The need for content producers to diversify their revenue streams and counterbalance the declining ad and print monetization is becoming increasingly important. Many are moving to subscription-based models and requiring users to pay for most, if not all, of their content.
However, an alternative opportunity is emerging for content producers to maintain their financial future. Namely, donation models.
Funding from philanthropic donors has, in the past, been reserved for nonprofit organizations but there's been a significant shift in thinking over recent years, proving that this new business model can be beneficial to all publishers of any type of content (nonprofit or otherwise).
And, importantly, consumers are increasingly more willing to pay for content. We’ve seen this with the growth of subscriptions over the past decade, but donation models also appear to be growing in popularity as an alternative way for users to support content businesses without having to commit to a regular payment. A Digital News report found that, although the number of people donating to news organizations is currently small, the scale of the opportunity appears much greater and many of the sample stated that they would be prepared to donate in the future.
So, why are online consumers more willing to donate now more than ever?
- Growing focus on high quality and reliable content
At the end of the day, it all boils down to making content worth paying for. To consider this link between value and donations, we can look at the concept of economic value:
“Economic value is the value that a person places on a good or service, based on the benefit they get from it.... When an individual buys a good, they give up a given amount of money in return. Because they value both the good they receive and the money they give up based on their subjective, intended use (for the good or the money) it is obvious from their choice to purchase the good, that they must place a higher economic value on the good than on that amount of money.” - Investopedia
Given this, any consumers who donates will believe that your content provides them with enough value to pay for. We can therefore assume that the increase in willingness to donate can be correlated with an increase in perceived value of content producers online.
Arguably, the Covid-19 pandemic has contributed greatly to this shift and has paved the way for content producers to become vital sources of information and entertainment, filling the gaps in people’s lives created by lockdown. What’s more, in an era of fake news and unreliable information sources online, consumers are perhaps appreciative of reliable and trusted content more than ever.
- No commitment for consumers
Unlike subscription models where users are required to make a recurring payment, donations are voluntary and don’t have to be paid on a regular basis. This means that it’s not only a financially more viable option for many consumers, but also allows them to access a variety of content across the internet without committing to a single subscription.
For a content producer, a donation model therefore allows you to be open to all consumers and not solely reserved for those who can afford subscriptions.
This is the approach taken by the UK’s The Guardian who is one of the lead runners in employing a donation model.
They highlight how they believe in ‘information equality’ where ‘journalism is available for everyone to read, regardless of what they can afford to pay’. They’re very careful to ask for support whilst understanding that not every reader will be able to. This provides a very sincere message, underlining their values and building trust with their audience. For those who can afford to support, it encourages them to help fund The Guardian so that they can continue to do their work of providing free journalism for everyone.
- Consumers appreciate the choice of paying or not
This leads on to the fact that online users appreciate having options. Rather than being blocked and forced to pay or leave, a donation model gives them a choice of paying or not. Although this means that the donation revenue stream isn’t as stable as that of subscription models, it does allow for a stronger and more trusting relationship with your audience.
Chicago Public Media (WBEZ radio), for example, believes that this model allows them to build a community of listeners, where those who can afford it support the production of content for the benefit of all.
“So, we wanted to actually see: Do our donors, when they think about the money that they give to us, do they think of it as paying it for media? Or do they see it as a philanthropic charitable donation? And what was really fascinating in that research is that it was neither of those. The thing that people said over and over again is that the reason they give to us is because they feel like they are in a relationship with us. … It’s like there is this really strong affinity with our brand. And they see us as an integral part of their lives. And I think it’s really hard to replicate if you are a true subscription service, in that you can’t get access to the content unless you pay for it. You know, we really are the original ‘freemium’ model. Our product is free. No one has to pay for it. And so giving people the choice to support something that they value is, I think, at the core of what makes our program strong” - Goli Sheikholeslami President and CEO, Chicago Public Media
This concept of community and membership creates a stronger relationship with listeners and helps to encourage not just donations but recurring support. They exploit this across their site, reinforced by the honest approach that they take (e.g. being transparent about where they get funding from) which helps their audience to feel part of the community.
They continue to provide users with options at the payment stage, where we’re able to choose between a monthly or one-time donation as well as the amount being given.
Emily Ramshaw, at the The Texas Tribune, goes further to suggest that donation models are not simply about having a choice of paying or not, but that journalism is an essential public service that should be available to all.
“In some news organizations, the subscription model has been most effective. It’s more transactional. You’re paying for access to this product. For us, we believe... Journalism is a public service that you shouldn’t necessarily have to pay in order to access. We want the public to be deeply informed and educated and able to make decisions regardless of whether they can pay for a news product. So, for us, the membership model makes more sense. It’s paying what you can, whether that’s $5 or $500 or nothing at all, and hoping that the generosity of those who can afford more will subsidize the work for those who can’t.” - Emily Ramshaw Editor-in-Chief, The Texas Tribune
On their website, they take a very direct approach and highlight how the reader is gaining access for free but, conversely, the quality journalism that they provide doesn't come without cost. The question at the end (‘Do you value our journalism?’) encourages users to support the production of content.
Should we therefore start recognizing content online, particularly journalism and e-learning platforms, as an essential public service?
Arguably, this content benefits not only an individual but a community as a whole.
“Economists teach us that there are two types of value. Some products or services have primarily private benefits. You pay for an apple, you eat it, and you get all the delicious benefits. But there’s a whole other category, known as “public good” services — things that benefit both individuals and the community. Having free education, for instance, helps the student but also makes society happier, safer, and wealthier.” - Report for America
E-learning for kids, for example, employs a donation model and highlights on their site that they aim to provide access to free education for all primary school children as a right that everyone should have. A donation is therefore framed as ‘making a difference’ in a child's life who may not otherwise have been able to have an education.
Although this concept is clearly a nice idea, is it a sustainable model in and of itself? We all know that advertising and print revenue is decreasing and commercials make for a bad user experience. So what about subscriptions? Can these two monetization models complement each other for content producers?
The answer is without a doubt yes.
The less stable donation model can be paired with subscription offers to enable a content producer to have a regular and more reliable income in order to grow sustainably. What’s more, this still allows for free access to users who can’t afford or don’t want to commit to subscriptions but leaves the opportunity to support when they can.
This can be taken one step further by segmenting audiences and providing personalized journeys depending on their frequency of visit, whether they’ve donated in the past, registered users, etc.
This combined model also exploits the super fans who are more than prepared to subscribe to and support your content whilst continuing to monetize from other users simultaneously. To see this clearly, we can combine the two curves below, showing how subscription plus donations creates a diversified monetization model.
Images originally from Peter Yang (Creator demand curve), more recent data on The Creator Economy from 2023 here.
What are the best practices for employing a donation model?
- Be transparent: content producers need to help audiences be aware of the challenges you face and understand that content is by no means free to produce. This honesty and transparency will build a trusting relationship between you and your users, helping them to see that their donations matter.
- Convey your mission clearly: if your audience understands why you’re doing what you’re doing and how your free content is having a positive impact on people’s lives then they’ll be much more likely to donate. If they can connect with your mission then they’ll want to be a part of supporting its continuation.
- Thank donors: this seems pretty obvious but is hugely important for nurturing these donors for the future. It’s your opportunity to address them directly and show that their support matters.
- Work on increasing engagement: although this is something that every content producer should be working on, engagement is key for increasing donations. The more engaged your users are (through newsletters, registration, high frequency of visits, etc), the more likely they are to support you.
- Consider combining donation and subscription models: as mentioned, employing these two models simultaneously provides you with diverse revenue streams that can work harmoniously together. Whilst donations allows you to be free to all users but isn’t hugely stable, subscriptions provide you with recurring and predictable revenue that can provide an improved experience to your most loyal consumers.
- Produce great content that’s worth paying for: most importantly, your content has to provide value to users and make them want to give up their money to support its production. This is particularly important in this mode given that users can access your content for free by choosing not to pay. So, you should use data to discover which content engages your users the most in order to ensure that you continue to provide this high quality and valuable content on a regular basis.
Did you know that Poool also allows you to employ a donation wall on your website?
Our clients, Le Petit Journal, an online journal for French expats, use Poool to collect monetary support from their audience in an effective way that builds a trusting relationship with users, encourages donations and conveys their mission as a publisher.
They additionally have a club especially for those who donate, which not only creates a community and encourages further support in the future, but also provides additional value in exchange for the donation. In the same was as a paywall and registration wall, their donation wall creates a value exchange with their audience - donations benefit the publisher whilst the user can join the contributors club and benefit from invitations to virtual events, vouchers, tickets to concerts and more.
Interested in employing a donation wall on your site and gaining support from your audience in the right way?
Book a meeting and free demo with our team to see how our products can help you to increase ARPU, build lasting relationships with your audience and ultimately turn your content into business!