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.