Monday, November 18, 2013

HBR Blog Post on FairPay: "When Selling Digital Content, Let the Customer Set the Price"

If you read the HBR Blog post that I co-authored with Marco Bertini (11/18/13), the sections below will suggest some links for more information on FairPay.

If you have not read that Harvard Business Review Blog post, it offers a summary of some of the ideas behind FairPay, and how they fit into a flexible architecture for better pricing that moves the exchange between seller and buyer from the transactional to the relational. We hope you will comment on that HBR post, and let us know what you think.

Marco and I are collaborating on a longer article that explores the principles of this architecture more fully [preliminary version]. Marco is Assistant Professor of Marketing at London Business School, a prolific author in HBR and other leading business and academic journals, and has been working for some time on many of the strategies that FairPay builds on. (More background on Marco and his work.) My background is as a practitioner in online media and e-commerce, and the technologies that drive that.  Our collaboration has been very rewarding, and we are very pleased that this HBR Blog post will bring these ideas to more people.

To dig deeper on FairPay [see Update, below]:

--Details on the FairPay Web site.

--Video and slide introduction.

--Process overview and diagrams.

--Blog Posts:  This FairPayZone blog explores FairPay at various levels and in various business use cases. The following posts may be especially helpful to HBR readers:
Strategy and behavioral economics methods
Journalism and similar content businesses

Posts address other businesses, including music, video, books, games, and software apps, as well as related experience with pay what you want pricing.  (Try the search box.)

I offer free consultation to those interested in evaluating and applying FairPay, and am happy to address questions. Please contact me at fairpay [at] teleshuttle [dot] com.

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Update: Links to:


*The fuller article co-authored with Marco Bertini has been submitted to a leading management review, and a working version is online.
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[Comments have been disabled after continuing spammings -- if you would like to comment, please email a request for approval, and it will be re-enabled for you -  fairpay [at] teleshuttle [dot] com]

Tuesday, November 5, 2013

Pierre Omidyar: Adventures in New Business Models for Journalism ...and FairPay


As a follow up to my post on Jeff Bezos and The Washington Post, I turn to another exciting entry into journalism by a top-tier e-commerce innovator with very deep pockets, and how the new FairPay business model can work for that adventure as well.

Pierre Omidyar, billionaire founder of eBay, also considered buying The Washington Post, but revealed in his blog that he decided instead to actively participate in developing an entirely new media platform intended to support and empower independent journalists. 

Such a platform is especially well suited to the use of the FairPay architecture, with its ability to engage readers to partner with journalists, by serving as patrons for work that they value.  My earlier post on Bezos and The Post outlines the fundamentals of how FairPay addresses this business challenge.  This post builds on that.

***Second in a series on tech billionaires (Bezos and Omidyar) reinventing the business model for journalism, not as their personal charity, but by creating a new kind of reader/patron empowered by e-commerce technologies.***

In tune with Bezos, Omidyar points to the primacy of customer relationships in e-commerce  (in his interview by David Carr):
Technologists understand our users and break down how user engagement increases from somebody that maybe just tries your product once and then goes away, to a different kind of person that progressively gets more and more engaged and then becomes just totally locked into your product. That’s something people in Silicon Valley spend a ton of time analyzing, working on and thinking about.
FairPay integrates this kind of engagement directly into the value exchange process (as described in my Bezos post). Here I highlight additional aspects of Omidyar's focus on "elevating and supporting" individual journalists, and how FairPay supports that.

Omidyar says (to Jay Rosen) he wants to run his venture as "a company, not a charity." That means generating a revenue stream (presumably from readers, not advertisers). Rosen describes this as "the personal franchise model." The ability to engage readers to serve as patrons is essential to that. 

FairPay naturally integrates the reader's evaluation of a journalist's value directly into the pricing process.  It engages the reader in ongoing "dialogs about value" on how the reader values the work of each journalist over the course of their relationship.  Readers intuitively recognize many dimensions of value, and the dialog can easily be structured to elicit pricing that factors in this judgment with regard to such dimensions as quality, style, investigation, reader value, and social value .

With FairPay, an Omidyar media platform can get direct feedback from each reader on the perceived value of each article, the body of work by that journalist, and the media service as a whole. 
  • This can be directly linked to compensation for each journalist, thus increasing engagement and the quality of the relationship on both sides. 
  • Readers will know that a significant portion of their payments go to the journalists, and that their feedback bears directly on how journalists are paid (and what investigations are funded).  
  • Conversely, journalists will be motivated to create a body of work that readers recognize as valuable by voting for them with their wallets. 
This gets to the issue of "Creating Shared Value," as described in the influential 2011 HBR article by Porter and Kramer, which suggests the need to "reinvent capitalism" with broader ideas about value creation that will "unleash a wave of innovation and growth." They propose that "creating shared value represents a broader conception of Adam Smith's invisible hand." Another of my earlier posts  shows how FairPay operationalizes that idea to reflect judgments of shared social value directly into pricing dialogs, creating that broader conception of the invisible hand.

FairPay is uniquely focused on creating the multidimensional dialogs on value that are needed to turn readers into patrons of important journalism. It not only supports the journalistic effort, but guides it to the tasks that the reader/patrons consider important. 
  • It builds a deep relationship with readers that can feed directly into the key editorial processes that determine which journalists to support, in what investigations, and how they are paid. 
  • It builds a value discovery engine into the heart of the media platform, to drive it toward work that is good and important, and to get readers engaged as patrons who pay for that, both for themselves and for the common good.
And given a model in which (as Rosen reports) "all proceeds...will be reinvested in journalism," readers can be strongly motivated to be generous patrons. Omidyar is quoted as saying he started eBay on the premise that "people are basically good." Modern behavioral economics demonstrates that his faith is well founded. FairPay offers a way to apply that virtue to support a wide range of valued services, including support of quality journalism.  In doing that, it leads to the answer to Jeff Bezos's central question: "Why should I pay you" (see previous post).

Wednesday, October 30, 2013

"Why should I pay you?" - Bezos' Washington Post - Mapping a New Business Model for Journalism

Jeff Bezos' central question about The Washington Post, is stated in his recent interview: "Why should I pay you for all that journalistic effort when I can get it for free?”

I suggest a process that can generate the answer.

***First in a series on tech billionaires (Bezos and Omidyar) reinventing the business model for journalism, not as their personal charity, but by creating a new kind of reader/patron empowered by e-commerce technologies.***

In his letter to Post employees, Bezos said "There is no map" -- but I suggest this process provides a map -- it may be crude and in need of some correction, like early maps of "The New World" but, like them, it is good enough to start a journey in the right direction, even if that journey may take some unexpected turns.

As Bezos encapsulated it in his interview:
The Post is famous for its investigative journalism. It pours energy and investment and sweat and dollars into uncovering important stories. And then a bunch of Web sites summarize that [work] in about four minutes and readers can access that news for free. One question is, how do you make a living in that kind of environment? If you can’t, it’s difficult to put the right resources behind it. . . . Even behind a paywall [digital subscription], Web sites can summarize your work and make it available for free. From a reader point of view, the reader has to ask, "Why should I pay you for all that journalistic effort when I can get it for 'free' from another site?"
"Why should I pay you?" is the central dilemma of Internet content, and exactly the question the FairPay process is designed to answer. There is no one simple answer, but I suggest the general shape of the answer is this:
  • We ask you to pay only what you think fair for the value we provide you -- isn't that fair? The quality journalism we provide is expensive to produce, and if people like you who value it do not pay a fair price, how can we continue to provide it?
  • We will treat you as an individual patron -- we will listen carefully to what you want, and you will get our best efforts to produce and deliver it to you.
There is no one simple answer -- but FairPay offers a reasonably simple process for seeking the answer in all its complexity, by fully applying the one-to-one power of the Internet:
  • The answer is an individual one.  It will vary from person to person, from day to day.
  • Finding that answer requires an ongoing, individualized process.
  • It also requires individualized pricing, a concept that is challenging as well.
This is a problem that was made difficult by the Internet, as Bezos observes, but it is also a problem that can now be solved using methods enabled by the Internet. 

So "Why should I pay?" -- The essence of this FairPay process is to undertake deep, computer-assisted dialogs with the reader on just that question
  • The answer must be individualized to pin down what value The Post actually delivers to me.
  • It must structure a dialog to learn what I think The Post is worth to me -- and to help frame my evaluation to fully appreciate the value I receive.
  • It must close the loop to drive toward a fair exchange between me and The Post over time.
  • The first cycles of this dialog may give poor results, but with good feedback and direction, this can drive an emergent process that delivers value, sets prices for that value, and converges toward a fair value exchange.
Bezos emphasizes that there is a need for experimentation and patience -- FairPay offers a structured process for ongoing experimentation that can be expected to move toward convergence, and to provide data to shed light on any rough spots so the process can be altered to work even better. Think of it as an adaptive value discovery engine:

[]

FairPay centers on the idea of customers as patrons who have only to be motivated.  It provides a mechanism for them to be patrons of journalism.  (It works similarly for patrons of books, music, video, apps, and other digital offerings.)

The essence of FairPay is in the workings of this engine:
  • to view transactions not as ends in themselves, but as steps in a process that builds a relationship based on fair value exchange
  • to let you learn and adapt, to provide what your patrons value
  • to let the patrons learn pay according to the value they perceive, and to be fair about that
  • to guide these dynamics, to motivate both the patrons to pay a fair price, and your efforts to seek to delight them
FairPay draws on three main enablers:
  • Modern behavioral economics that shows that people are not heartless profit maximizers, but can be motivated by a sense of fairness and related aspects of reciprocity, altruism, and self-image to pay more than they have to (share their "value surplus"), when given a good reason.  Supporting the quality journalism of The Post, for my own benefit, for the common good, and out of fairness, is just such a reason -- if given in terms that are specifically relevant to me and responsive to my concerns. Think of me as a patron, and make me want to be a patron.
  • Computer-assisted dialog, and the growing ease of use and power of such dialogs to inform the process of understanding what I value, and to help me to recognize what value I have received. Engage me as a patron and show that you understand what I care about.
  • Predictive analytics that can help The Post to shape both the service it offers me and the dialog it has with me in a way that gives me what I really care about, and makes me want to pay a fair price for it. I will be a patron if I feel what I patronize is worthwhile and respects my desires.
How much should I pay? FairPay treats that as a matter for dialog.  Only I can determine what I value, and what price I think fair for it.  FairPay lets me pay what I think fair. ...But it does not stop there.

Why should I pay fairly? FairPay enables The Post to suggest what I should pay, track what I do pay, understand why I think my price is fair, and tell me whether they agree it is fair. All of this is specific to what I read, how often, how much, for how long; whether I read it for business or pleasure; how affluent I am; and many other details. The Post can measure and report that to me, consider what I say about the value I perceive, and factor that into their suggested price. They can tell me they think I am being unfair, and limit what they offer me, or they can tell me that I am being generous and enrich what they offer me. If The Post plays this game well (mostly carrot, a little bit of stick), they can give me what I value, and motivate me to pay a fair price for it.

These enablers and this value discovery engine inform a new invisible hand, one that can entice readers to happily pay a fair price for the content they consume. It gives the reader the power to set a price they are comfortable with, but gives the publisher the power to nudge that to a level the publisher is also comfortable with over time (or to cut back on what is offered).

That new dynamic balances my goals and The Post's. The Post can gamble on my fairness for a time, to see if am willing to be a patron. (Doing so costs them almost nothing.) If not, it can leave me to deal with a conventional paywall subscription, or to fend for myself. If I am willing to be a patron, The Post can serve me at whatever level I justify that I pay fairly for.

I suggest this fits perfectly with the guidelines Bezos outlined in his letter to Post employees:
"We will need to invent..."
...this map is both an invention and a framework for continuing invention
 
   "...which means we will need to experiment"
...FairPay is a method for experimentation in the form of structured dialog with readers, for dynamically learning what they value, at what price, and for guiding the Post's adaptation to provide it.
 
    "Our touchstone will be readers, understanding what they care about .... and working backwards from there"  
...that is the touchstone of FairPay, turning the invisible hand to drive just that, in a new kind of emergent pricing process.  
(More details are provided in the sidebar, other posts on this blog, and on the FairPay Web site.)

***First in a series on tech billionaires (Bezos and Omidyar) reinventing the business model for journalism, not as their personal charity, but by creating a new kind of reader/patron empowered by e-commerce technologies.***

Wednesday, October 16, 2013

Speaking on FairPay at Zuora's Accelerate East Conference on The Subscription Economy

I was pleased to present at two sessions in Zuora's Accelerate East conference in NYC on October 16. As noted elsewhere on this blog, Zuora is a company that is driving what they have termed "The Subscription Economy," and provide an important role as thought leader in this rapidly growing space. The event was very stimulating and well attended. Here are the two sessions I spoke at.


Marketing Panel: 
Innovative Pricing and Packaging Strategies
Wednesday, October 16 – 3:45 to 4:45

Moderator: Brian Bell, CMO, Zuora
Panelists:
Matt Shanahan, SVP, Strategy, Scout Analytics 
Steve Woda, CEO, uKnow.com
Richard Reisman, Online Media Consultant/ President, Teleshuttle Corp
Kelly Berry, Marketing, Sailthru
Dave Govan, Shutterstock

Topics/Abstract:   Learn strategies for accelerating your marketing levers to drive business growth and hear best practices first-hand from businesses that have done it. Learn how to use pricing and packaging as a tool to increase customer acquisition, value per customer and reduce churn.


The Future of Media Panel
Wednesday, October 16 – 5:00 to 5:45

Moderator: Brian Bell, CMO, Zuora
Panelists:
Peter Kriesky, Founder, Kriesky Media 
Gregg Hano, CEO, Mag+
Richard Reisman, President, Teleshuttle Corp & Online Media Consultant


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[This post was added on 3/31/17 to fill in a gap in coverage, but dated as of the day of the conference.]

Thursday, May 30, 2013

BitTorrent's "Gated" Torrent Bundles -- Just add FairPay Gating

BitTorrent has introduced "Torrent Bundles" a new "relationship based"content superdistribution bundle.  This is a move very much aligned with the relationship-oriented monetization strategies of FairPay. Both exploit free and gated offers, and both go beyond freemium by doing it in a way that is relies deeply on partnerships with artists and other creators/producers of content.  Torrent Bundles and FairPay are both great ideas, and the combination promises to be even better.

  • Torrent Bundles provide a viral superdistribution technology designed to work with various forms of gating, in a way designed to build a relationship.  
  • FairPay offers a totally new kind of gating that is based on reputation for fair payment over the course of a relationship, one that can fit very nicely into such bundles and increase their effectiveness in a way that dynamically seeks payment levels that work for both the buyer and the seller.

BitTorrent Bundles are described on their blog as providing a viral download that combines a portion of free content with a portion of "gated" content that can be unlocked.  More background on the business model and planned features is in the Wired interview with marketing head Matt Mason:
The BitTorrent Bundle is described ... as an evolution of the torrent file concept. The user downloads the Bundle, which contains not only free content — in the case of the first Bundle, the Dada Life remix of the Kaskade track “Dynasty,” as well as the trailer for Kaskade’s Freaks of Nature tour documentary — but also a gateway to premium content, as well.
How you open that gate is determined by the creator of the content. For this launch Bundle, it’s simply by sharing your email, but alternatives include pay gates, pay-what-you-want gates, or even links to outside sites like Netflix or iTunes. BitTorrent Bundles, in other words, gives musicians, moviemakers and artists of all kinds more control over how their work gets shared and sold.
 As noted by Mason, Torrent Bundles have Pay What You Want offers in mind.  FairPay is short for "Fair Pay What You Want."  FairPay takes the concept of buyer participation in pricing and building relationships to embed relationship-feedback-based gating directly into the pricing process.  This is described more fully in the sidebar and elsewhere in this blog and the FairPay Web site.

Briefly, the idea is that FaiPay tracks how buyers set price, asks them why they set a high or low price, and uses that information to develop a Fairness Reputation.  It then extends the social contract with buyers, by offering some content only to those who establish a reputation for fairness.  This gating based on Fairness Reputation can apply to premium content, or can apply to all content after an initial period of relationship building.  The result is that the natural human drives to be fair, to reciprocity, to altruism, to confirm to social norms, etc. are reinforced by the incentive of continuing and better offers.  This gives buyers a strong incentive to not try to free ride, and enables sellers to learn what the buyers value and how to deliver it.

Mason's book, "The Pirate's Dilemma," talks about reinventing capitalism, and how enlightened businesses can compete with pirates and gain internal efficiency while bringing greater value to society.  FairPay provides a highly automated adaptive engine designed to do just that in a systematic way.  FairPay solves the price-setting dilemma. (It also changes the game regarding piracy "When buyers set prices, no man will be a pirate.")

I am seeking to reach out to BitTorrent to suggest that it would make eminent sense for them to create a FairPay pricing option within their bundles, and would be happy to assist in that.    Any reader who can assist in making a connection to them (or others with compatible ideas) is invited to do so.  (I can be reached at fairpay [at] teleshuttle [dot] com.)

This is the first I have written here about the use of FairPay in a viral superdistribution context, but that is one of the ways FairPay was designed to work.  Anyone can redistribute bundles that contain FairPay offers, and the recipients can begin to establish their own FairPay relationships (and reputations) to get the added content (if not already in a FairPay relationship).  Of course criteria for pricing of content received virally would be expected to be relatively lenient, to encourage risk-free sampling, so that both senders and recipients feel well treated.)

FairPay is designed to coexist with, and even mimic, other pricing models.  It can operate along a spectrum of free, free for feedback information (including just an email, as in the Ultra Torrent Bundle), conventional non-gated Pay What You Want, and reputation-gated Fair Pay What You Want.  It offers the free plus paid mix of freemium, but in a way that provides a flexible boundary between free and paid, customized to each buyer.

Also relevant to BitTorrent, by creating a platform that supports FairPay, a byproduct is building a FairPay Reputation Database. This can be used to enable any producer of content on that platform to make offers to new buyers based on the reputation they have gained with other sellers, and thus make better offers to those having a reputation for being reasonably fair. (This can be done is ways that do not compromise privacy.) As owner of this database, BitTorrent would build a valuable asset (one that works much like a credit rating database).

BitTorrent Bundles seems to be pointing the way to a more enlightened and efficient model of content distribution. As people begin to see the merits of these ideas, the value of the FairPay pricing strategy will be increasingly clear.





Friday, March 29, 2013

Paywall 2.0 ...and Paywall 3.0 -- Focus on the Customer!

Recent presentations by Zuora, the champion of The Subscription Economy, and its president Tien Tzuo, describe "Paywall 2.0," as "why focusing on customers is the only way to win" in a blog at The Guardian, "The Reinvention of Media" on Slideshare, and "The Future of Publishing" in a longer white paper.  There is also a 20 minute video.

This as an excellent foundation for what I see as the next step, FairPay, which I am suggesting as Paywall 3.0.  Zuora is right about Paywall 2.0, and FairPay builds on that to deepen -- and center on -- the customer relationship. 

[Update:]  I should be clear from the start that The first rule of Paywall 3.0 is that There is no Paywall -- as will be seen below, there is a FairPay Zone in which readers may pay or not ("fair pay what you want"), and publishers decide case by case, and month by month, on what basis to maintain the relationship with each reader. This goes way beyond "soft" and "porous" and brings in aspects of a membership model. (The paywall is retained only for those who do not cooperate fairly.) [added in response to feedback 3/29/13]

As noted by Zuora (in The Guardian version),
...as the demise of Variety shows, paywalls are not enough. That's because it's never been just about the paywall – it's about publishers viewing readers not as anonymous demographic statistics to sell to advertisers, but as customers who are willing to pay for something of value. In this changing customer-centric world, media and publishing companies need to adopt a more data-driven approach to understanding customers, design bundles and pricing plans that meet their needs, and strengthen their relationships with customers to ensure a they'll keep coming back for more. Let's call it Paywall 2.0...
Now starts the hard road to recovery. And that recovery will come from a truly customer-centric approach. It is about building customer relationships, finding ways to build loyalty, having a range of offerings from free to paid-for that make sense...
Paywall 1.0 was a good start, but isn't enough. Publishers need to move towards the second iteration...
I firmly believe we live in a world where success is not about how many products you ship. It's about how strong your customer relationships are, and how well you are monetising those relationships. 
As described in this blog and related Web site, FairPay reinvents the architecture of digital commerce to focus completely on the customer relationship.  It does this by shifting from a short-term transaction view of pricing to a long-term relationship view, and empowering the customer to engage in meaningful "dialogs about value."  It is this FairPay dialog that generates the price, with deep participation by the customer.  FairPay works as an adaptive value discovery engine that sets the price -- and how the product is offered to the customer -- to match what the individual customer wants and values.

Zuora rightly focuses on the many challenging aspects of subscription operations and how to build a business around ongoing subscriptions.  FairPay is fully consistent with that. In fact Zuora has expressed an interest in adding FairPay into their offering, as an alternative approach to pricing that their clients can apply as an option.

Paywall 3.0

FairPay can be viewed simply as just another pricing model that Zuora's subscription services can offer (one based on pricing and payments in arrears, with a decision process for renewals based on user pricing behavior).  That is fine, but consider how FairPay points to deeper strategic opportunities.

I suggest the historical perspective is:
  • We shifted about a century ago from negotiated (participatory) prices to seller-imposed prices that enabled efficient mass marketing, but distanced the seller from the consumer.  The costs of that have been lack of knowledge of the customer and lack of loyalty from the customer that have been hard to compensate for (such as with remedial market research and loyalty programs).  
  • Now the new phenomena of digital products and networks have disrupted commerce again, with movements to free, "freemium," and even "pay what you want" and "name your own price."  Businesses have found it challenging to adjust to this, and no current models really do the job well (most obviously in information and content industries).  The Subscription Economy can help (as for Netflix and Pandora), but getting consumers to pay for information and services that obviously have near-zero marginal cost remains very problematic (and relationships are critical, as Tien had previously observed with regard to Netflix's serious pricing missteps).
From that broader perspective, FairPay is a radically new architecture for deep two-way relationships between consumers and businesses - dialogs about value, as actually realized by each buyer in their specific, day-to-day contexts.  This is done by applying a structured balance of powers in an ongoing relationship (such as by subscription), in which:
  • the consumer sets an individualized price they think fair, after use, and 
  • the business continues to permit FairPay transactions/renewals as long as they agree that consumer is "fair" about the price (in their individual context). 
  • this continues in an ongoing and adaptive process.  (Unfair buyers are downgraded to lesser offers or conventional fixed-price--providing an incentive to be fair.)
The overall impact is that:
  • FairPay participatory processes can bring in far more customers (over a wide range of price points), increase profits (by capturing more latent value), and empower win-win relationships based on fair value exchange. Think of a privilege that is earned and maintained - a zone of pricing freedom, a "FairPay Zone."  
  • Much like custom negotiation (but with important differences), this participatory process can also be far more economically efficient than set prices, by including flexible consideration of all relevant dimensions of value, usage, context, ability to pay, etc.

As noted above, Zuora has expressed an interest in adding FairPay into their offering, as an alternative approach to pricing that their clients can apply as an option.  Building a FairPay offering to customers on a strong infrastructure base like Zuora's makes a great deal of sense.

We are looking for companies interested in trying this new step forward.  (Please contact us if you have an interest:  fairpay [at] teleshuttle.com)


[UPDATE:]
Newer posts expand on this from the perspective of customer journeys and loyalty loops: