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6 mins read

Local news needs micropayments

The covid pandemic may have staved off bankruptcy for many local news publishers, as the forgivable PPP loans offered a two-time infusion of capital to any company that had been in business for more than a certain length of time, enough to cover most of payroll and rent. As those publishers get closer to burning through that life preserver, talk about how to save local news will return, and will include the usual suspects: non-profits and donations, memberships and donations, and something originating from the ad network giants.

However, one tool that should be at least tried, but is regularly dismissed by failing publishers and industry commentators, is micropayments.

In a recent newsletter, Simon Owens, who writes about the media, outlined four hurdles that micropayments must overcome. He’s actually not completely wrong, but three of these hurdles are just correctable mistakes by publishers, while the other is basically a ‘deer in headlights’ problem.

Before addressing the hurdles, it should be noted that local news is basically the only media industry that has not adapted to the internet. The other major media industries – films, TV, music, even national news – have all adapted and thrived, just like they have with every other major technological innovation. It didn’t happen overnight, and it was an iterative process as the incumbents in those industries learned what worked (sometimes from new competitors, e.g. Netflix, Spotify) and what didn’t work, but they are mostly happy with where they are now. Sure, executives in these industries complained about the internet, but eventually implemented new business models. (I left out magazines, but they are more like local news in the sense that they have also failed at adapting, and much of the points made here can apply to them, also.)

Simon’s first point is about limited marketing real estate, and what happens when a reader hits a paywall. This isn’t really a resource issue, but rather about ineffective marketing. Publishers need to do more than display a headline, cover the lede after 2 seconds, and then demand a subscription. You’re not even going to sell an individual article based on a headline, let alone a $100 subscription. Just like film studios use trailers to sell tickets and streams, news publishers need to offer a free excerpt that makes the reader want to see more. A non-subscriber landing on an interesting article is more likely to pay for a single article (or a day’s worth of news) than a subscription, but will leave the site when they refuse to be tricked by a headline.

Which brings us to Simon’s next obstacle, that $1 articles won’t sell. That is a straw man argument, as they don’t have to be priced so high if processing costs don’t consume most of a payment. Maybe he thinks that is an appropriate price because it’s the effective price for many newsletter posts. Newsletters that cost $5 or more per month for one new post per week is something that appeals mostly to fans, not random or occasional visitors. Articles should be priced in dimes and quarters, not dollars. Ten or fifteen cents is almost free, and is more likely to attract an impulse click than one dollar, or even 75 cents (which is closer to one dollar than it is to free). When charging for news, demand will be elastic relative to price. This is also not just about revenue, as there will also be some repeat customers who will eventually just subscribe out of convenience.  

Simon is only conditionally right about too much friction, which happens with a poorly designed and implemented payment process. Using a credit card for every article is unacceptable, which is why most micropayment services require users to log in once, just as if they were a subscriber. Once logged in, paying for individual articles takes less time than redrawing a page because ads were loaded from a third-party ad network.

If this piece was behind a paywall, you might read one-quarter of it before seeing a subscribe or pay pop-up, and if you were logged in to your account, the rest of the article would take less than three seconds to be displayed once you clicked on “Pay”.  And since the sign-up process for the payment service only requires just an email address to get started, even that reduces friction to a minimum (certainly less work than disabling your ad blocker, or creating a “free” account with the publisher to be able to read three free articles each month).

The last hurdle – no publisher wants to be the first to try micropayments – is unfortunately true, as shrinking, dying newspapers seem afraid to try anything new. However, acknowledging this fact at least disproves the not-even-anecdotal “micropayments have been tried and nobody wanted them”. They haven’t been tried (many companies have been created to provide the service, but publishers have chosen not to test them, and instead ride their downward spiral to history).

There will inevitably be a “first” publisher to try offering a la carte access to paywalled news. It will happen, because one publisher will realize bankruptcy is unavoidable if they make no changes (PPP has delayed this by two years).  Or when someone starts a new local news site that utilizes a model which includes a la carte payments. Micropayments alone will not generate a lot of revenue (certainly not as much as subscriptions), but they provide a key structural component for the overall revenue model. Sites without a locked-down paywall don’t really have a paywall, so they will even lose subscription revenue. And a solid paywall with no a la carte options leaves money on the table. Revenue from individual articles and day passes may only be 20% of revenue, but that is a lot more than 0%.

Some publishers fear that offering a la carte access will cost a lot of subscribers. This is the flip side of the delusion that readers who will only subscribe to one or two sites will choose them. They can’t all be right, and most will be wrong. People who regularly pay for articles will end up subscribing, not for financial reasons, but out of convenience (subscribing is still easier than picking and choosing articles). Also, when people pay for individual articles, it tells publishers what people are really willing to pay for.

One adaptation that will be critical to the success of local news publishers who choose to use micropayments will be the ability to choose what to cover. In the glory days of newspapers, they were awash in advertisers and had to hire writers just so most pages weren’t all ads. Nobody read anywhere near all of the articles, but that was okay, as the ads subsidized a wide range of content that provided something for all of the readers. The new model will not allow editors to be as sloppy in deciding what to report. The model demands efficiency. Publishers must cover the important news that readers need to know, and convince them to actually read it.

It’s possible that local newspapers and their digital sites will never return to their glory days of all the stories that the ads can pay for, but people do want to be informed about what is happening in their towns and cities. The right balance of funding for reporting the news can and must be discovered. That discovery process can only take place in real life, not in debates like this, as much fun as they are.

Ken Goldsholl
President/Co-founder, News of the Day, Inc. and xsact, Inc.

Disclosure: Simon was a consultant for a few years ago (despite his skepticism about micropayments, he gave us excellent suggestions). (operated by xsact, inc.) makes it easy for publishers to try micropayments, without modifying their website, with and The main function of Transact is to allow for payments of very small amounts of money (as little as one U.S. cent) between buyers and sellers of digital media. Our goal is to create a more efficient ecosystem for news, features, and entertainment, without the distortion and overhead that indirect payments typically impose. Transact is based in Santa Barbara, California, but has been designed by engineers around the United States and Europe.