December 02, 2004

Gated Content Now Drives 50% of Salon's Revenues -- How it's Working

SUMMARY: After almost a decade of swimming in red ink, Salon looks like it may pull itself into the black for 2005. And the hero of the day? Gated content. 2.2% of Salon's 3.7 million monthly visitors are now paid members at $35 a pop. Plus the site makes its highest CPM ad sales on four-hour passes for the estimated 50,000 readers a day who agree to view long ads in exchange for access to gated content. Here are more details on Salon's most successful membership campaigns, why people pay, and what's next:
When Salon gated off 20% of its site for paying subscribers only in an attempt to keep the wolf from the door back in April 2001, few media (including us) expected the tactic to really make a difference.

Three months later only 12,000 of its more than three million regular monthly visitors had paid up, and the site was out hat-in-hand again looking for investors to keep afloat during the worst of the recession. Subscriptions were not the golden pill that solves all ills.

Three and a half years later we didn't expect to be writing this story. At an estimated $2 million per year in subscription sales plus an additional estimated half a million in Day Pass ad sales, that 20% of gated content is now contributing roughly half of Salon's total income.

If Salon hadn't taken the gating step, it's doubtful they'd still be around today -- despite the goodwill of kindly investors. According to SEC filings for quarter ended Sept 31st, things are still a bit shaky. But for the first time, we've got real hope that the site is entering solid financial ground for the long-term.

We interviewed Senior VP Marketing Patrick Hurley to discover how the site's learned to make subscriptions pay off finally....

Lesson #1. Bells & whistles don't work unless visitors really, really like you

What do Premium subscribers get for their $35 a year? Access to everything extra Salon's marketing team can think of to throw at them. This includes:

o Access to the 20% of desirable content that's cordoned off for paid subs and day pass holders only.

o Table Talk discussion boards.

o The entire site as a PDF, updated daily and ready to read on the customer's PC or printed out to read on the commute in to work.

o An AvantGo version for PDAs.

o A month free of the audio version of the New York Times or Wall Street Journal via Audible.

o Choice of three different free magazine offers. Salon has ten different gift magazine subscriptions it rotates in three at a time. Currently Wired, U.S. News and the New Republic are being offered.

But when all is said and done, none of this is why people really pay. In fact, only about 1,000 subscribers have taken advantage of the PDF, and only about 7.5% participate in the Table Talk message boards. Hoping to find out what the key impulse behind paying was, Hurley's team ran a survey last December simply asking subscribers why they anted up.

Results: "Salon's readers join because they believe in what Salon is doing. They are passionate about the site and its content and they want to support us. It has very little to do with getting no ads or more tchochkies," says Hurley.

As a result, in early 2005, Hurley will be changing Premium's positioning from a subscription to a PBS-style membership. "If it's purely transactional and you get an option to circumvent that with the Day Pass," Hurley says," you're going to do that. If we make it more of a membership, it's something you'll be proud to identify with."

Lesson #2. Spend some energy on renewals

"We used to have both a monthly and annual price point for Premium," Hurley says. "But we found that multiple pricing actually suppressed conversion. Annual, on the other hand, has the greatest longevity because of the automatic renewal." (Some 90% of Salon's annual members choose the automatic renewal option.)

Following up on non-renewers and auto-renews whose cards ceased working was not one of Salon's strong suits. "We didn't fully understand the value of people whose subscriptions had expired. We were totally focused on new people," Hurley confides, adding that "no one at Salon had a background in circulation management or direct mail. It's been a learning process for everyone in the company."

Finally this year Hurley's team were able to cobble together a quick series of emails to try to convert expires. Now Salon sends three renewal reminders - one three weeks prior to the renewal expiry date, another one week prior, and a final reminder the day before. After twelve days (Hurley tested on how many days to wait), a reminder offers three additional months free on renewal.

"We track renewals for a three month period," Hurley explains. "68% renew in the first month. By the end of three months, the renewal rate is up to 73%."

Lesson #3. Maximize promos when the fish are biting

"The U.S. Presidential election and the war in Iraq were major drivers in September and October," Hurley says. The team leveraged readers' passions for the topics of the day and the site for a series of subscription promotions, some planned, some fortuitous (see below for creative samples).

-> Two for One Gift Subscriptions

"This has been very successful," Hurley explains. "And we actually got the idea from a ContentBiz Summit speech by American Greetings." Visitors who aren't currently subscribers "buy a membership, give a membership free" promotion, while subscribers themselves are offered the chance to give two gift memberships for the price of one.

The two-for-one offer has been run a number of times, but it was most successful prior to the election. "We'd encourage Premium members to give a membership gift to an undecided voter, maybe someone residing in a red state. The idea was to 'get Salon in the hands of people who need it.'"

"We also put on an election countdown ticker. It would say only 15 days to the election, get your two-for-one offer now."

(Note: Hurley had tried out the countdown ticker in the past. "When we raised the price of Premium from $30 to $35, we had a ticker saying 'only 10 days left to lock in $30 annual price for life.' At the end of the countdown period, we resurrected it for another two weeks. And we had almost as many sign-ups in the second two weeks as the first!")

--> Partnerships with MoveOn and America Coming Together (ACT)

As electioneering kicked into high gear, Salon cut a deal with MoveOn, the community-building Web site used so effectively by the Howard Dean campaign. Salon allowed MoveOn to package story links into their mailings.

"When someone on a MoveOn list clicked on a link, it went to the Salon article with a customized welcome to sign up for a membership," says Hurley. "We stripped off extraneous third party ads and included only ads targeted at MoveOn's audience. Readers could read the whole story without a Day Pass. We gave them a half-off offer. This drove a significant number of subscriptions."

In fact 15% of MoveOn readers who clicked to the customized article page wound up converting to paid Premium subscriptions.

Encouraged, Salon worked a similar promo with advocacy group America Coming Together (ACT). Results were significantly lower -- with just 1% of resulting visitors converting from reading a specially-posted article to purchasing a premium membership.

--> URL in Doonesbury

"Garry Trudeau decided that for a week he would include an article URL in his Doonesbury comic strip," Hurley says. "The first site was a small newspaper in New Hampshire. The traffic he sent them crashed their servers. So he felt it might be necessary to contact sites he was going to point to in advance."

Salon was one of those sites. Hurley took advantage of the warning to post a customized experience for Doonesbury readers, with another special welcome, including an online reprint of the cartoon in question.

"We were just lucky to find out in advance."

Due to all these event-driven campaigns, Salon's paid subscriptions rose precipitously by 10% from 80,900 to 89,500 from October 1st- November 30th this year. Will the cause-driven accounts stick in a non-election year? We'll see...

Lesson #4. Day Passes can be a major production pain, but sponsors adore them

The Day Pass idea works very simply: in order to read more than the truncated first few paragraphs of an article, visitors must click through a multi-screen advertisement. At the end of the process, they have a choice between accepting four-hour-only access to the Premium content or signing up for a year's subscription immediately.

Although some critics feared Day Pass access would halt paid subscription growth altogether, especially when fresh passes were available every day, the opposite has proven to be the case. The site's paid subscribers have quadrupled in the years since the first passes launched.

Selling advertisers on the idea was tough. "It was very hard at first," Hurley admits. "We were trying to sell an entirely new concept. Now we have a track record with dozens of repeat advertisers." The line-up includes HBO, Comedy Central, Visa, Best Buy, Showtime, Nokia, and Cadillac. The site is sold out through 2004 and into early 2005.

The Day Pass hasn't eliminated ads elsewhere on the site, but it's where Salon can charge the most. "It's clearly the most premium priced ad unit we have," Hurley says. But because the Day Pass's CPM is so much more expensive than what most advertisers are expecting, Salon often creates a combo package that wraps the Day Pass together with other more traditional advertising formats (read: banners and pop-ups) to bring the price more in line.

Also, since Day Pass ads don't fit IAB specs, every one needs to be created special for Salon. Formats Salon has tried so far include multi-screen ads which require the viewer to click several times, as well as Flash movies running up to thirty seconds.

Although an average Day Pass ad takes 52 seconds to view, 87% of visitors who start the Day Pass process make their way through to the end -- viewing the entire ad to earn their pass. Roughly 45,000-60,000 Day Passes are completed by Salon visitors each day.

Now the team is experimenting with ways to get more of the 3.7 million monthly visitors to complete Day Passes. The problem is juggling paid subscription concerns with ad sales. Day Pass-style ads that block the site's home page get much higher response rates for advertisers, but Premium subscription sales suffer.

With roughly 50% of income from subscriptions and 50% from advertising, it will be interesting to see which direction Salon turns in for 2005.

Useful links related to this story:

Creative samples of various subscription promo campaigns:

Ultramercial with which Salon cooked up the rich media Day Pass idea (includes links to past campaigns):

Vertical Response - Salon's email services provider for renewal campaigns


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