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May 28, 2002
Event Wrap-up

2002 Summit Wrap-Up: Experts Advice on Selling Subscriptions to Web Sites & Newsletters

SUMMARY: This Wrap-Up Report outlines the six key areas the expert speakers revealed in their case histories: 1. The money is in the renewals, 2. Making money with trials, 3. Content that people will pay for, 4. Marketing that converts visitors to buyers, 5. Free versus paid content, 6. The future: How big can this get?
Early Tuesday morning Neil Budde, Publisher of The Wall Street
Journal Online stepped up to a podium to give what he thought
would be a fairly standard speech. You know the one: "Here's a
brief backgrounder on why we started charging for subscriptions…
here's our growth chart over the years, etc."

Then a funny thing happened. Out of the blue, a member of the
audience interrupted Budde with a quick question. Budde politely
answered it. Then he tried to return to his prepared speech, but
it was too late. A forest of hands had shot up.

For the next hour and a half, the audience grilled him
relentlessly.

"Out of your canceled renewals, what percent are actual cancels
and what percent are bad credit cards?" "Which of the links on
your home page converts the highest percent of paying
subscribers?" "How do you use WSJ.com free email newsletters to
sell site subscriptions?" "How much price testing have you
done?" On, and on, and on.

More than two thirds of the audience were themselves leaders at
subscription Web sites and newsletters (the rest were about to
launch a subscription site, or served the industry). They
were not interested in what analysts think, or whether or not the
model would "work."

They demanded the nitty-gritty details of how to make it work
better.

How to sell more subscriptions. How to raise profit per
subscriber. How to test price elasticity. How to convert more
free trials into sales. How to renew more customers, and whether
auto-renew is the right answer.

Faced with an informed audience of their peers, throughout the
day speakers volunteered incredibly useful, hands-on data.

(In fact one speaker, Scott Ehrlich from RealNetworks RealOne
SuperPass, abandoned his prepared speech altogether after about
two slides. "Forget this presentation," he said. "I'm just
going to answer your questions - they're more interesting.")

Here is a quick summary of the trends and general facts that
seemed to true across all speakers' experiences:

#1. The money is in the renewals

Last year most speakers were focused on how to get people to pay
for subscriptions. This year the focus is on renewals, because
it is not worth getting new subscribers in if you can not convert
them.

In fact, as MyFamily.com Inc's Craig Sherman said, "If you don't
have at least a 50% renewal rate, you're dead. You're not in the
subscription business."

Tobin Smith of ChangeWave also noted that you need to track your
first time renewals separately from second-time renewals, as
these groups perform very differently. The initial sale is about
gaining buy-in, the second about keeping it. The third is a
relationship for life.

The real "juice" in subscription profits is in those third year
folks and beyond, because you spend almost nothing to continue
selling them.

Do not assume that month-to-month buyers are as profitable as
year-to-year buyers for you. Michelle Rutkowski of
ConsumerReports.org noted her average month-to-month subscriber
lasts under a year. Track month-to-month buyer average
lifetimes carefully.

Josef Mandelbaum of AmericanGreetings.com also noted that he
would never go month-to-month because his subscription sales are
so event-driven. For example, subscribers who bought around
Valentine's Day will probably need the service the following
Valentine's Day, but if they see a charge on their credit card
in August when they have little reason to use his service, they
would be tempted to cancel.

Which brings us to the next point: Auto-renew.

Speaker after speaker said they were using auto-renew (A.K.A until
forbid or recurring charges) instead of asking subscribers for
the order again each time their term ended. The few people in
the room who were not using auto-renew when they arrived that
morning, left that night thoroughly convinced to make the change.

Rutkowski, who may be closer to consumers' feelings about auto-
renew than anyone in the business, cried out, "Show me the
waterfall of consumer complaints! There are none!" However, she
agreed with everyone about the importance of clearly spelling out
the auto-renew feature to new subscribers and warning consumers
prior to "dinging" their cards each year. "I think it's suicide
not to go out and email them before you ding, if nothing else to
make sure you have a good card to ding."

Bill Martin, former Publisher Unstrung, warned that auto-renew
may not be the killer app for pricier B2B subscriptions. "People
invariably get pissed off, and you have to work hard to appease
them." Matt Graves of PaperLoop.com concurred. He lets his
month-to-month subscribers auto-renew forever if possible, but
the annuals require another order.

In either case, most agreed that the thing that really makes the
difference in renewals of any type is the way you treat your
subscribers during their first 30-90 days. MyFamilyInc.com's
Sherman explained, "Communicate with them during those first 30
days. They have such high expectations, they're wondering 'What
am I gonna get?' Surprise them with extra benefits. Give them a
positive memory at the start."

It will pay off big for you further down the road.

#2. Making money with trials

Everyone noted that the minute they offered a free trial, takers
exploded by a multiple of about four times the number of people
who accepted a hard offer.

However, this does not mean free trials increased profits, because
people who take freebies do not always convert well to buyers.
(In fact WSJ.com saw their subscription sales plummet for a while
as a direct result of a free trial offer test.)

Consumer sites pretty much uniformly recommended only offering a
trial if you ask for a credit card up front with it. Trial
takers can cancel later if they don't want to be charged. B2B
sites recommended being careful about who is invited to take a
trial (Matt Graves, "Don't poison your file with unqualifieds")
and having a tested, tried and true trial conversion series in
place.

In many cases, a free-version email newsletter along with heavily
descriptive subscription sales copy (including a "site tour") can
take the place of an actual free trial. Just be sure, everyone
cautioned, that you are not giving away too much for free.
Then folks think they can get 'enough' for free and never
bother to pay.

#3. Content that people will pay for

As much as we celebrate the role of the marketer, when it comes
to selling subscriptions online the power belongs to editorial.
If your content is highly unique, relevant and useful, people
will buy it.

Despite the rise of subscription sites, the Web and email boxes
are still packed with free content that competes with paid
offerings.

AmericanGreetings.com's Mandelbaum noted, "Most people go to two-
three different sites to get their needs served, not one site
exclusively." Unstrung's Bill Martin said, "Some of our biggest
competition were free Blogs written by like San Jose Mercury News
reporters in their spare time. They had really good stuff."

ChangeWave's Tobin Smith warned attendees of an even bigger
threat to getting people to pay for subscriptions, "Inertia is
your biggest competitor by a factor of magnitude."

How do you get potential subscribers to get so excited that
they pay despite their own laziness, despite the million other
things going on in their lives, and despite the free and paid
competition?

There appear to be two routes to content success (beyond relentless
quality, quality, quality, quality). These are:

a. Unique content that only works online (for example
RealNetworks NASCAR channel allows you to choose to listen to
your favorite driver's audio feed during the race). This is
impossible in traditional broadcast where you have no choice
about which voice you will hear during the race.

b. Content with a strong voice and personality: Smith said,
"People are dying for leadership." Formal news reporting and
balanced, professional features journalism may work well in other
mediums, but in online what counts is a unique personality that
both feels "expert" but also that people respond to on a visceral
level. (Well, gee that makes your editorial hiring easier huh?)

#4. Marketing that converts visitors to buyers

Smith said, "People want an emotionally laden promise. People
buy with emotion and then rationalize with logic."

John Hansen, Publisher FantasyGuru.com (a sports site he noted,
not the other"s") proved this theory in reality by holding up a
copy of his extraordinarily successful print advertisement "Whoop
Ass".

As he explained, his content provides the best data on which
players to pick for fantasy football teams. However, subscribers
are not buying the best data; what they are buying is the chance
to beat the other people they are playing fantasy football
against. Hence his marketing message is not about superior data,
it is about whooping ass.

(By the way, John's whole speech was killer; and it was so fun
to see big household brand name executives practically falling
off their seats with laughter and happy agreement at each of this
entrepreneur's 'Top 10 Ways to Be Successful in Online
Subscriptions' speech.)

Killer marketing "hooks" side, the other thing everyone agreed it
takes to succeed is a direct marketing sensibility including a
predilection for testing and tracking results numbers
obsessively.

AmericanGreetings.com's CEO Mandelbaum admitted that much of his
success (1.4 million paid subs and growing) came from hiring old-
time direct marketing experts to consult on marketing efforts.

ChangeWave's Smith said of his success, "It's all DM 101."
ConsumerReports.org's Rutowski agreed, "It's not rocket science,
it's basic direct marketing logic." MyFamilyInc.com's
Sherman expounded, "We're not a broadcast marketing company.
We're a direct marketing company. That really means we're
totally obsessed with numbers."

Email is also the killer app for marketing subscriptions (as it
seems to be for practically everything else these days).
However, unlike their offline counterparts, online subscription
marketers were not just sticking to the letter of the law when it
comes to email marketing.

The law (currently) says you can send email to anyone you have a
"prior business relationship with." No matter how hungry
these marketers are for new subscribers, the ONLY lists they
email are names that have definitely answered the "May we email
you?" question affirmatively.

As Mandelbaum said, "We had many more email addresses than
permission to talk to them, so obviously we couldn't email them."

(Frankly we can not think of many print publishers for whom that
decision would have been "obvious.")

This reluctance to email names that have not explicitly given
permission becomes even more impressive when you review the fact
that every single speaker said email was critical to their sales
success. Email converts trials to buyers, and buyers to
renewers, and renewers to multiple-term subscribers.

As long as you do not screw it up with non-permission mailings, or mailings that are so frequent that recipients are annoyed,
even slightly, with your brand. (One speaker said he was a
little scared to go more frequent than monthly. Everyone
sympathized with him, although most were carefully testing weekly
or twice monthly mailings.)

#5. Free versus paid content

Everyone agreed that to sell subscriptions, you need a sharp,
obvious delineation between what is free and paid in your service.
(The paid better look a heck of a lot more valuable.)

RealNetwork's Scott Ehrlich proclaimed, "The trend is, you can't
do this halfway. Some free, some paid. You have to make a
commitment and do it."

(Especially if what is free and what is paid was decided in during
committee meeting in one of your internal conference rooms, and
it is not blatantly clear to the average surfer why decisions were
made.)

The big challenge seems to be paid barrier placement where, if
someone clicks to see, hear or do more, they will be presented
with a barrier that says, "Hey to do this you've gotta pay."

The big solution appears to be as soon as possible. The more
free stuff you have, especially free stuff with your own branding
(versus syndicated 3rd party content), the harder you will find
converting freebies to paid will be.

Once you figure out where to put that barrier, the next challenge
is in making it as sexy as possible to convert the most visitors
into trials or buyers. As WSJ.com's Budde said, "That's what
we're working on testing next."

#6. The future: How big can this get?

Last year the major consumer sites were all talking about hitting
the half a million mark as though it was the Holy Grail.

This year, that 500,000 subscriber mark is far behind. Now
people are talking (and some achieving) seven figures. And in
B2B land, the numbers of actual subscribers may be far smaller
(as always) but the profit per renewing subscriber is incredible,
to-be-dreamed-of, oh boy.

The other cool thing is that advertisers are apparently falling
into lockstep with subscription sales efforts. The analysts who
warned, "When subscriptions cause your site visits to fall, your
ad revenues will plummet too" were far off the mark.

According to Bill Martin and Tobin Smith (with wildly different
sites, audiences and advertisers) online advertisers are
delighted to pay a premium of $100-200 or more CPM to reach
readers who care enough about your site or ezine to pay to
subscribe to it.

Paid buyers are worth more to everyone.

Why do analyst firms such as Jupiter still flourish opinions
in the naysayer side of e-subscription marketing? In the words
of one of our attendees, "I think they're afraid to eat crow."

Want to get the 250+ page transcript of this event? Click:
http://sherpastore.com/page.cfm/1950?a=cb

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