Facebook, Patreon and Infrastructure Platforms for Publishers
Why subscription publishing needs a platform
There are two pieces of news this week that both hint at an overarching topic: infrastructure for subscription-based publications. As I’m going to argue, it will take a platform that provides said infrastructure for the paid writing ecosystem to strive.
Let’s get through the news real quick, before looking at the bigger picture.
Facebook is Building Subscription Features for Publishers
The Wall Street Journal reported that Facebook is working on a feature which would allow users of its app to subscribe to publications. Since the feature will supposedly go live at the end of the year, there are still many open questions. From the article:
Many details remain up in the air, but discussions have centered around making the feature available only on stories published natively to Facebook through its Instant Articles product. Talks have also focused on how to structure the arrangement, with Facebook leaning toward a metered-payment model, which would allow users to read some articles for free each month before prompting them to pay, three of the people familiar with the matter said.
Another point under discussion is how payments would be processed and whether Facebook would get a cut of the revenue. One model being looked at is to have Facebook take payment information but let publishers keep all the money, some of the people said.
For Facebook, this makes a lot of sense. Users need to find interesting stuff every time they look at their Newsfeed. Professionally produced content is only part of the experience but it is clearly important. There is a maximum of baby and feet-on-a-hammock photos people enjoy per day. So, as more publishers are trying to establish a subscription business, Facebook needs to give them an incentive to keep their content on the platform. Selling subscriptions would certainly fit the bill.
Of course, the actual usefulness to publishers will eventually come down to the details. Since those are yet unknown, any judgement would be premature. There are two points in the WSJ article, though, on which I want to comment. For one, it appears like Facebook wants to set the terms and prescribe the details of the model (i.e. a metered-payment model). To be really attractive for all kinds of publishers, allowing them to set their own terms would clearly be preferable. Second, any model where publishers don’t get the subscriber data — which enables them to build a direct relationship with readers outside of Facebook — should raise a red flag with any executive considering whether or not to use it.
Patreon’s CRM
Patreon, the membership platform for artists and content creators, announced several updates yesterday. Among them the introduction of a CRM-like tool that gives creators more data on their supporters as well as new ways to connect with them:
The new “Patreon Membership Engine” centers around the Patron Relationship Manger, the first CRM for pro content creators. It lets them sort patrons by how much they’ve paid or when they joined, and provides their email addresses — something YouTube, Facebook, Instagram, Snapchat, Twitter, and other platforms refuse to give creators.
This Salesforce-For-Artists lets them contact their fans with special offers or thank yous, like hawking higher priced merchandise to top spenders while upselling new $1 subscribers to their more expensive reward tiers.
One of the key changes the internet caused for content creators is that the direct, personal relationship with the audience became a critical success factor. As I’ve written in Podcasting, Personality & the Future of Media:
In the print age journalists where mostly anonymous bylines. Only hardcore media consumers — that is: mostly media professionals — could name more than a handful of journalists. What mattered was the brand of the outlet. Those days are over. Today, writers have become personal brands. The best exceed at creating a following. Among regular people.
The internet gave journalists a face (first in the form of pictures, now increasingly also videos) and a voice. As people relate to people first and foremost, it’s almost natural that once we had a choice between brand and person we went with the latter.
This, of course, doesn’t only apply to journalists but all kinds of content creators. The internet lowered the entry barrier for creators and, thanks to its global scale, turned content distribution into a non-issue. What matters today, instead, is building a lasting relationship and finding ways to monetize it. Patreon set out to build tools and a platform that do just that for creators. Giving them increased access to their paying audience will allow them to improve monetization.
But Patreon is focused on a certain type of creator — mainly creatives — and not fine-tuned for the needs of professional publishers or writers. When asked about the intention behind the relaunch, co-founder and CEO Jack Conte told The Verge:
“It feels much more like, you know, a place to run a business — a place to actually make money and get paid and run a membership platform”
That is certainly a step towards professionalization. Which is a good thing. The company’s heritage is goodwill, as the very name of the brand indicates: Patreon. Paying users on the service are patrons. That is, their payments are an act of generosity rather than adequate compensation for a valuable good. While I think there is something to that line-of-thought (the connection the subscriber feels with the creator is certainly a key ingredient in the decision to pay for the content), it’s a fine line to walk on. The new Patreon lingo emphasizes the notion of memberships and I certainly prefer that.
Infrastructure Platforms for Subscription Publishers
Both news have an overarching theme. Old and new publishers alike are looking to build content businesses with a subscription model. And a growing number of users seems to accept that quality content is something that needs to be paid for — and that advertising won’t do the job.
While some established publishers like the New York Times or the Wall Street Journal have a decent chance to succeed at that business model transition, many won’t. As I’ve written about at several occasions, a subscription-based publication is build on different types of content as well as different organizational structures. Thus, it’s a market which lends itself to new entrants; and there is a growing number of them in areas ranging from journalistic writing to business analysis.
If the current trend line continues and subscriptions become a viable business model for publishers — which I am quite confident in — this will open the door for another type of business: infrastructure platforms for subscription publishers.
Challenges in a Subscription World
Let’s first talk about the challenges both users and publishers face in subscription world.
Users:
- Trust: The issue of trust comes in several dimensions. First, it matters when deciding which content to subscribe to. Is that a writer/publisher who produces quality on a consistent basis? Will I get my money’s worth? Will I get it back if s/he doesn’t deliver that quality? Trust also matters in terms of payment: Do I want to give my payment details to that publisher?
- Too-many-subscriptions: As more publishers start to put their content behind a paywall, we’ll reach the point at which any given person’s willingness- and/or capability-to-pay is exhausted.
- Discovery: A general challenge on the internet, but twice so when it comes to subscriptions. First off, (a lot of) such publishers’ content is behind a paywall. And second, the business model lends itself to highly-focused niche publications. So, how do I find the best writers in their respective domains?
Small publishers & solo writers:
- Building an audience: This one needs no explanation.
- Conversion: If a publisher has managed to attract an audience, the extra challenge in subscriptions is to convert those readers/fans into paying customers.
- Technology investments: There are three critical pieces of technology that a subscription publication needs: a CMS (content management system), preferably with some features that allow creators to interact with the customers. A payment system that works flawlessly. A CRM and analytics tool that allows to gain a deep understanding of customer preferences and to deepen the relationship
Growing publishers:
Once a publisher has entered the growth stage, new challenges arise.
Background processes: When the site grows, the background processes become more challenging as well. Those are, for example, financial processes like the collection of outstanding balance, or editorial processes like the publishing schedule.
Talent discovery: If the growth strategy includes growing the editorial team, it’s even more important for subscription publishers than for ad-based ones to find the very best writers in their respective domain (otherwise, why would you pay for them?)
Growth acceleration: Once the initial growth phase slows down — that is a publication has reached a decent percentage of its core audience — further growth usually becomes harder. It either takes increased investments in marketing, the addition of new (but related) areas of expertise, or internationalization.
An Infrastructure Platform to the Rescue
You can categorize those challenges into three areas: infrastructure, user experience and user growth. Those are areas that lend itself to a certain type of business: a central infrastructure platform.
When it comes to digital infrastructure, there is little reason to create something multiple times once there is a good-to-very-good solution. With regards to subscription publishing, that means it’s not particularly useful if every publisher invests in custom systems once there is a solution that fulfills most needs of publishers and users. Particularly since ad-tech plays no role for subscription-based publications — the reason why it can make sense for advertising based publishers to build proprietary CMS software — a customizable industry standard solution should do.
The same goes for the user experience-related challenges. Further even: a platform is way better suited to create solutions to them than individual publishers. As an independent entity, it could ensure trust like no publisher can (e.g. via ratings, acting as a fiduciary etc.). It could create narrow bundles of the best publishers/writers in a certain area-of-interest and sell them at a discount (thanks to bundle economics). And it would know any user’s areas-of-interest and could act as the connector between publishers and readers.
The latter is precisely why a platform would also help with user growth. It is in the very nature of any (successful) platform to attract a sizable chunk of the demand-side (in our case: subscribers). If there were a platform, used by a large number of people who are willing to pay for content, it would certainly be helpful to any publisher looking to grow its userbase.
Add all this up and I think it’s safe to assume that a continuing boom of subscription-based publications will be an opening for a business that acts as a central infrastructure provider for subscription publishers while also attracting the willing customers. Such a platform would have a very straight-forward business model: it could simply take a cut of all the transactions it facilitates.
You can think of this hypothetical platform as a combination of Medium and Patreon. Take Medium’s frontend product (though with more customization options for publishers) as well as its network and Patreon’s backend tools and business model. Then add a few dedicated features for publishing businesses and readers. (Regular readers will know that I’ve long argued Medium should take this route.)
Of course you could argue that there are good solutions for any given challenge out there: Wordpress as a CMS, Stripe for payments, and several CRM tools from Salesforce to Mailchimp. You wouldn’t be wrong. But none of them provides an integrated solution. However, the convenience that comes from an integrated solution is precisely what makes it valuable. And particularly for small businesses that don’t have IT departments — among which, I argue, you’ll find many of tomorrow’s successful subscription businesses. Plus, none of those services provides the additional benefits that such a platform would offer in terms of user growth.
But would such a platform be a good business? A growing number of subscription publications is a nice starting point. But creating such a platform with an ecosystem mindset would likely create additional upside: It could turn into the catalyst for the development of more subscription publications. That is, once someone creates simple tools, more people tend to experiment with them. Today, there is no simple one-stop solution for entrepreneurial writers who might think about starting a subscription publication.
What if one existed?
