Even though I am a regular reader of Slate, I missed this announcement last month that they are putting in a metered paywall for International (i.e., non-US) readers. Like many other news sites, you can have, in this case, 5 free articles a month and for more will have to pay $5 a month for access to everything. This is basically a new way of getting International readers to pay for its premium product, Slate Plus — that is, by the age old tradition of downgrading the quality of the free product. Fair enough, but why?
The reason Slate gives is that it is ad supported:
… there’s a problem: Our U.S.-based sales team sells primarily to domestic advertisers, many of whom only want to reach a domestic audience. This may sound provincial, but there are decent business reasons for it: Maybe the car company buying ads on our site doesn’t sell the model it’s advertising in your country. Or maybe the marketing strategy where you live is different. Whatever you think of the logic, the fact is inescapable: Many U.S. advertisers won’t pay us to reach readers outside of the United States.
Yes, that makes sense. The usual solution to that is to find advertisers outside of the US and if there is one thing that platforms such as Google’s DoubleClick are able to do is find those advertisers. Why would a site like Slate have a “US-based sales team” or a “sales team” at all?
Anyhow, the question is why? So only US readers are currently valuable to Slate and US advertisers don’t want to pay for International readers. That is all fine. What you can do is make sure you don’t serve up ads to International readers and get accurate measurement of US readership and impressions put in front of them. End of story.
But that is not what Slate wrote:
The end result is that, outside the United States, we are not covering our costs. That leaves us, as a business, with two choices: either make up for low ad rates by increasing the number of ads on the site, or turn to our readers to pay a fair share of the costs of producing the site. We’ve opted to do the latter.
“Not covering our costs”? What costs are those exactly? It is just a web page. One can imagine that International calls on that page add up but I would still be surprised if Slate as a marginal rather than a fixed cost intensive business. Again, even poor ad rates internationally would still likely cover those costs.
The bigger issue is this: it is easy for International readers to present themselves as being in the US. So many video sites, for example, as for it, that many already have the knowledge, plugins etc to do it. Slate is giving them yet another reason to do so. That may be a form of copyright infringement or something but, in this day and age, any reasonable media business has to expect it.
The problem for Slate is this: if, by encouraging International readers to mask their location, they do so in non-trivial numbers, then the data that Slate presents to its sales team to obtain US advertisers will be inflated. In principle, that won’t erode total revenue so long as Slate and those advertisers have an idea of precisely how inflated those numbers are. I don’t know how they would do that (beyond the very short term) so one suspects that this announcement pay reduce Slate‘s US advertising revenue over the medium to long-run.
The bottom line is that the last thing a media company wants to do is play games with second degree price discrimination. It is hard to have group pricing because then you have to identify whether someone is a member of a group at precisely the same moment you are giving them incentives to not reveal that.