September 24, 2007

25+ million SEK is nothing to sneeze at

Advertisers are bad masters for online media, probably especially to newspapers, so one shouldn't rule out premium (a.k.a. paid for by users) material and features even if the international trend is to go all advertising supported. There are lot of ways to implement premium features, and with the devil in the details a freemium model makes a lot of sense to many web sites.

Martin Jönsson writes, in essence, that 2 million SEK per month doesn't make it worthwhile for Aftonbladet to run its premium service Plus. To put it in perspective annual sales of 25 million SEK from Plus is about 10 % of Aftonbladet Nya Medier's annual revenue (first half of 2007 run rate excluding Blocket/Bytbil).

While paid for features negatively affect word-of-mouth and search traffic, in Aftonbladet's case one must remember that the trade off for Plus is different from NY Times Select's. Aftonbladet Plus is lowbrow (celebrity pictures, dieting etc) while NY Times Select might be the definition of highbrow. If blogs don't discuss the latest bikini pictures of Jessica Alba, that might not be as big an issue to Aftonbladet as blogs not discussing Paul Krugman's latest column is to The New York Times. Especially if Aftonbladet get the people who actually look at the pictures to pay far more than advertisers would do. And Aftonbladet can capture less search traffic for its Swedish site than New York Times can for its English site, so the alternative cost of locking certain material is smaller to Aftonbladet.

As the latest push for Plus is only 5 months old, Aftonbladet likely has some efficiency gains still to make in the sales process, which could push its current conversion rate of free to paying of 3 % towards 5 %. That would make Plus a 40 million SEK business. Worthwhile? Probably.

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