A no-brainer gets rejected. This is likely my last gig, and I want to do what I love doing. But the advertising-based model is teetering.
Many readers have suggested to me that they would be willing to pay a reasonable annual subscription fee, and that I should put the content or some of the content behind a paywall. The reasons most often given for it fall broadly into two categories, with the first being far more common:
- “I’m tired of the ads, they’re distracting, and I would rather pay a little every year to get rid of the ads.”
- “Your stuff is too good to just give away. You should charge for it even if it limits readers to those who are seriously interested.”
I have been thinking about it for years. Ultimately, the way I see it, it comes down to a choice:
- An equation expressed in dollars where I come out ahead dollar-wise.
- My larger goals in life.
The equation expressed in dollars goes like this:
Once I put WOLF STREET behind a paywall, no matter how intensely I try to persuade my readers to come along with me and pay for WOLF STREET, I will lose the vast majority of my readers. Only a small percentage would make the hop.
So here is the sample math: If WOLF STREET costs $50 a year, and 10,000 readers (a small percentage of my current reader numbers) make the transition, it would amount to $500,000 a year in revenues. That is quite a bit more than I make off my silly, intrusive, and hated ads. So from that perspective, this would be a no-brainer.
But there are several problems with this equation, if it even works. For one, my readership would be gutted. And these readers are who this site lives for.
Then there is “churn.” I would lose paying subscribers all the time, and just to stay even, I’d have to market and advertise the site to get new readers to replace the once who left. And if I start marketing the dickens out of the site, pay for ads on other sites, hire a marketing team, and so on, I might get this to 20,000 readers. And $1 million in annual revenues. Or maybe not.
But here is the thing: I would have to totally change my business model and what I do for a living.
My larger goals in life.
Right now, my business model is this: Spend much of my time researching, mulling over, and diving deep into data and analyzing what I find, and then writing it all down to where it makes sense even to me, and building charts that even I can understand at one glance. And I spend a lot of time communicating with readers in the comment sections – all of which I really enjoy.
And importantly, WOLF STREET is widely read, and I’m having an impact on the debate.
In short, my business model boils down to this: I spend no time on marketing the site. I focus on creating the best articles I know how to create and hope that word gets around. Hope is not a strategy, but so far it has worked, thanks to my readers. And advertising revenue came with it.
Under a subscription model, I would constantly be trying to market a newsletter because subscribers unsubscribe or don’t renew, and I’d have to labor to fill those spots, and then I’d have to labor to get more subscribers in order to grow, and I’d have to bombard inboxes with promo emails that are trying to get people to subscribe to my can’t-live-without newsletter hidden behind a paywall.
And this time spent on marketing and selling a newsletter would have to be subtracted from the time I spend researching, analyzing, stewing over, and writing about financial, economic, and business topics, and communicating with my readers.
Look, I’m not the youngest guy anymore.
This is likely my last gig. I want to keep doing it until my brain freezes over. I feel young, and I’m fit and healthy — knock on wood — so I hope I will have many more years doing what I love doing. And what you see in front of you is what I love doing.
However, at this stage in my life, I really don’t want to spend my time doing what I don’t like doing. I have done enough of that in my younger years. I’ve paid my dues, as they say. I want to enjoy the rest of my life: And hawking subscriptions just doesn’t fit into it.
When I started the predecessor site in the summer of 2011, with this ghastly name…
…I had zero readers. When the first reader somehow found the site, I was immensely excited. I hollered at my baffled wife: “I have a reader!” Then after a while, I had 100 readers a day, then 1,000, wow! I started putting ads on my site. And they started making a few bucks a day – on a good day, enough to buy a nerve-soothing craft brew at a watering hole. And my still baffled wife could never quite figure out why I was working so hard for so little.
It’s called sweat equity. In the summer of 2014, I shed the ghastly name and switched to WOLF STREET, and things have been rocking and rolling since. Now the site is making pretty good money — “beer money,” I’ve come to call it, because I love a good IPA.
So I could probably increase my beer money by a big jump – maybe by multiples – if I switched to a subscription model. I’d have to hire a marketing team. I’d have to pay for advertising on other sites to lure people to a landing page that scares them into subscribing to WOLF STREET so they can find out how they can survive the coming whatever….
No thanks.
Also, some readers’ finances are stretched, and they don’t spend money on subscriptions. With a paywall, I would systematically exclude them. Many other readers just don’t want to spend money on subscriptions. And hiding a site behind a paywall can kill search traffic. These are people who may not know the site but are looking for something to which a WOLF STREET article provides an answer. There is a democratic beauty to advertising-supported publishing: Everyone gets to read it.
But there is a democratic beauty to advertising-supported publishing only if it can function, which is less and less clear.
The advertising supported model is under heavy attack. There just isn’t enough money in it for online publishers. Advertisers (such as Ford or Macy’s) spend a fortune, and publishers get peanuts.
The middlemen siphon most of it out — thick layers of middlemen: The ad agency hired by the advertiser, the “ad tech” companies that have managed to insert themselves layer by layer, Google that runs a big part of the show, other ad exchanges, etc., and then my own ad agencies. And the portion that the middle is siphoning out is getting bigger and bigger.
For many publishers, this just isn’t working out. Though their sites are big and have lots of readers, they aren’t generating enough revenues to fund operations. Layoffs have been ricocheting through the publishers for years, now even pure online publishers. Just so far this year, the layoff reports include:
- Vice to shed 10% to 15% of its people.
- Buzzfeed to slash 220 additional people after laying off its entire podcast team last year.
- McClatchy Company (Miami Herald, Kansas City Star, etc.) offered buyouts to 450 employees.
- Yahoo, AOL, and The Huffington Post got hit by layoffs, as owner Verizon announced that it is planning to axe 7% of its people at its media companies. This series of layoffs is on top of the buyout program announced last December with which Verizon is trying to shed 10,400 employees by mid-year.
- Gannett, the giant that owns over 100 news sites, plans to lay off as many as 400 journalists across its properties, after a round of voluntary buyouts late last year.
- Condé Nast has trimmed staff at various sites this year, including Wired, Glamour, and GQ magazine.
- The Dallas Morning News cut 43 jobs, half of them in the newsroom.
And it’s just February 18!
So I don’t know for how long the advertising-supported model will continue to provide me with beer money. There may be a day when this model no longer functions for a small publisher like me — when the giants such as Google, Amazon, and Facebook don’t accidentally leave enough crumbs behind for me to feed on.
But that day is not yet in sight. For now, my site is growing, my readership is growing, my beer money is still growing, I’m having a blast doing this, and I intend to keep doing it until my brain freezes over.
Since my podcast team — which consists of me, myself, and I — has not been laid off, here’s my latest podcast: What’s Causing the Subprime Auto Loan Fiasco? Listen to... THE WOLF STREET REPORT
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