I enjoyed this article in the Guardian proposing a service called Bookify. No doubt this is the sort of thing that Amazon (and possibly Google etc) are trying to create.

In this post I want to look at why advertising rates are so much lower online than in print, and show why affiliate revenues are part of the answer for online publishers.

Before many people had access to the internet, advertising media was relatively scarce. If you wanted to reach people in a certain niche, let’s say people who like Formula 1 motor racing, you only had a few options. There were magazines such as Autosport, Motorsport and F1 Racing, maybe five or six in total, and then the mainstream newspapers. Prices were high because advertising space was scarce. As an economist will tell you, it was simple supply and demand, and with this market the power was with the publishers – the supply. While the media wasn’t a monopoly, it wasn’t easy to start a new publication and this helped to keep prices high.

Then the internet came along. Today, if I want to follow Formula 1, not only are there the magazines and newspapers from before, but literally thousands of websites to choose from. And therein lies the problem – and also the opportunity! Now there are huge numbers of publications chasing the same ad spend. Things have flipped: the power is now with advertisers – the demand. That’s the fundamental shift.

What does this mean for the wider economy? If advertisers, such as retailers, can achieve the same marketing result with just a fraction of their former advertising budget, due to lower ad prices, they can either lower their prices, pocket the difference as profit, or move ad spending into new areas of marketing. In practice they do all three, but it’s these new areas of marketing that are the big opportunity for publishers.

Rather than spending on ads, a retailer can operate an affiliate scheme. Here, someone gets paid by the retailer when that person’s recommendation leads to a sale. Most people believe that word of mouth marketing is not only the oldest but also the most effective method of selling, and I agree. You are much more likely to buy a new type of phone if your best friend tells you it’s the one to get, rather than a man in the shop or an advert in a magazine.

Having run affiliate schemes myself in the past, I know that the one big advantage is that you only pay for the sales you actually make, rather than with ads where you pay up front for sales you might make. It helps cashflow immensely, because you’re paying out of existing takings, rather than giving cash up front before the revenue rolls in (and with lots of advertising the revenue doesn’t roll in anyway). Also, as a retailer I’m happy to pay a relatively large commission on an affiliate deal, because I know 100% that a profitable sale has already been made, and I can very accurately track the efficiency of each penny of marketing spend.

The challenge for the affiliate is to build a strong enough reputation with the customer that the affiliate’s recommendation to buy a product will be acted upon some of the time. It’s really about becoming a friend to the customer, so that word of mouth takes effect.

It should be clear by now that affiliate deals are a massive opportunity for publishers if they can build a strong enough reputation and bond with the customer that the affiliate recommendations are acted upon. This requires a genuine and honest commitment on behalf of the publisher to help their customers, not a mercenary attitude where money rules at all costs. In future posts I’ll look at how this relationship can be built and strengthened.

This article on the Huffington Post does a good job of summarising the case against charging for online subscriptions.

What makes this an interesting debate is seemingly something that none of the main combatants can see: the “free vs subscriptions” debate is not either/or, winner takes all. It’s horses for courses (or some less cliched variant thereof). For some sites, such as many of the high-end financial sites, a paywall works just fine. For other sites, where similar content is available elsewhere, a paywall won’t work.

You might even say it’s a matter of commercial judgement.

For people to accuse the other side of “not getting it”, or being thieves, is to miss the point. But why let facts get in the way of a good argument?

Outside Regents Park tube

If your publication is free, it’s vital that it reaches the widest possible appropriate audience. You don’t make as much money on each copy, because there’s no cover price revenue, so you have to distribute more copies. Low margin, high volume.

That’s why it’s such a shame that the London Evening Standard seems to have got it wrong so far. Where we work, on Oxford Street, it’s pretty much impossible to get a copy of the paper. You might be able to get one at Oxford Circus tube station if you’re lucky enough to arrive in what seems like the 20 minute window where the paper is there. If you’re up at the Tottenham Court Road end, forget it.

Can you get it in shops? Not really. Are there street vendors like there used to be? Not really.

The London Evening Standard has achieved an amazing feat: at a single stroke destroying both their subscription revenue base and  their distribution channel by going free. Peter Preston mentions in the Guardian that the Standard manages to distribute 600,000 copies a day! How? Where? To whom?

Still, I’m sure they know what they’re doing.

You might remember some time ago I wrote about an offer from Autosport magazine that I received by email, where I got a free trial issue of the magazine, and then six issues for £1 total, before reverting to a standard-priced subscription.

Well, I’ve now had two issues of the magazine and they are very good indeed. I will be keeping my subscription going.

Conclusion: if your magazine is exceptional, then a targeted free-issue offer is likely to work well.

Here are five different ways people are using Twitter that you might find useful for your business:

1. Links to your articles
This type of feed just provides a link every time you post a new article. It can be automatically created by your content management software.
Benefit: it alerts followers when there’s something new to be read.
Drawback: it can get monotonous, and gets less effective if you publish too often.
Example: @guardiantech – The Guardian’s technology feed.

Interesting links to other sites
Rather than linking to your own articles, you can aim to be an interesting source of links to other information.
Benefit: a useful community service that casts you as a source for news, helps to build your brand.
Drawback: doesn’t engage people directly with your own products, services and information.
Example: @smashingmag – Smashing Magazine – An online magazine for designers and developers.

Customer support
You can set up searches on Twitter to find customers who mention your product and are having problems. You can then respond. For example, I posted a message saying that I was having trouble purchasing an image from iStockPhoto.com. A representative of the company then contacted me to get in touch. (Actually, I’m not sure if he was an employee or just a member of the community offering support.)
Benefit: rapid alerts if something goes wrong, and a quick chance to provide good customer support.
Drawback: time-consuming, reactive rather than proactive.
Example: @rackspace – the Rackspace hosting company.

Behind the scenes
Here, you tweet about what’s really going on in the company. Sometimes this is done under the name of the person, rather than the company itself.
Benefit: Personalises the brand and shows that there’s real people involved.
Drawback: only one person’s view, can appear unprofessional if not done well.
Examples: @krishgm – Channel 4 News presenter Krishnan Guru-Murthy. @NobleF1 – Autosport F1 Editor Jon Noble.

Supplying content
Sometimes you can put snippets of fully-formed content on Twitter. @VizTopTips publishes very short pieces of content exactly as they would appear in the magazine in their short Top Tips column.
Benefit: readers can experience your unique information and discover (or be reminded) how good it is.
Drawback: content must be good and relevant.

A report by Continental Research, covered in the Guardian here,
argues that micropayment systems would be more palatable to consumers than monthly or annual subscription systems.

Apparently “When it came to micropayments, 35% of respondents said they would be prepared to pay 2p per article, 22% would pay 5p, 13% 10p and just 6% 20p for each piece of online content.”

Even at 2p per article, that’s a CPM rate of £20, which is more than most sites can charge for ads! It almost sounds too good to be true!

Over the last few years a plethora of different surveys have reached very different conclusions about micropayments (maybe a case of “He who pays the piper calls the tune”).

I’ve been involved with the internet since about 1993, and I can remember talk of micropayments going back as far as the year dot. So how come we’ve had 15 years and micropayments still haven’t taken off?

The fundamental issue here is one of psychology. It’s covered well in the book Free, by Chris Anderson.

If you pay a subscription, you only have to think about it once. After that, all your access appears free. If you use micropayments, every time you want to access an article your brain has to ask itself “Is it worth it?”. That’s the extra cognitive step that leads to trouble.

You might argue that mobile phones successfully use a Pay As You Go model, which is similar to micropayments for articles. So what’s the difference? Probably there are several. First, phone calls have never been free, so there’s no expectation that they should be. Second, perhaps people value the human interaction of a phone call more highly than reading an article, so they’re more willing to pay. Third, you only have to pay your phone bill to one company, whereas with micropayments you wouldn’t want to set up a new account with every provider.

But doesn’t Apple effectively use micropayments for the apps in its iPhone app store? Yes, it does. And similar to the Pay As You Go phone model above, it works for two reasons. One: users have been conditioned that apps were never solely free. Two: you always pay the bill to Apple, very easily, through an existing account that you’ve already created.

So what’s the bottom line? If there’s any hope for micropayments, there needs to be one single micropayment system that covers the vast majority of sites. Maybe the publishing industry just needs to get together and agree a standard system. Then we’ll finally see if the survey respondents who say they’d use micropayments will put their money where their mouth is! I’m not holding my breath.

You probably think of the text and images that go into your magazine, or onto your website, as “content”. As a publisher, you might think you’re selling “content”. But content is a dirty word, and here’s why:

Imagine two articles on Formula 1 motor racing. One is written by Murray Walker, a commentating legend who did his first racing commentary in 1948, and has met, interviewed and personally known almost every great driver and champion in the sport. The other article is by an anonymous hack, cobbling together wire copy without personal insight and probably without personal interest in the sport. These are both “content”. But which would you rather read?

The problem with thinking in terms of “content” is that content is a commodity. Everybody has “content”. Publishers would do better to think of themselves as providing Branded Information. Maybe that’s the brand of the magazine, or the brand of the contributor.

Two main ways of providing branded information spring to mind. Either look at the message, or look at how it is delivered.

A distinctive message: The Economist doesn’t provide “content”, it provides analysis and comment which you know will be rooted in facts, statistics and quality writing. It’s distinctive. It’s not a commodity. It’s Branded Information.

A distinctive delivery: Jim Cramer, of CNBC’s financial show Mad Money, gained a big reputation for his presentation style: shouting, ranting and being larger than life. In his case the quality of the information he presented was arguably sometimes lacking (especially with the benefit of hindsight), but he didn’t just provide facts and comment, he entertained the audience. It’s distinctive. It’s not a commodity. It’s Branded Information.

It’s a waste of time to develop commodity content, because it fetches commodity prices. And on the web, the commodity price of content is almost zero. But as the Financial Times has shown, both online and in print, people will pay good money for Branded Information.

I’m currently listening to the audiobook of “Free”, by Chris Anderson. For people who work in publishing, there’s a lot of interesting things that are worth considering. I’ll write more on this when I’ve finished the book – you can get your own free electronic copy of “Free” here, either as text or audio.

Also, for those who aren’t so keen on Google or the idea of free publishing, there’s an amusing short article here entitled Sergey Brin Doesn’t Understand How Book Publishing Works, complete with disparaging funny picture.

This list of 50 ideas on using Twitter for Business, by Chris Brogan, should get magazine publishers started with thinking how they might use Twitter to build their reader communities.