Insider’s “Smart” Paywall is What Many Publishers Run

Hard. Metered. Dynamic. These are all words used to describe different types of paywalls. And each has its merits depending on the type of business that you are running.

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Now let’s jump in…

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So, it’ll help to break those three down with simple definitions:

• Hard wall: This is where all of the content is locked.
• Metered: This is where a certain number of stories are locked each month.
• Dynamic: This is where there are effectively no rules, but instead, the paywall software attempts to determine a user’s likelihood to pay.

We’ll come back to that because it’s an interesting concept. Last week, Insider’s Editor in Chief, Nich Carlson, sent a memo to the editorial team talking about the future direction of the editorial operation. There was a lot about how AI will be used and how Insider is “becoming the next-gen WSJ.” (Disclosure: I work for Morning Brew, which is owned by Axel Springer which also owns Insider.)

But this part in Carlson’s memo jumped out, courtesy of Semafor’s Max Tani:

We are also working on changing how our subscriptions business works. In the near future, all of our work will be behind a “smart paywall,” which will ask people to pay only if a very smart algorithm thinks they are likely to pay.

The quote retweets of Tani’s tweet are fascinating, with many people mocking this. And maybe’s Carlson’s terms “smart paywall” and “very smart algorithm” contribute to this mockery. But I suspect if we peel back the onion a bit, what is being discussed here is nothing more than a dynamic paywall.

So, what does it mean to be smart?

In many respects, metered and dynamic paywalls are doing very similar things. They are leaving enough content open so that the random person who hits the site is able to read the content while still providing a strong enough stop-rate to convert your more loyal readers. For context, the stop rate is the percentage of your audience that actually sees your paywall.

Back in 2019, the Shorenstein Center on Media, Policy and Public Policy released its Digital Pay-Meter Playbook. One thing the report found was that “most publishers are too generous and need to stop more readers to force conversion.”

A majority of the publishers studied across this metric are stopping a limited proportion of readers relative to their overall audiences. Among the more than 500 news organizations analyzed, the fiftieth percentile of publishers stops only 1.8 percent of their readership with a paywall or meter. Publishers with “sustainable” digital businesses report stop rates between the 80th and 90th percentiles of all publishers studied (at or above 4.2% of all readers). The publishers that reported more than 6% of unique visitors reaching their stop threshold had “thriving” digital subscription businesses – robust teams, and well-developed audience engagement strategies.

In other words, if 6% of a publication’s unique visitors are seeing the paywall offer, it’s likely that the publication is “thriving.” And this makes sense in principle. People don’t know they have to pay for something if you never tell them.

With a metered paywall, the publication has a pre-determined number of stories before preventing the reader from seeing the content. For example, Digiday and Skift both let you read three articles a month before you have to start paying. This is pretty standard and assumes that if a user wants to read a story a week, they’re likely benefiting enough to pay.

A dynamic wall analyzes the user’s behavior to determine how many articles they should read before seeing a paywall and then changes the rules accordingly to maximize the conversion.

Let’s look at two scenarios. First, a user comes to the site and reads four articles in a row, but then disappears for two months. Second, someone reads three articles every month for six months in a row.

With a metered wall, that first user will see the paywall even though they have not developed the loyalty to the brand to justify paying for it. Compare that to the second user who is clearly demonstrating loyal behavior (coming back month-after-month is a great sign), but because they happen to be under the stop rate, they’ll never be truly gated from seeing content.

The dynamic wall is trying to take into consideration more information about the user to determine their propensity to pay. That user who has read three articles every month for six months is likely to pay, therefore the next time they come, they should be shown a wall immediately even if its their first article in the month. At the same time, if a user has not returned in two months, don’t hit them with a wall right off the bat.

Another way to look at it is the source of the user. If they are coming from Twitter, it’s unlikely they have deep brand loyalty versus someone who is a newsletter subscriber. This, by the way, is why newsletters are so encouraged for all media companies; it increases the likelihood that people are going to consume enough content to justify paying.

Further, you can look at what type of content cohorts are reading. The fluffier content that Insider publishes will likely never get someone to subscribe—but it’s great for ad impressions—compared to harder hitting business reporting. And so, not all content is created equal when determining what will get a user to convert.

All a “very smart algorithm” means is that the paywall software that Insider users—Piano, if I recall correctly—is looking at user behavior in aggregate and determining when users are most likely to subscribe. It then pushes the paywall when a user exhibits that same behavior. Does it always work? No, of course not. But with data sets large enough, you can start to get more predictive with things.

But the important thing to remember is that whether it’s a hard, metered, or dynamic wall is less important than a holistic subscription plan. You have to create the content readers care about and understand that the paywall is just a tactic to an overall subscription business. Tactics can’t overcome a poor strategy.

When licensing goes wrong

Licensing your brand can be an immensely lucrative opportunity. You don’t have to take on the financial risk, but you receive a cut of revenue. Disney has become a juggernaut in this space with entire teams responsible for managing various licensing partners.

But you have to be incredibly careful when doing this because if you don’t structure the terms correctly, you can wind up doing more damage than good.

Take, for example, MrBeast Burger. Jimmy Donaldson aka MrBeast, launched this food brand in 2020 with Virtual Dining Concepts. The idea was that restaurants who were struggling during the pandemic could offer ghost kitchen capabilities to sell the MrBeast Burger.

The issue with this is that managing quality is virtually impossible without strict guidelines. According to this tweet from Donaldson:

Yeah, the problem with Beast Burger is i can’t guarantee the quality of the order. When working with other restaurants it’s impossible to control it sadly

And so, he is stepping back from promoting the brand because it’s doing him more harm than good at this point. But in this screengrab tweet, stepping back is not so cut and dry. He writes:

I would [retire MrBeast Burger] if I could but the company I partnered with won’t let me stop even though it’s terrible for my brand. Young beast signed a bad deal

In other words, he may be stepping back from MrBeast Burger, but MrBeast Burger will still exist with the current brand name. That is the risk of licensing your brand. Even if you don’t want to promote it anymore, if the licensor is not in breach of contract, they can continue using your brand.

Licensing can be unbelievably high margin. But if you are not smart with picking your partner or ironing out the details in the agreement, it can come back to harm the brand.

We’ll see how long MrBeast Burger survives without the man himself promoting it.

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