Five reasons why Facebook Credits will save newspapers

December 6th, 2010 by Dave Leave a reply »

First things first, I hate seeing the phrase “can save newspapers” thrown around all over the shop whenever a new techy idea comes out.

But, chances are you’ve found this via Twitter and, if you’re anything like me, seeing someone claim they know what will save newspapers is enough to make you click just so you can tell me why I’m so very wrong. Go ahead.

This post is going to simply outline what I think is a massive development for the potential of selling content on the web.

For years, the industry in-joke has been this formula for online publishing success:

1. Publish content
2. Get traffic
3. ????
4. Profit!

Hopefully the following points can explain why I think the ‘????’ in that horrid equation is now obvious: Facebook Credits.

Before we begin, let me add that I’m not proposing all newspapers become Facebook apps instead of standalone sites. Rather, in a similar way to the ‘Like’ button that is appearing all over, it should be a system which is implemented neatly with the individual sites.

1. Social gaming is the new crossword puzzle – and it’s worth $6bn worldwide

Last year, report the NYTimes, the Daily Mail made £12 million through digital content revenues. Meanwhile, Zynga – the company responsible for Farmville – is set to net $500 million from sales of virtual goods.

Virtual goods are every business’ dream. Imagine being able to sell something that essentially doesn’t actually exist. Take roses, for example. Josh Halliday reports in the Guardian that Flirtomatic, a social network which is barely even heard of, sold more virtual roses last year than Interflora sold real ones.

Not only that, but it convinced 100,000 people to pay to ‘attend’ a virtual fireworks night.

But what does this have to do with newspapers? An awful lot.

Jim Tucker, a very good friend and former editor of a national newspaper in New Zealand, once told me about a cunning experiment he devised when he first took over as editor at a newspaper. He took his staff to the streets to find out why they buy the paper. If they said they loved the features, they could put more money into it. If it was more sport they craved, then at least now they’d know.

What did they find? Crossword lovers. Serious crossword lovers. You see, a lot of people who bought the newspaper didn’t give two hoots about the news but, once their beloved crossword was done, they’d give the rest of the paper a read. It was a model that suited everyone, even if it did shatter the egos of Jim and his staff.

Social gaming is the new crossword.

Am I telling everyone that newspapers need to start deploying farm-based games across their sites? No, don’t be silly. What I am saying is that people’s desire to have Facebook Credits in order to play online games is, for editors, a gift from the gods. Suddenly, we’ve got millions of people – young people, don’t forget – who have credits. Credits which they didn’t buy to read news but, now they’ve got them won’t give much thought to spending a couple on content.

The newspaper would, on current rates (dictated by Facebook), take 70% of each credit’s monetary value.

I believe, ladies and gents, that’s what we call a business model.

2. No self-assembly required: let Zuckerberg worry about it

A little while ago, I blogged this:

When you by The Times, do you have to go to a special newsagent which just sells that paper? Do you then have to cross the road to get the Telegraph? No.

My point then was that we need a central payment system which deals with every newspaper and content provider on earth. Problem is, who exactly would do it? If NewsCorp tried, there’s no way the other papers would collectively think “Oh, Rupert’s got a good idea…” and sign up.

But it needed to happen, and Facebook has got there first. This is good for newspapers. Think about The Times, and the money spent on the following:

  • Designing, developing and implementing the paywall software (and the new look site to put it all on)
  • Setting up the systems needed to securely and reliably handle the influx of sensitive data now coming their way
  • Establishing a new customer services team to handle queries (“It doesn’t work on my computer”,”I want my money back” and so on)

I’m sure that’s just the tip of the iceberg. If you use Facebook as your model you can just, erm, sign up. As Gordon Ramsey would probably say, “Payments: done.”

3. Wall? What wall? It may be paid-for, but it’s certainly not hidden

One of the criticisms levelled at The Times is that, due to the paywall, their content is hidden. You may be reading it, but you can’t share it with your friends or colleagues.

Potential customers can’t get to the opinion section of The Times’ site – so it would be a very trusting person indeed who’d take a risk on it, even if it is just a quid. No surprise, then, to see many of The Times’ opinion writers gleefully sharing their links on Twitter when the paywall momentarily stopped working.

With Facebook Credits, the potential to have the best of both worlds is a real possibility. Would “Dave Lee just bought Charlie Brooker’s latest column from the Guardian” look so out of place on your Facebook feed? The entry would have quick, enticing kicker which could potentially lure in a few extra punters.

If a friend of mine pops in to leave a comment – something along the lines of “I loved this, one of Charlie’s best!” – the power of social recommendation will then transform into profits.

Where with The Times you’re presented with a locked door, by using a payment system so tightly incorporated with the world’s dominant social network, you’re working behind a pay window, not a wall.

4. Your mum could do it

I’m not insulting your mum. But I do know she’s statistically unlikely to be able to get her head round something like a pay wall. Or rather, she’d be put off by the technical oddity of it all that she’d be reluctant to even try.

As a person who has their very own mother, I know that the less computer-literate out there want things to be as simple as possible.

Simplicity, in this case, means familiar. It means “set up by my son so I can use it from now on”.

Facebook Credits are going on sale in Tesco. Even if you’re not convinced in my argument so far, that move by the supermarket giant should at least tell you a little bit about why this is going to be massive. Get your head round that for a moment: Tesco expect people to physically go to a shop, buy an actual product (a voucher) and then take it home to buy something virtual.

If someone like my Mum, or my Dad, or even my newspaper loving Nan knows that she can get all the great stuff on her computer just by popping to the shops to get it, they will. Trust me, buying vouchers to use online from the local supermarket is much less hassle for some people than filling in an online form. To you and I it may seem absurd, but I’m right.

And that’s before you get into the promotional possibilities. Every time you spend £20 or more on petrol you get 100 clubcard points and… some Facebook Credits? Automatically deposited into your account?

The disconnection between all our content providers mean this couldn’t happen now. “Spend £10 on beans and get a free day’s trial on The Times’ new website” sounds dull and, ironically, as old media as getting a free CD-ROM on the front of a mag.

Facebook Credits being in Tesco offers the first real breakthrough in which the concept of online currency – something to buy quality goods with online – can hit the mainstream.

5. Selectivity breeds success – without subscription, you can concentrate on added-value

It could be argued that if the Guardian had a paywall, they wouldn’t have got the Wikileaks scoop. Its openness (and political stance, of course), spurs much of its success.

But with Facebook Credits, the Guardian could use these big, unique moments to earn money without killing their audience numbers.

Asking people to pay for hard news is a bad idea, and one that will fail. Information wants to be free, and it always will be. But while you wouldn’t ask someone to pay for this: WikiLeaks cables claim al-Jazeera changed coverage to suit Qatari foreign policy, would it be so unreasonable to ask for a few credits for added value like this: US embassy cables: browse the database? Or perhaps this: Julian Assange answers your questions?

It’s this judgement that makes the difference for me when it comes to successfully encouraging people to pay. Facebook Credits – by nature of being a one-off micropayment – would allow editors to establish which stories would be paid-for, and which ones wouldn’t.

It’s a freedom which would herald the birth of quality, multimedia journalism to our media industry. An in-depth investigation, for the first time in the history of online journalism, would become more profitable than SEO-friendly stories about celebrities. Who doesn’t like the sound of that?

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52 comments

  1. Dave,

    Great idea and analysis!

    Regarding the proliferation of Facebook Credits, you may be interested to see that online retailers in the U.S. are beginning to offer them as an incentive for purchases. Check out http://www.shoebuy.com/credits.

    Full disclosure – my company, Ifeelgoods, Inc., is the technology that Shoebuy is using for this promotion.

    Scott

  2. Chris Rooke says:

    Dave,

    Agree with Scott; terrific post and great observations/ideas.

    Related to your post and Scott’s comment, you’ll be interested to know that millions of consumers are willing to engage in a meaningful way with brand advertising, in exchange for the ability to access premium content, earn virtual goods and currency, and much more.

    Full disclosure – my company, SVnetwork (SocialVibe), is the technology platform, and largest performance brand advertising network on the web and mobile, powering this consumer behavior, and delivering a true engagement solution to the world’s largest brand advertisers.

    SVnetwork and Ifeelgoods, Inc. are complementary solutions which are out in front, helping brand advertisers and e-commerce retailers alike reach and provide relevant value to today’s hyper-connected consumer.

    Chris

  3. I don’t have a company or product I’m trying to flog but just thought I’d pop by to say what a thoroughly marvellous idea!

    Indeed, it’s helped by the fact that every Facebook user gets about 20 free credits with their account anyway (I am right by saying this aren’t I? It happened to me) so it’s an incentive to buy some more if you can use them on more than Chinese water torture-style games like Farmville.

    This is the nearest I’ve seen to a newspaper-saving idea being foolproof. I can’t see why this wouldn’t work.

    Patent this idea now, Dave, make your millions.

  4. CDSupreme says:

    Point one is a massive oversimplification. You think getting 70 cents on the dollar is a business plan? The “news” is going to be saved by turning it into some side benefit of people paying for FarmVille? No, that’s definitely not going to happen.

    The second point just makes no sense. A centralized payment system may have benefits… but that how is using facebook credits any different han using PayPal? It’s really not. On top of that, there’s not a single mention of how facebook would control how/when/where you’re allowed to see the content you pay for. I believe that’s called a pay wall, which you later deem unnecessary. If I’m not paying for content which I couldn’t access originally (due to a pay wall), then what am I paying for?

    Your third point assumes people want to are more willing to buy using facebook credits… but assuming they’ve already bought facebook credits. That’s circular logic. Of course they’ll use them if they have them. But what’s going to motivate them to acquire credits? Apparently, FarmVille… but not newspapers themselves. I’m sure more people actually use/have a balance/payment options in PayPal accounts than facebook credits. So there’s no real reason that facebook credits are better (other than you declaring it so). There are more people with bank accounts than facebook accounts… and the process of depositing into your account is the same. So “potential userbase” is not necessarily a selling point.

    Your fourth point assumes that it’s easier for older people to create a facebook account, buy credits, deposit credits, and then make a purchases. How is that easier than using cash to buy a physical newspaper? You’re assuming deep market penetration to illustrate this benefit. But how many people have bought facebook credits for their account… 5-10% max? And how many of those are older people? Probably pretty close to zero (you even go out of your way to trumpet the fact that millions of young people will use facebook credits in point one). Your whole argument is about scale/ease of use but the scale/adoption aren’t even there yet.

    The fifth point about added value has nothing to do with facebook credits at all. Obviously, newspapers would benefit from additional revenue streams because it’s silly to try and sell a commodity (information). While your ideas aren’t bad (but probably have all been considered before), you’re suggesting an incredibly volatile business model dependent on selling related content after giving most of it away for free. Clearly, you don’t understand that their previous model prevalent in the industry that was based on the lock-in of a physical newspaper. That means that in order to read the sports section, you had to buy the entire newspaper. It was further subsidized by ad units around this content and the classifieds section. Unbundling this model into an a-la carte model is the exact opposite way to keep newspapers around. It might help a few individual journalists… but then who would EVER write local community news if nobody is paying for it? The bundling of profitable items with money-losing items makes it possible for these papers to subsidize journalism that otherwise might not happen.

    Basically, your idea boils down to:

    1. Publish content
    2. Get traffic (and social benefits)
    3. Give away everything while selling added value content for 70 cents on the dollar
    4. Profit!

  5. Jaap Stronks says:

    I won’t link to articles behind a NYT paywall, because my followers and friends will have to pay to read it.
    I won’t link to articles behind a Facebook Credits paywall, because my followers and friends will have to pay to read it.
    It will be linked more easily and frequently, but still. Every single article on the web will be far more frequently shared and linked to when it’s not behind anything at all. Paywalls, social media integration or iPad apps won’t change the fundamental shift in economics: there’s an abundance of freely available and easily accessible content on the web. It’s no longer a scarcity, it’s a commodity – and Facebook Credits isn’t going to change one thing about it.

  6. Mark says:

    Why does “news” always have to come attached to the word “paper”?

    Why not just say Facebook credits and other online virtual sales techniques will save news organizations?

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  8. Brian Smith says:

    Online currencies is very promising, but it will be very insecure on Facebook. I came across a new idea called Social Exchange by a company called MyCube. This sounds appealing and promises to offer privacy and control of our content.

  9. very cool blog page. Filled me with a more effective understanding this economic climate. Thanks a lot buddy

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  11. mavi tur says:

    facebook credits was very interesting, never seen before.

  12. Dane Tidwell says:

    I think the idea has merit.

    I love when people have such insightful comments like “it’s silly to try and sell a commodity (information)” Really? How much of that “commodity” are you providing other than your opinion on stories someone else has worked (and more than likely been paid” to research, develop, and write?

    And “I won’t link to articles behind a NYT paywall, because my followers and friends will have to pay to read it.”
    Really?
    So basically you’re probably running advertising on your site and your visitors and friends are generating revenue for you on content that you readily acknowledge you are stealing from someone else.

    Content is not free. Someone, somewhere, had to invest time (aka money/resources) into collecting it, writing the article. Or taking the photos. People who demand that the work should be free for them to regurgitate on their websites so they can get their AdSense pennies need to go to work and give their checks away for a few weeks. After all, ____ should be free, right?

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