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By Thomas Baekdal - March 2012

The Frustrating Tale of Convincing People to Pay

This is a brutally honest article about what it has been like to build Baekdal Plus, and the frustrating task of trying to convince people to pay for it. I will outline how I calculated my expected subscriber rate before launch, exactly what happen after launched, and why I'm, today, running out of money.

But before we get started, I just want to point out that I have no plans to stop doing Baekdal Plus. I plan to continue bringing you the best articles I can make, regardless of what might happen in the future. This is my dream, and I don't intend to give that up!

It takes a lot, to give a lot

Baekdal Plus, as you probably know, is my premium content. It's very detailed articles about the shift in media, and what you need to do to prepare for the future in a connected world. Each article is between 8-16 pages long, with a few of them being close to 20 - and I spend weeks writing them, testing out ideas, looking into trends and comparing them with the concepts that I write about. On average, each article has been incubating for several weeks before publishing, and they are often tied together into a much bigger picture.

It's all about helping you embrace the new connected world the right way, and to understand what the shift in media is all about.

As you can probably tell, creating content like this takes a lot of time and cost a lot of money. It's not something that can be done on a late evening or on a Sunday afternoon. I work full-time, 50 hours per week, writing these articles.

Back in 2009, when it started getting serious, I realized that I needed to find a way to make money out of it. It was too much work as a hobby.

At first I believed, like everyone else online, that I should just focus on advertising. But there was a problem. While my traffic level was high (I had about one million unique visitors per month), the number of pages per visit was only 1.28.

The reason is that advertising works great with easy to digest, no-brainer, snackable bites of content - preferably containing a cat video. It doesn't really work with in-depth comprehensive 15-page articles.

As a result, my total advertising revenue, with one million unique visitors, was only $750 per month - far from what I needed to sustain myself. Clearly, advertising was not an option.

What else could I do?

I could sell each article as a separate downloadable PDF, like many other sites are doing. But Baekdal Plus is all about new media and looking into the future. Selling PDFs is 'old' and I couldn't do that. How could I tell you to embrace the new world, if I didn't do it myself?

Which only left one other option - subscriptions. I needed to find a way to get people to subscribe to what was to become 'Baekdal Plus'.

The price

The next question was what price to set. I wanted my price to be really good and correlate with the quality and size of my content. But the problem was that most other media companies were selling themselves short. For instance, you could buy a subscription for Vogue and get 12 issues for just $12. Most other media outlets where selling digital editions for $2.99, and the Guardian was selling their iPhone version for $3.99 for a full year.

That was just insane. How could I compete in this world?

I knew there was no way I could charge the price I wanted, so I settled on what I believed was a great price of $5/month and $49/year.

The upside, of course, was that with such a low price, it would also be easier to get more subscribers.

A realistic estimate of # subscriber

Now came the big one. How many subscribers could I realistically expect to get? We all know that people don't want to pay for anything online, and are constantly telling publishers to give away their content for free. As they claim, the currency on the internet is 'attention'. Many people even have the audacity to say that publishers should pay their readers for the time they spend on their sites.

Note: After I launched Baekdal Plus, many people have told me to 'forget it and just focus on advertising'. This whole 'culture of free' is just out of touch with reality.

Still, with one million unique visitors, at least some people would be willing to buy a subscription, so I was feeling optimistic. But how many could I expect?

Back in 2010, many of the big newspapers had conducted studies, asking their online readers if they would pay for the newspaper if they put up a paywall. The result was always around 5%.

This was great news, because with one million readers, and 5% turning into subscribers, this would give me 50,000 subscribers. And at a price of $5 per month, I was looking at $3,000,000 in revenue. That would be fantastic!!

Of course, I didn't believe that for a second. Even though 5% sounds ridiculously low, there was no way 5% would actually turn into subscribers. That is just not how the internet works.

Instead, I estimated that only 0.5% would turn into subscribers, and only for some of my traffic. You see, of those one million visitors, 700,000 were primarily reading my design articles (which I later moved to 42concepts).

So my calculation went as follows. I calculated that only 0.5% of my design audience would be interested in my business content, and only 0.5% of my business content + 0.5% of my design audience would turn into subscribers. The Result = 1,518 subscribers.

But this was per month, and If I then extrapolated that to a full year, adjusting for the overlap caused by returning visitors, the total number of subscribers would be around 7,000 people. It was much lower than the 50,000, but still a pretty decent number.

Then I started to look at it in a more skeptical way. First I removed all the one time visitors, all the non-value visitors, and I was left with 74,000 truly valuable readers. Of those I then estimated that 5% would subscribe (only 0.3% of the total), leaving just 3,700 subscribers. Again, this was for just one month, so by adjusting for the overlap, the total number of subscribers per year would be about 5,200 people.

Next I decided to look at my truly valuable audience. The group of people I knew liked my content. I looked at number of followers, number of RSS subscribers, number of people getting my email list, and people visiting my site more than 10 times per month. In short, my core audience.

The result was about 35,000 true readers (a far cry from the one million). Of that group, how many would subscribe? 1,000 of them (2.8%)? That didn't sound unreasonable, did it?

And since these where all dedicated readers, I expected that a large group of them would subscribe from day one. I hope that about 500 to 1,000 would subscribe within the first couple of weeks, but I set the estimate low, at just 250 people.

Finally, I decided to analyze just how many subscribers I would need to break even. I looked at all my expenses, server costs, electricity, bandwidth, equipment, and money that I needed for food and rent. And I came to the conclusion that I would need to make roughly $50,000 per year, just to pay my bills and get food on the table. Which amounts to only 830 subscribers (out of one million uniques).

So there you have it. Visualized, my estimates looked like this:

And when I compared it to my one million total visitors it certainly looked doable. I knew it would be hard, involve a lot of work, and cause many sleepless nights. But surely this would work. Just look at it!

I made sure I had enough money in the bank to sustain myself for longer than a year (more than enough) and then I launched Baekdal Plus on December 7, 2010.

I was so excited ...:)

What happened next...

The first subscriber showed up after just five minutes. But it took 11 days before the next subscriber appeared. Here I had a site with about 30,000 unique visitor per day, and after two weeks, only two people had subscribed!

After that, things did pick up a bit, but not by much. In fact, after the first three months, I only had 29 subscribers in total. That is a conversion rate of just 0.003% - 100 times lower than my most skeptical estimate.

How was that even possible? That is a lower conversion rate than a random Adwords campaign for a product that people have never heard of. It is much lower than the conversion rate of spam post or blogs posting affiliate links to Amazon.

I was in complete shock. What about those 250 truly dedicated readers that I expected to turn into subscribers from day one? I still had about one million visitors, in fact, my overall traffic was still growing. The problem was just that nobody subscribed.

This was my first true lesson in the disruptive power of the 'culture of free'. I learned that even my most dedicated fans wouldn't pay for content online - not even for a price of just $5.

In the months after that, my subscription rate slowly increased, but it was nowhere near to the level I needed. Not even giving away my two books for free to all subscribers helped. And after one full year, the total amount of subscribers had only reached about 200 people, and my bank account was starting to run low.

At this point I thought about giving up, but there was a catch. And the catch was you - my subscribers.

You see, something astonishing happened in 2011. The few people who did subscribe really, really like the content. So much, in fact, that I cannot recall ever getting so much positive feedback doing anything else. Sure I was not making any money, but I was making a difference - a big one.

As one subscriber recently wrote:

Just wanted to send a quick note to let you know my new subscription to your blog is the best investment I've made recently. If you don't mind me saying this, you should probably raise your price. Amazing, amazing, amazing articles and insights! Very deep arguments/point of views but so easy to read and digest, to the point, stays with the reader after reading.

This was a bit of a dilemma. On one hand, I was clearly not making any money, and the subscription rate was appalling. But on the other, the content I did produced was clearly what people wanted (and needed).

How can I give up on that? Isn't that worth fighting for?

The problem is not the content or the model. The problem is the huge step between 'free' and 'pay'. The psychological step of persuading people to pay for content online is immense, far greater than anything I ever imagined. I knew it would be hard, but this was insane.

So in January, I asked my subscribers for help. I needed to get 600 more subscribers, which was quite a bit considering that I only had about 200. But still ...600 people is nothing. It is only 0.06% of one million. And only 1.7% of my truly loyal audience. How can that not work?

Asking for help did work. In just two weeks, after a ton of positive recommendations from subscribers, another 130 people had signed up.

Now we are talking. If this keeps up, I would make it after all! But of course, it didn't. While January was a fantastic month, February was one of the worst ever, and in March, every thing was back to 'normal' with a small trickle of new subscribers every week.

Baekdal Plus is growing every month, and people seem to really like it. But the fact is that I just paid all the bills for April, and I can pay my bills for May, but then the funds I invested will reach zero. What's left is the money I made in 2011, which doesn't amount to much. It will only last me another three to four months, then I will run out...

As I started out saying. I don't plan to give up on Baekdal Plus. The trend curves are all pointing in the right directions, and the feedback tells me that I'm doing the right thing. And with more and more media companies putting up paywalls, the culture of free is slowly being eroded. Every indicator point to the fact that this *will work* in the future. I just need another 18 months to get there...but I only have money for five.

Baekdal Plus is more than a job. It's a passion, a purpose, a dream ...and as feedback from my subscribers tells me, it's also worth it. There is no way I'm giving up on that.

But I need to find a secondary revenue stream for the next two years, and I need it fast. Any ideas?


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Thomas Baekdal

Founder, media analyst, author, and publisher. Follow on Twitter

"Thomas Baekdal is one of Scandinavia's most sought-after experts in the digitization of media companies. He has made ​​himself known for his analysis of how digitization has changed the way we consume media."
Swedish business magazine, Resumé


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