One of the people we spoke to for our recent podcast on “Man cannot live by newsletter alone: the realities of going solo as a journalist” was media analyst Thomas Baekdal. The episode raised lots of questions about the relationship between paid and free subscribers, and what stage journalists need to get to before they can realistically go it alone.
This piece was written by Thomas for subscribers to his newsletter, and is republished here with his kind permission. Sign up here to receive his analysis straight to your inbox.
One thing that Esther asked was how journalists should start their new publications, and both Anne and Simon recommended that you should build up a community and audience first, with a free newsletter, before you turn it into a paid option. But while I pretty much agree with everything else they said, this is the one thing I disagree with.
I believe it’s way more important to start out with paid, and then build from that. And I believe that, over time, this will allow you to become profitable faster than if you just tried to build up a free audience first.
But let me explain why.
There are a lot of really good reasons why you would want to offer something to people for free first.
Esther actually made a good point when I mentioned this to her. She said:
If you’ve just got a newsletter, I think you need to reach a critical mass before charging because otherwise you’d never grow a base past a few dozen subs (people are just garbage at sharing stuff).
She is right. Sharing does not work the way it used to, and you need to get people to see what it is that you have to offer. I also explain this in my Plus article above. I talk about how just asking for money is not going to work.
You need four more things. You need to tell people who you are, what you have to offer, how that fits into what people need … and, you need to give people a way to see it.
But, in the media world, we have a lot of different ways of doing this. For instance, most successful newspapers today have a metered model. This is a paid-for model, but where you can read the first five articles for free, per month.
Another way is to give people a free trial for a couple of weeks, or you could do the limited access model, where you give people one free newsletter per month, but if they want the full weekly newsletter, then they have to pay.
So, there are a lot of ways that you can show people what you have to offer, even though you have a paid-for model from the start.
But the reason why I believe this is so important is because of the mindset it forces you to have.
When offering people something for free, you tend to also measure this in terms of how efficient it is at attracting a free audience. And the problem I have come across many times is that a free audience and paid-for audience is not the same thing.
Just because your free newsletter is able to attract a lot of people, it doesn’t mean that it will also work as a paid-for newsletter.
I learned this the hard way. Back in 2010, I had a million visitors coming to my site every month, but when I then ‘flipped the switch’ to paid, only a very small group of people chose to convert. Instead, I found myself in the situation where all my traffic was basically meaningless, because it was not the type of traffic that was interested in my paid model.
Keep in mind, this was back in 2010, and back then, it was a lot harder to convince people to pay. As you may remember, back then everyone would tell you that content online should be free, and everyone who tried to put up a paywall was ridiculed.
There is a funny article in NiemanLab, from 2010, where they interviewed a bunch of people about how the New York Times was asking people to subscribe.
Here are a few examples of what people said:
I predict it will be modified enough – either by the Times themselves or outside developers – to be rendered irrelevant by March.
Since The New York Times “porous” paywall won’t even go into effect until early 2011, it’s possible the so-called “wall” will still be active as 2011 draws to a close. But the decision to ditch it will have already been made internally.
The paywall won’t ever be launched, and the leaders of New York Times Co. will admit it was all hatched out in a moment of online madness that swept the industry in late 2009.
While news outlets that are hewing to the pay-to-read model will persist in charging readers, the trend will continue to move against them. More and more content will be offered for “free” to consumers as distribution platforms continue to proliferate.
The NY Times effort to implement a paywall won’t survive the end of the year.
This is how it was back then. Anyone who had the audacity to talk about paywalls was characterized as a fool. Why have a paywall when you can offer all your content for free on Facebook?
Of course, today, we all know better. Today, free traffic from the platforms has failed, and paywalls are the new shining star. The New York Times metered paywall is a gigantic success, and during this pandemic, subscription growth has been absolutely amazing.
But this isn’t just happening in the traditional industry. We see the same thing on YouTube. YouTube Premium is growing, and so are YouTube direct subscriptions where people choose to subscribe to an individual channel. And look at Patreon. We see so many incredible examples of YouTubers and other creators being supported financially that way.
Another example is Twitch. Twitch is almost entirely defined around pay. It’s one of the things that sets it apart from YouTube. People go to Twitch and they pay their favorite streamers.
And we see it with crowdfunding, with Discord and pretty much every other channel.
Paid is the new normal.
So, when I started my paid-for site in 2010, people told me that I was an idiot, but we changed this. Today, the culture around pay is that it’s how you support the things that are valuable to you.
And I believe that, in 2020, you will benefit from starting with paid. It will help you truly understand what your real audience needs faster than if you just give them something for free, and more importantly, I believe it would make you profitable sooner.
The reason is how long it takes to build something up.
Think about it like this.
If you start just offering your newsletter for free, you are going to spend the first years just building critical mass. But since it’s free, it also means you have zero revenue.
Now, if you already have a job you are happy with, that’s fine, but most journalists I have seen starting new things have done it because they either lost their job because of downsizing in the industry, or because something happened that caused them to quit.
And if that is the case, you can’t afford to spend three years just building up a free newsletter. You need money, and the sooner you can start making money, the sooner you can get it to work.
Even if you are not cash-flow positive within the first year, there is a huge difference between making some money and not making any at all.
Think about these two situations:
- Situation #1: You start with a free newsletter, which you build up over three years. And then you ‘flip the switch’ and manage to convert 5% of your audience over the next year.
- Situation #2: You start with a paid newsletter, which takes you two years to build up to a profitable level.
So, yes, the free model allows you to convert your paid-for audience at twice the speed. But, you did so at the cost of having no income for a very long time before you even got to that point.
The paid model, however, took twice as long to convert people, but you became profitable twice as fast.
Obviously, this is just one example, and there are a lot of variables that influence this. But I believe going paid from the very start will get you to your goal faster overall.
However, there is another problem we have to think about. What is an expected conversion rate? Well, Substack, for instance, is telling its star writers (the people they specifically partner with) that they can expect a 10% conversion rate based on their existing already built-up free audience.
However, in my experience, the conversion rates I see around the world are usually much lower than this. Think about a YouTuber. Take something like The Fully Charged Show (which I love). They have about 720,000 subscribers, but only 3,790 people are supporting them on Patreon (paying only $4/month on average).
That’s only a 0.5% conversion rate.
Another example is Johnny Harris, a former journalist from VOX who has now started his own thing. He has about 585,000 free subscribers on YouTube, and 1,570 Patreon supporters.
That’s a 0.25% conversion rate. Granted, he only started a few months ago, so this will likely increase over time.
And this is the reality I see with most digital natives. It is exceptionally rare that I hear about anyone who has a 10% conversion rate, and almost all of them are already celebrities within their area.
And think about how crazy this is. If only 0.5% of your free audience converts, and you need 600 subscribers paying $9/month to make a living, you need to first build up an email list of 120,000 people.
Can you build up such a big list? For most people the answer is no.
So, I believe it is vital that you focus on paid from the start. You need to move yourself into a different mindset.
The reason this works is because it forces you to think about the value of what you do every day, and you can directly measure whether you are doing a good job or not by looking at whether people convert. And by doing this, you can focus on things that directly help you convert people, which focusing on a free audience often wouldn’t do.
But obviously, none of this is going to work if people have no idea what you have to offer. So going paid from the start means doing a lot more to sell what you have to offer.
In my case, what I’m doing is that I define this around my Plus reports, which are 25-40 page trend reports, and then my newsletter (which you are reading now) is used for nurturing my readers. In other words, I use my newsletter to get people to read my Plus reports.
If you just have a newsletter and nothing else, this is a lot harder, and you need to be even more clear about why it is worth paying for.
But embrace the paid-for mindset. The sooner you do that, the quicker you can optimize for the right things.
Thomas Baekdal’s free Baekdal Plus newsletter is sent out once a week and features the latest articles as well as unique insights written specifically for the newsletter. If you want to get the next one, don’t hesitate to add your email to the list.
