Why the micropayments business model matters

By Felix Salmon
March 8, 2012
Kevin Drum has an interesting take on the Matter debate: if Matter does great journalism, it will succeed, and if it doesn't, it will fail, and the business model doesn't, well, matter.


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Kevin Drum has an interesting take on the Matter debate: if Matter does great journalism, it will succeed, and if it doesn’t, it will fail, and the business model doesn’t, well, matter.

I don’t have much of an opinion about Matter because I suspect their delivery mechanism is beside the point. It does have the benefit of keeping overhead costs low, but that’s probably a wash since they also have no advertising revenue. Basically, if they’re able to consistently produce spectacular pieces of journalism that generate a lot of online buzz, they’ll succeed. If they can’t, they won’t. But that would probably be true regardless of what kind of delivery model they choose.

I differ with Kevin here — I think the business model matters a lot, precisely because niche publications can’t support themselves online through advertising.

There are two ways of looking at this: the quantitative, and the practical. The quantitative goes something like this: let’s say that there are 2 million science nerds in America — that Matter’s potential audience is 2 million people. And let’s say that if Matter publishes a great piece online for free, it reaches 200,000 of them. If it manages a respectable RPM (that’s ad revenue per 1,000 pages) of $5, then that story will bring in 200 x $5 = $1,000. Even if it reaches a million science nerds it still only has revenues of $5,000 for that story. And then you have to back out the ad network’s take, the ad sales guy’s salary and commission, the time spent trying to do biz-dev deals, and in general the enormous publishing-side infrastructure that all successful ad-supported websites require. By the time you’ve done that, there’s literally nothing left for editorial.

The practical level is even simpler: a niche long-form science-journalism website is never going to get the kind of scale which advertisers want. Big-name brand advertisers want to reach lots of people lots of times. They’ll advertise on blogs, which can get audiences in the millions, but they’re not going to advertise on a site which only updates once a month or even once a week. In general, the amount of inventory online is growing fast, and websites need to be able to keep up with that growth or start seeing their advertisers fall away, one by one.

With subscriptions, though, the math is much more compelling: if you get 20,000 people paying a buck apiece for that story, that’s $20,000, with no sales overhead; most of that money can end up going to editorial.

What’s more, if you’re writing for a small audience rather than a mass audience, you massively increase the opportunity space with regard to the kind of journalism that’s possible. Drum is right that the best writers and reporters in the business are expensive. But they will also nearly always work for less money if they get to chase down really juicy stories, or write exactly what they want to write, in a medium which will give them all the space they need. I’m sure that Christopher Hitchens didn’t charge the New York Review of Books or even the Atlantic anything like the kind of money he was being paid by Vanity Fair.

Matter has a compelling pitch as far as writers are concerned. You don’t need to dumb down your story, or make it accessible to a mass audience: instead, you can be obsessive and geeky and so long as you end up with a fantastic investigative narrative at the end, that’s fine. What’s more, we won’t cut out half your story unless doing so really makes it better: we don’t have any space constraints.

Professional-quality nanopublishing has never really worked online, because the ad-supported business model can’t make it work. In a world of micropayments, however, everything changes. Matter’s early to this game; one of the reasons I’m excited about it and hope it succeeds — and one of the reasons that 1,881 people have pledged $108,470 to make it work — is that if it works, then it will blaze the way for many other publications, in other fields.

There are lots of things which are yet to be worked out, not least how content behind a paywall can be effectively shared on the increasingly social internet. (Which is one reason I hope the Matter paywall is at least a little bit porous.) And I’m sure that Matter will make mistakes: all startups do. But at some point, a publisher somewhere is going to crack the nanopublishing/micropayments nut. And when that happens, it will be revolutionary for the world of online journalism.

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