The shift to “freemium” subscription models

As their initial forays into subscriptions mature, publishers are taking a step back and reexamining which models and approaches are best suited to their specific businesses, audiences and products. As part of that process, many are exploring the pros and cons of metered access models and reconsidering if a metered approach is right for them.

Publishers that initially introduced metered models across their properties are increasingly moving towards freemium models, pulling down their meters and instead reserving more of their content — or distinct portions of their content — for paying subscribers only.

Others that already operate freemium models are layering meters on top to create “hybrid” approaches in the hope that additional content restrictions will drive more readers to become paying subscribers. This typically involves reserving a distinct portion of content for subscribers and metering everything else.

Metered models can work well in some instances, but publishers must evaluate them in the context of their specific content, products, audiences, strategies, needs and business goals. 

Publishers weighing metered models against freemium models should consider the following.

Freemium models convert subscribers more effectively

On the whole, freemium models drive subscriber conversions more effectively than metered models. By their nature, metered models monetize users that consume publishers’ content relatively frequently (dependent on meter limits, of course). Freemium models on the other hand often allow publishers to extend beyond a core group of highly engaged users to monetize a larger portion of their audiences. Many publishers find that generating demand with freely available content before upselling audiences to premium, subscriber-only content and features is often a more effective strategy than simply taxing their most loyal and engaged audiences with a meter.

From a product and marketing standpoint, “unlimited access” is rarely viewed as a particularly attractive feature anyway. We’ve helped a variety of publishers conduct audience research at Toolkits, and we repeatedly find that the prospect of an endless stream of content appeals to a small portion of prospective subscribers. If anything, the inverse is true: Audiences typically gravitate to products oriented around scarcity, efficiency and concentrated value, rather than those that require high-volume consumption to justify their price points.

Metered models can help drive discovery, engagement and audience growth

One potential benefit of metered models is their ability to promote engagement and audience growth. By their nature, meters only restrict access for users who frequently and repeatedly consume content, meaning new audiences and infrequent readers can sample publishers’ content and become familiar with it before they’re ultimately asked to pay.

By contrast, freemium approaches typically make less content available for free, which can lead to instances where new audiences are immediately met with paywalls and are not given an opportunity to familiarize themselves with publishers’ brands and content before being asked to subscribe. Any publisher operating a freemium model must ensure a balance is maintained between freely available content and subscriber-only content to ensure that audience growth isn’t stifled, and that a healthy top-of-funnel audience is being cultivated despite premium content restrictions.

Metered approaches also come with some inherent technical advantages that may aid discovery and distribution. For example, metered content can potentially generate search traffic more effectively, depending on how sophisticated a publisher is with its approach to SEO for paywalled content. Capitalizing on inbound traffic from social media and other platforms might also prove more straightforward, if complicated access rules for traffic arriving from different channels can be avoided.

Freemium models generate more actionable data

Freemium models typically provide publishers with stronger audience signals than metered models can, resulting in clearer data around the types of content and features that audiences find most valuable, and ultimately what’s most likely to drive them to subscribe.

Although publishers should avoid making editorial and product decisions based heavily on behavioral and conversion data, freemium models can offer a simple and powerful view into where a product is performing well, and where it might be improved. If a feature is driving relatively few conversions, a publisher might consider discontinuing it, for example. Meanwhile, if coverage of one topic or theme is driving significantly more conversions than others, editorial teams might adjust their focus to better meet the needs and interests of their audiences.

By contrast, gleaning meaningful and actionable data from metered paywalls is often more complicated. Since meters primarily monetize broad consumption, the immediate insights they provide about audience interest and intent are relatively weak. A reader might convert on a piece of content after hitting a meter limit, but have actually derived significantly more value from three pieces they accessed prior.

Sophisticated analytics and measurement approaches can help to provide more insight but for many publishers – in particular those operating with smaller audiences, teams and budgets – freemium models offer a much cleaner and simpler view into their audience’s demands.

Freemium models can drive stronger content and products

Metered paywalls are relatively easy for any publisher to implement without significant changes to their content, editorial approaches, or broader organizational mindsets. Many publishers’ initial forays into subscriptions were oriented around metered models for that reason: Meters enabled them to quickly stand up subscription products, see how they were received by their audiences, and then evaluate if subscription products warranted further attention and investment.

For those publishers placing audience revenue at the center of their businesses and roadmaps, however, freemium models can help reorient their broader organizations and mindsets more firmly around subscriptions.

Successful freemium models require a far more deliberate approach to content and product development. Publishers must spend time packaging compelling content and features into coherent products that justify premium pricing, and arbitrarily placing content behind a paywall without rhyme or reason is not a recipe for long-term success. This may require adjusting their editorial mindsets and output, hiring staffers with expertise in new areas, or creating dedicated teams responsible for generating subscriber-only content.

Freemium models also require publishers to reorient their wider operations more firmly around the needs and interests of their audiences, ideally informed by ongoing audience research and by paying close attention to the specific types of content and features that resonate. Ultimately this should align editorial teams more closely with their audiences, creating a feedback loop that enables them to tailor their content and output to more effectively to meet the needs of their audiences, rather than optimizing to the needs of advertisers or other stakeholders.

Freemium models allow for stronger product positioning

Freemium models often require publishers to put more thought into the products they’re producing. This often enables them to more clearly communicate the unique and differentiated value their products are intended to provide, and results in sharper product positioning and marketing.

As audiences become more discerning and increasingly gravitate towards products they perceive to deliver the most value, simplicity is powerful. As publishers move beyond the smorgasbord approach which results in too many subscriber features and benefits, the ability to tell a clear and compelling story about the value of their products – and to clearly set themselves apart from competitors – is increasingly a competitive advantage.

Freemium models are typically far easier for audiences to understand, too: Some content is free, and other content they have to pay for. If executed and communicated effectively, readers shouldn’t be confused around where and why they’re encountering locked content.
For the reasons outlined above, products based on meters are typically harder to market effectively beyond a core group of engaged users because their value propositions are inherently tied to content volume rather than clear and differentiated value.

Metered paywalls are less secure

Metered models are inherently less secure than freemium ones since content is designed to be freely available to a large portion of publishers’ audiences via meters. Users who exhaust their meter limits can often find ways to access paywalled content by clearing their cookies, using privacy modes within their browsers, switching devices, waiting for their meter limits to renew, asking friends to access content for them, etc. By contrast, freemium models are often more secure since there’s a clear separation between content that’s freely accessible and that which is reserved for paying subscribers.

Technology is also a factor: In many cases metered paywalls are implemented with client-side technology, rather than the more secure server-side approach often used to power freemium models. Client-side implementations typically offer increased flexibility and easier implementation, but are easier for users to “hack” their way around.

The extent to which publishers’ audiences are likely to circumvent their paywalls depends largely on the nature of their products and audiences, but as publishers place more content behind paywalls, consumers are becoming increasingly savvy with ways to get around them. Publishers with unique or highly valuable products that are not predicated on volume of consumption might therefore see value in the added security that freemium models and server-side content protection can afford.

Freemium models can impact other revenue streams

Publishers are increasingly placing subscription products at the center of their businesses and audience strategies, but many have other revenue streams to consider when evaluating whether a metered approach is right for them.

The impact of metered and freemium subscription models on publishers’ other revenue streams depends on a wide range of variables, including the nature and quality of their products and audiences. For some publishers a freemium approach might generate less topline traffic than a metered approach would, which could limit the potential of other revenue streams such as advertising or commerce. 

Meanwhile, publishers operating freemium models must strike a careful balance between how much content they offer for free and how much is reserved for subscribers if they have other revenue streams and business needs to consider. Those with advertising businesses might choose to make a greater portion of their content available for free than those more firmly focussed on driving subscription revenue, for example.

For many publishers, a blend of advertising and subscription revenue is emerging as the optimal way to extract revenue from their audiences, and a freemium approach can offer an effective approach for balancing the two.