantly more value from using the web than they would be willing to pay to eliminate disturbances from advertising and privacy concerns. In practical terms, each euro an internet user is willing to spend to limit advertising disturbance equates to six Euros worth of value from current ad-supported web services."

That's not entirely surprising. While ads may be annoying, consumers have largely learned to tune them out as necessary or desired. Why pay for an ad-free experience when you can just blind yourself to the ads at no cost, or if you're slightly more sophisticated, install an ad blocker?

Clearly, there aren't any easy solutions for publishers. Despite the fact that consumers typically get far more from publishers than they give, most publishers will have a hard time closing the gap.

According to the IABUK's study, "if those services that are currently provided for free were to be charged for (at a level that generates the same amount of revenue as ad-supported services), 40% of current users could stop using the internet."

From this perspective, it's worth considering that 'it is what it is' Online publishers might get the short end of the stick, but this is the business they've chosen to be in. The most successful publishers, of course, have proven that you can build a viable paid content business online, but paid content is a smaller market than ad-supported content, and there are businesses that do just fine with ad-supported content too.

So what's the answer for publishers looking for a more equitable exchange with consumers? In my opinion, a good number of publishers, particularly newspapers, would be far better off worrying about their cost structures than how much value they're theoretically not getting paid for. After all, ad-supported versus paid is a pointless argument if you're spending more than you can make with either model.

Patricio Robles

Published 22 September, 2010 by Patricio Robles

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

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Comments (1)

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Steve Davies

I set up a successful digital publishing business a couple of years ago using a business model that monetised engagement with our audience - this included freemium revenues and brand supported services - very little of these revenues fitted into the classic 'ad-supported' mould – but then this was a purely ‘digital’ business without the baggage of a paid-content business model. 

The reason why publishers are experiencing the 'short of the stick' as you say, is due to a classic and quite simple paradigm shift that every business school student would be familiar with.  Put simply the 'value' in the value chain has shifted and they've been left carrying a cost and skills base that is completely out of synch with this new model.   The value is still there, the volume may be less, but that won’t last for long – every industry goes through this cycle of ebb-and-flow then transformation, before beginning all over again.

If you stand back and look at the situation afresh - recognising that value is what the end-consumer translates it to be then you realise that brands, ad and PR agencies and publishers 'all' have a part to play in providing the entertainment, information and convenience that consumers seek from publishers and broadcaster.  In the past these have been separate and distinct elements of the value model, able to survive with relatively passive connections to each other. 

The future however involves a far more deliberate relationship and whether the consumer or brand pays for the outcome is less important than the need to identify where to add most value to one (or both) of these stakeholders.  The most likely paymasters are the brands, which means publishers and agencies may eventually become one but currently very few publishers have the skill-set, mindset or will to grasp this new reality. 

It’s almost comical to hear publishers protest that consumers should pay for their content, because it’s valuable – and yet in every other market that’s a situation that is defined by the consumer and not the supplier of goods.

about 6 years ago

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