iTunes Beats Paypal for Registered Users

January 7, 2010 in Essays, Technology & Science

A few months back I was watching Apple’s Rock N’ Roll event (this post has been in my drafts half written since then!), and one thing mentioned that really struck me was the number of registered iTunes users who have registered credit cards – a whopping 100m.

I’ve seen the comparisons done between social networks (“omg, Facebook is bigger than Brazil!”), but hearing the iTunes figure made me realise that I have no clue how that stacks up against the other big hitters in the online world, so I did some research…

Registered Users

Ebay – 88.4 million

Paypal – 75.4 million

Skype – 480.5

Facebook – 300m

iTunes – 100m

Gmail – 146m

Yahoo Mail – 285

Windows Live Mail (msn/hotmail) – 343m

Wikipedia – 10.5m registered (only 148k ‘active’)

I’m still shocked that iTunes has more credit cards registered than Paypal, that’s a very impressive asset. I’m going to try dig up the equivalent for Amazon, but it’s tricky to find. The skype numbers should be taken with a pinch (or a truckload) of salt, as their definition of “Registered User” is basically any skype account ever created, including ones that were never used, have been inactive for years or multiple accounts for the one person.

Graphs

I thought some graphs might be nice so I did that too:

Registered Users

reg users pie

Definitions

Ebay – All users, excluding users of Half.com, StubHub, and our Korean subsidiaries (Gmarket and Internet Auction Co.), who bid on, bought, listed or sold an item within the previous 12-month period. Users may register more than once, and as a result, may have more than one account.

Paypal – All registered accounts that successfully sent or received at least one payment or payment reversal through the PayPal system or Bill Me Later accounts that are currently able to transact and that received a statement within the last 12 months.

Skype – Cumulative number of unique user accounts, which includes, among other things, users who may have registered via non-Skype based websites and users that have more than one account.

Wikipedia – Active: Users who have performed an action in the last 30 days.

Sources

Yahoo Mail, Gmail, Bing Mail, Ebay, Paypal, Skype, Facebook, Wikipedia,

Let me know if there’s any other companies you want me to add to the stats.

Murdoch’s Paywall

November 23, 2009 in Business, Economics, Essays

There has been a lot debate online recently surrounding Rupert Murdoch’s change of mind about paywalls for his online newspapers. I’ve been reading a huge number of arguments on both sides (including a 40min video interview with Rupert himself) and am sad to say that most of them seem to be missing the point.

Earlier today I read Adrian Weckler’s article ‘The case for a paywall for Irish newspapers’, and decided to write my response in a post here, and to summarize my thoughts on the debate in general.

Paywall or Die?

Ardian makes many of the points that are being made by journalists and newsfolk around the world, that the business model is collapsing and they can’t afford to keep giving it all away for free. He finishes his article with the question:

But if the choice is a continuous decline in circulation figures or a paywall, it’s not really that tough a choice. I mean, ask yourself: what would you do?

The fundamental problem in the paywall debate, but the one too often overlooked, is one of supply and demand. The question the article asks is “Should we decide to command a price, yes or no?”, but economics tells us that the only question one can really ask is “Can we command a price“.

As a simple analogy, imagine one major Irish newspaper put up a paywall, but none of it’s competitors decided to follow suit. This paper obviously wouldn’t do so well, most of the news stories would be available in the other major publications or elsewhere online, it’s own articles wouldn’t be shared, tweeted or linked to as much as other papers and it would also lose the water-cooler effect if much fewer people are reading it.

This is the best analogy I can think of to describe the problems I see with an industry wide paywall – but the problems that afflict that single newspaper would hurt the whole industry, and the competition would be from other online news sources, international papers, bloggers and independent journalists.

The Economics

If you view news as a commodity, it can be fairly undifferentiated. If you take my analogy above, there are some people who would stay and pay for the subscription, but most would not. This is because the news is largely the same to them regardless of the source.

It is also served up at a near zero marginal cost. Think about it, how much does it cost the Sunday Business Post for each additional article read by a new visitor (or even – how much does it cost yourtechstuff.com?). In economics, when the market is competitive, price will always fall to the marginal cost. If you’re in an industry with a marginal cost of close to zero, it will be very, very, very difficult to command a price.

The Business Model

So back to the closing question, paywall or death? As always, (and without wanting to sound like a Carlsberg commercial) there’s a better third option here. This is a business model problem that newspapers have. In print, they have little competition for audience attention, and therefore can sell that attention for a high price to advertisers. Online, this is not the case, and so the price the can command for advertising is much lower. They therefore need a new revenue model, and here’s my suggestion for how they should get started:

Always remember that standard news articles cost nothing to distribute, attract an audience and command no price, so if you’re going to publish them, keep them free. Then figure out how to convert a proportion of the readers of those articles into paying customers.

If you want to charge your readers (or a subset of your readers), start by asking what value you can add to your service to make it worth the price. This is the biggest flaw in Murdoch’s plan – he’s wants to introduce a new price, but without introducing a new clear reason for his customers to buy. Some publications, like the WSJ, already add value by offering in depth insight into content for a specific market. This is one option, but it does leave you open to new competition that could easily offer the same content for free.

Preferably this new revenue model would involve selling new scarcities, such as personalisation, physical products, access to ‘behind the scenes’, or an editors time (e.g. letters to the editor can be read by everyone, but only written by subscribers – or better yet a discussion forum with the editors, accessible only by subscribers).

Here are some quick examples of news organisations leveraging free news articles to sell scarcities (there’s obviously not too many examples though, otherwise the industry wouldn’t be in such a pickle!):

  • Tecdirt’s “crystal ball” membership option – for only $15 per year “with the Techdirt Crystal ball, we give you a chance to see the headlines of some of the posts we’re working on, and some indication of when they might get published. And, once a story is published, you’ll be able to see it up to 60 minutes before anyone else can.”
  • The New York Times’ Gold & Silver online membership plans – The packages carry an annual cost of $150 and $50, respectively, and emphasize behind-the-scenes benefits like newsroom tours, exclusive videos of reporters telling “the story behind the story” and ancient back issues.
  • The Insight Community – a clever way to charge a brand to work with your readers to build or design a new product.

So that’s my input and advice for this debate, and can be summarized in these two lessons that I learned on my first day of Leaving Cert Economics:

  1. In order for a good to command a price, it must be scarce in relation to demand
  2. In a competitive market, price will always fall towards the Marginal Cost of production

Sounds Like Advertising

July 27, 2009 in Essays, Uncategorized

In a similar vein to my last post about “Content as advertising“, I’ve been thinking about how this concept could be picked up on and used by the music industry. Think “music video as advertising“, but hopefully without the corporate-sellout overtones!

The Pirate Bay

These days, a lot of artists are realising that the free distribution of digital music, which the internet provides, is more advantageous than it is damaging (think “Youtube viral” rather than “Napster file sharing”) and that obscurity is a much bigger threat than piracy.

Given that this is the case, and many artists are using free music to create and grow a fanbase, they should try keep their costs as low as possible to start off. But they also want a good music video, something that compliments the track and that people can watch on Youtube. So why not let a company create your music video? This way the company can get some genuine content to help them advertise (not just some old jingle) and the band get money, exposure and a free video.

YouTube

Have a look at the YouTube stats, a huge proportion of the top videos are music videos – with the top spot going to Avril Lavigne’s Girlfriend with 122,399,477 views. On the other hand, the advertisements with the best songs are generally the top viewed, e.g. O2’s most popular Irish youtube video is the one with the new Florence + The Machine song Cosmic Love. The ad was released a month before the single, making the ad the only place people could go to hear it, and quick skim through the comments (e.g. “i love this song :)”) shows that people are watching it to hear the song. It’s a win-win: Great exposure for both O2 and for the song (now in the Top 10 in the Irish iTunes chart).

I Want My AdTV

The next step up from “great song meets great ad” is an advertisement as a music video. I know that to some this will sound like a very ugly combination, but I’m sure it can be done in a way that is tasteful and doesn’t compromise the integrity of either the artist or the song. In fact, that’s the beauty of this approach, if it was too corporate or all about the advertisement then no one would want to watch it! It is in the company’s best interest to leave the art as uncompromised as possible.

As before, I can’t find any good example of this having being done yet, but I think this video below (found via a fluffy link) could have been a perfect example, if it was slightly more music video and slightly less advertisement.