What should you consider when starting a subscription-driven or membership website?
The answers are not always obvious, even to a seasoned print or electronic publisher. Starting a new website is very different from running an existing property. Over the past 10 years, my partners and I have worked on over 100 successful website startups, as well as several that were not successful. Our understanding of website publishing is rooted in the world of print, which has given us insight into the similarities and differences between the two types of launches. This report will document the best practices we’ve seen, and been part of, over the past decade. The examples and costs we use to illustrate the best practices we’ve identified are geared toward a website that will generate $2 to $5-million per year in total revenues after three to five years.
Website publishing is different from print publishing in several ways. While all the traditional revenue streams apply (subscriptions, advertising, classified listings and product sales), website publishers also rely on affiliate marketing programs. These programs are revenue streams unique to the Web. The mix of revenue can also be quite different from print publishing, with advertising being less dominant than in magazine or newspaper publishing.
The sources used to generate website subscriptions are very different from those used to generate print subs. While print publishers rely on direct mail and inserts cards, online publishers use search engine marketing, affiliate marketing and co-registration marketing to build a subscriber base. Successful online publishers also give away 10 to 20 percent of their content for free—via email newsletters and article summaries as a key strategy.
The economics of online publishing are also different than print. A very successful B2B subscription website (like the one referenced in Figure 1) may have 75,000 basic subscribers who get limited content, and only 5,000 to 10,000 paid subscribers who have access to full content. The basic subscribers are valuable, because some percentage will become paid subscribers and they do generate some revenue from advertising, affiliate or product marketing programs.
While this report will not attempt to cover all there is to know about successful online marketing and publishing ( browse topics for Mequoda’s comprehensive list of reports on the topic), we will share the 17 steps recommended for a successful launch of a new subscription-driven website. In the process, we’ll cover the concepts required to publish a successful website at a basic level. For example, while there are dozens of ways to market a website, this report will focus on the use of search engine advertising, also known as keyword marketing or pay-per-click marketing. We use this method in the launch phase for two reasons. Not only is it a major source for marketing your website, it is actually possible to plan, execute and analyze a search engine marketing campaign for a website that does not yet exist. This process is often called “dry testing,” because it allows a publisher to test a publishing concept without actually launching the website.
To prepare this report, we are relying on our experience of launching and re-launching more than 100 subscription websites. When comparing B2B and B2C launches, we have found them similar. A B2B launch can be somewhat easier, since the subscriber and advertiser audiences are usually easy to define and quantify. B2B websites also tend to have smaller circulations and fewer subscription sources. Nonetheless, the steps required for launching a B2B website and a B2C website remain similar.
The 17 steps have been revised and modified over time, and we can now safely say the list is comprehensive, if not exhaustive. We hope these steps make your journey into website publishing more successful, enjoyable and profitable.
Learn how to choose the best subscription pricing & single-copy pricing strategy for your subscription websites & subscription apps when you download a FREE copy of How to Use Contrast Pricing to Increase Subscription Revenue.
1. Focus Your Website Product Idea
Without a strong product concept, you have nothing. As a website publisher, you are running an information business. First and foremost, you are an information provider—marketing is secondary. So what will you provide your readers? And why are they going to want it? Get the concept down in a simple position statement of one to three sentences. If you can’t do it in 25 words or less, you probably don’t have a good idea. A tightly focused subject—for instance, “restoring 1960s Mustangs” instead of “restoring Ford cars”—is particularly important for subscription-driven websites. Your website should be targeted to a specific group of readers who share very specific information needs, and are willing to pay a premium price for that information. You must also identify your editorial competitors, both print and online. For print competitors, you should gather at least six months of back issues. Study what they’re doing and figure out how your concept will position against theirs. Remember, a great website offers its readers news and reference information, making it part periodical and part encyclopedia. It can also offer a software application that is Web-based and provide interaction between your data and personal data supplied by each user. The stock portfolio managers offered by many investor websites are just one example of a “sticky” interactive website application.
|Like many investor websites, Morningstar.com offers a Portfolio Tracker for registered users.|
2. Profile the Information Needs of Your Target Customer
Who – precisely – is going to take time out of their life for your website? Why will they need or want your website? You must be able to provide a simple and logical explanation of who wants your services. Your goal is to locate a target market focused on people who (1) have an established interest in what you’ll be writing about, (2) are proven website users and subscribers, (3) are part of either a growing or very stable audience and (4) are not adequately served by existing publications and other websites. The biggest mistake website publishers make is overestimating the number of people who will subscribe to their website – most print newsletters, for instance, never reach more than 10 percent of their potential audience and many run quite profitably with only one or two percent of the market. Niche websites are no different. In fact, a willingness to pay for print newsletters is one great indicator of demand for a subscription-driven website. At the same time, the interactive nature of the Web has created many very successful subscription websites that have no newsletter counterparts. Dating websites like Match.com and eHarmony.com generated some $450 million in 2003 and are competing with print personals and physical dating services. Many successful websites don’t compete with traditional print publishing. Still, there is always an offline competitor that must be identified to properly understand your online opportunity.
3. Prepare an In-Depth Competitive Market Analysis
Start with a Google search for the keywords your prospective customer might use to look for the information and services you plan to provide. Note carefully the paid and the free (organic) listings. If you find many paid listings on the top, right side of the search results page, it may mean that customers who want this information are willing to pay for it. It could also mean that there are online retailers, direct marketers or other non-website publishers who will be competing for your customer’s attention. You’ll want to create a comprehensive, competitive analysis to understand the marketplace you’re going to enter. Start by finding all the websites that show up on the first three pages of search results for the top 10 to 100 keywords that are associated with your topic. Explore each website and categorize their business models (see Mequoda’s Generating Website Revenue) using a computer spreadsheet. In addition to website publishers, pay close attention to vendors who give away free information and services to the customers you will jointly target.
Many of the websites you find will be run by print publishers who are also competing for your prospect’s time and money. You’ll need to understand their online and offline strategy. To discover the size of their print audience, audit reports (postal, ABC, BPA), the Statement of Ownership, Standard Rates & Data and media kits should all be scoured for circulation clues. You are looking for information on frequency, rate base, sources, sales levels, premium use, price, discounting, renewals and seasonal fluctuations. Pay particular attention to the relationship between their print magazine or newsletter and the companion website. Magazine website publishers, in particular, are just beginning to either charge for access for a solo subscription (as ConsumerReports.org has done for years) or make the website and print periodical benefits of subscribing, like Businessweek.com and SI.com. Later, these print and online media will provide the free (and paid) marketing access you’ll need to sell subscriptions to your website.
All the data we reference above is available online through their own subscription-driven websites. If you’re on a tight budget, the public library will have both the Oxbridge and SRDS directories. Your search will begin with directories that list the media we’ve mentioned, and then move on to collecting sample copies and other information the publishers can supply. New York-based Oxbridge Communications publishes annual directories of newsletters, magazines, catalogs and mailing lists. Chicago-based Standard Rate and Data Services publish monthly directories of magazines and mailing lists. On the book-publishing front, your library will have a current copy of Books in Print.
Once you know who your competition is, comb their websites, request sample copies or purchase copies of appropriate publications. In the case of magazines, request media kits in hard copy or access them online. You may very well be a future advertiser, so it will become important to understand each magazine’s advertising pricing. You’ll also find that many media kits include a wealth of data about your publication’s market—including estimates of size and purchasing power, plus readership demographics.
4. Select Your Competitive Position
Now it’s decision time. You’re looking for an opening in a market that is robust. Use a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis to evaluate the websites, print periodicals, books and service providers that will be your closest competitors. How will you be different and how sustainable is that difference?
Perhaps the best competitive position is that of the niche player. Find a small, healthy market where larger organizations won’t venture. As a rule of thumb, any business that will generate less than $5 million in annual sales is of no interest to a corporate publisher. Business units that small will not support the weight of corporate overhead imposed by larger companies. This places you on a level playing field with other entrepreneurial organizations where your star power, enthusiasm and great execution can be enough to create a profitable Web-based information business.
5. Quantify the Economics of Your Idea
We are not looking for details here, but big-picture data:
- How many paid and free members will you have?
- How much will you charge for an annual subscription?
- What other revenue sources can you depend on?
- How will you generate members and how much will they cost?
- How long will they stay members?
- How will you host your website and what will that cost?
- How many staffers and freelancers will you need to execute your vision?
This analysis should be done with numbers that represent your website in a mature, developed state—perhaps three to five years old. We’ll worry about getting there later.
Mequoda Website Publishing Model 2.0
6. Grade the Concept—Pass or Fail?
You know what’s out there, so how does your concept stack up? Is someone already doing 50 percent of your editorial idea? Or 75 percent or 80 percent? If most of your ideas already exist, you probably need to rethink everything and return to Step 1. You can use the model detailed in Step 5 to figure out approximately how much revenue competitors are bringing in. Will your concept go after that same revenue pie, displacing competitors? Will it expand the pie, bringing in additional readers? Or will it make a new pie, targeting a different group of readers and partners? Make your decision to move on to the next stage: does your concept pass or fail?
Learn how to choose the best subscription pricing & single-copy pricing strategy for your subscription websites & subscription apps when you download a FREE copy of How to Use Contrast Pricing to Increase Subscription Revenue.
7. Determine the Pre-Launch Startup Budget
You are looking to develop a website prototype and a full, professionally prepared business plan. You’ll use these to prove and fine-tune your concept before incurring the expense of building the working website and developing the real content you’ll need to fill it. You’ll also use your prototype and business plan to raise funds for the launch phase.
Start with the test phase (the next step) and determine how much money and time it will require. A complete business plan usually requires you to perform a market test, to line up key personnel, and to prepare and test a non-working website prototype with potential customers. This is all in addition to preparing the financial projections and writing the business plan itself.
Adding it all together, a small niche could be tested for as little as $100,000, with $500,000 being the average. The budget shown makes lots of assumptions about which tasks you’ll perform yourself and which you’ll outsource. Keep in mind that the intense time required might also cost you money (in lost income) if you have to leave or curtail your current employment. While 12 to 18 months is the average timeline for a website launch, we have seen successful ventures get up and running in six months. Anything less would be extremely rare and would require shortcutting many of the steps we’re recommending. For very small markets with a clear need and little or no competition, this may be the best approach.
8. Raise Test Capital
If you are an entrepreneur, financial support for detailed research and market testing usually comes from three sources: your savings, your friends’ savings or your families’ savings.
If you can internally fund from an existing business, there are two prime possibilities: your company’s cash flow or a secured bank-loan. For big ideas, you may find angel investors who are willing to fund your development. The dot-com bomb has come full circle and many companies and investors are looking for reasonable business plans that will give them online access. Keep in mind that outside investors experienced in direct marketing who are available to support your launch will look for control and big returns.
Most mid-size subscription-driven websites require modest investments when compared to magazines or other periodicals. All but the largest can be launched for $500,000 to $2,000,000. They quickly become self-funding because of their modest, fixed overhead and subscription-driven economics. While most banks won’t loan money for the initial development, they will loan money for operating capital once a track record has been established. Meet with your accountant and lawyer to discuss possible tax savings the test phase may offer individuals or companies.
9. Identify Key Personnel, Partners and Vendors
The trick: to identify the right opportunities and find the people who can make those opportunities happen—particularly for subscription-driven websites, whose only assets are its personnel and its subscriber base. If you are externally funded, your investors will pay more attention to your staff lineup than to your idea or your business plan. Look for people with a track record of doing exactly what it is you are asking them to do. An added bonus is a key management team member who wants to invest in the project.
The key functions include: editorial (the product), marketing management (the revenues), information technology (the distribution) and finance (the bottom line). Your managers must be willing to live and breathe the website during its first year or so. Their dedication and enthusiasm must be complete, but they should also be experienced in startups. And if you see a weak link, find a consultant experienced in your market.
It’s also never too early to start the search for strategic partners who can supply content, give you access to the market and build and host your website. Most website publishers, at a minimum, will outsource the market testing, website creation, website hosting and search engine optimization for their venture. More so than any other business, subscription-driven websites can operate with a very small staff and outsource specialized functions to a variety of partners and vendors.
On the marketing front, many of what may at first appear to be competitors will end up being your partners. Website publishers who serve the same market need each other to gain cost-effective access to new subscribers. Many of these relationships will be reciprocal revenue-sharing deals where you recommend and sell the other publishers products and subscriptions. Make a point of getting off on the right foot with these folks as early as possible. Don’t be annoyed if some don’t welcome you warmly right away. While some may welcome you based on reputation alone, others will wait for you to prove your commitment to the market and establish your subscriber base before they’re willing to promote your products. As the newcomer, its up to you to get the ball rolling by promoting their website, products and/or events.
10. Perform a Keyword Intercept Market Study
While qualitative, anecdotal data is useful, you may also want to get in the heads of your prospective customers where you’ll meet them in the future—on the pages of Google and Yahoo! search results. Both paid (pay-per-click) and free (organic) search are the backbone of every subscription-driven website’s new member acquisition program.
A Keyword Intercept Market Study is used to catch users who have searched using a keyword that indicates interest in your website idea. Using pay-per-click ad words, you’ll offer the searcher the chance to voice their opinions and earn a small incentive for their trouble. The survey should take less than 15 minutes and can include 50 to 60 easy-to-answer questions. Use the survey to discover who they are, what other websites and media they use and to explore the unmet needs your venture will attempt to serve. The results can be valuable in defining the website’s functionality and content. A clever survey can also gauge reaction to certain language and copy that will guide the subscription acquisition wizards in the creation of your marketing landing pages and order flows. Good survey designers, like good copywriters, are few and far between. Select a firm with experience in online survey research and subscription-driven website development.
11. Create a Functional Product Specification and Paper Prototype
A subscription-driven website offers its design team the challenge of creating an entity that includes all the functionality of an encyclopedia, newsletter and desktop software application—rolled into one easy-to-use website. Based on hours of website usability testing, we can tell you that most websites are very difficult to use. A good functional specification and well-tested paper prototype will help you produce a website that is customer-friendly—a rare thing in late 2004. It can, for the time being, be a powerful source of competitive differentiation and advantage while the rest of the world catches up.
The functional specification describes in words what the user can do on each page of your website. A wire frame is used to track where each click takes the user, or simply put, how your website pages connect. A paper prototype (see Paper Prototyping by Carolyn Snyder) and usability testing are used to fine-tune your functional spec and your wire frame before you begin spending time and money to build HTML webpages or the programs that will run them.
12. Prepare a Detailed Content Plan
Outline your editorial content for your website and email newsletters in as much detail as possible. Provide descriptions of article types and special editorial sections. Provide a brief description of enough editorial material to cover three to five months of website updates and weekly email newsletters. Make sure you have enough material to publish at your chosen frequency—weekly for most websites, daily if you have the content plan to support contacting your customers that frequently. Take your best material and prepare a non-working prototype.
Also, make it clear who will be creating the content for the website and email newsletters: how much via staff and how much via freelance. Make a few exploratory calls to well-known writers and experts. Consider adopting a board of advisors. This lends credibility to your efforts and its members may provide some very valuable advice.
Editorial content may be the blood and guts of your magazine, but its name and design are the skin that gives your backers and subscribers their first impression of your effort. Your name should portray exactly what you want, naturally drawing readers to your website. If the domain URL for the nameplate you want is taken, but not used, don’t hesitate to go after it. Domain squatters will often sell you the name for a few hundred, or a few thousand, dollars.
The design of your website must do three things. First, it must be easy to use and navigate. In some market niches, the usability of your site may be your strongest competitive advantage. People are willing to put with inconvenience when it’s the only place they can go for the information they are seeking. When all else is equal, the easiest, most intuitive site wins.
Next, it must match up to, and speak the language of, the demographics you are trying to reach. Labels, headlines, snippet copy, and links must be in user-centric language. A surprising number of websites seem to have multiple “owners” and it’s reflected in the way they organize their content. The organization of the areas of the website must be in support of user goals.
And finally, it must also set your website apart from your competitors. Navigation, typeface, layout and color are all at your disposal. However, in your effort to stand apart, be careful to not move away from standard web conventions that actually enhance your site’s usability. As much as possible, exploit your audience’s prior knowledge and the mental models they apply your topic.
13. Create and Test a Non-Working Website Prototype
Now its time to take everything you’ve learned and make it real, or at least as real as the facades in a Hollywood movie. Using your final mockup and functional spec, it’s time to build Web pages that link. Use your best content to populate the pages directly. During this stage you’ll explore the paths a user might take to do all the things they can do at your website. These paths are often called use-cases, or task scenarios, and are captured in sequence as storyboards, another term borrowed from movie-making.
Once your non-working prototype is ready, it’s time for another round of usability testing. You’ll isolate three to five tasks and let someone who fits your target customer model try to complete them without help. If significant problems are found, you may continue to iterate the process until the average user can navigate your simple website tasks with ease. Be on the lookout for confusing language and functionality that the user expects and does not find. Usability testing can make or break the success of your website.
While it is possible to do your own usability testing, it’s difficult to achieve the level of impartiality required to get honest, helpful feedback from your test users. Planning, executing and facilitating a usability study is as time consuming and difficult as conducting a full-scale marketing research study that entails surveys and focus groups. In addition, accurately interpreting results requires a good deal of background knowledge in web site best practices. This is one area where time and money spent up front saves development and, more importantly, redevelopment dollars down the road.
14. Conduct a Search Engine Marketing Test
Online subscription marketing requires you to focus on either email marketing for publishers with access to the appropriate opt-in email list, or pay-per-click (PPC) search engine marketing. While you’ll use other sources to acquire subscribers for your website, email and PPC marketing are best for new product testing because, as we mentioned earlier, they can be planned and executed as a campaign before your website exists. We’ll assume you don’t have access to an appropriate email list for the purpose of this report.
PPC testing for a startup is quite a bit different than testing for an ongoing website. A startup just doesn’t have the capital available for a huge multi-panel test. Experience must be your best guide to setting up a startup matrix. For a mid-size website that will ultimately attract thousands of subscribers, a test that generates 500 to 1,000 gross credit card orders would be about right. Ideally, this would be made up of 10 keywords broken evenly into five panels. Four panels might explore three price levels and two trial periods, while the fifth panel should test a different creative format.
Each of these tests will give you information that will help make the decision to launch and move you to profitability faster when regular publication begins. Allow two to four months lead time to plan and execute your test. It can be done faster – but haste often leads to mistakes. We’ve seen plenty of tests that were rendered unreadable by poor execution. Choose vendors that are website marketing professionals. Again, you’ll choose between managing the test in-house and outsourcing. Cost constraints and experience must be your guides.
If the results vary dramatically, compare the cost-per-order or your best combination with your economic needs. If the cost-per-order is too high for all keyword and creative combinations, it could be time to forget the idea and move on.
Keyword Marketing Test
Full Matrix Campaign Budget
15. Prepare the Final Business Plan
This is the last step of the testing phase, where all findings from the previous steps are put together in a professional, compact format, projecting the first five years of operation. It should document and expand your preliminary research, detail how your test will be interpreted to create an on-going program with multiple sources, lineup key personnel, and finalize your website prototype.
In addition, the plan should spell out revenue strategies for selling other products and services to your subscribers. How will you leverage your brand and content to create books, reports and events? If you plan to take display or directory advertising, or generate revenue as an affiliate for other websites, detail the revenue model and potential participants. Don’t forget to explain how you will staff and manage these ancillary programs.
Once you have a detailed financial model, check your estimates from Step 5 with your new “real” projections. Any major discrepancies should be fully investigated. Keep in mind that the intense time required might also cost you money in lost income if you have to reassign current personnel. Again, a competent professional can be retained to prepare the business plan for you.
16. Raise Launch Capital
You are now entering the actual launch phase. Your tests point to a valuable product. Now you just need to convince those with the big bucks to back you for the first three to five years. To make this kind of sale, you have to be a publisher. As far as you’re concerned, this product does exist. You just have to get it to its subscribers.
Remember, a supportive attitude and solid experience in your investors is the thing that lets you sleep at night. While sources of earlier testing money may also be sources of launch capital, you will undoubtedly have to add others. Formal investors, such as general venture capitalists, usually aren’t the best source. In fact, they pointedly stay away from direct marketing; most don’t know anything about the peculiarities of the industry, and the incredible array of cost and revenue streams boggles their minds.
Other media companies are usually the best place to start. In fact, they may have been interested in a product similar to yours, but hadn’t found that perfect person with your energy and dedication. If your idea is a good one, they would be silly to “steal” it. People are the key to this business, not ideas.
17. Execute Your Business Plan and Let it Go
Remember, nothing is written in stone. Both your business plan and website should be allowed to evolve as you and your team gather data and experience. Be constantly on the lookout for better ways to run your business and new ways to sell subscriptions and ancillary product opportunities. As the market changes, make sure your editorial and functionality changes with it, or in front of it. Your editor should implement an ongoing research program that includes one-on-one reader contact and statistical research. Your website, like any successful business, should be allowed to take on a life of its own.
A feeling of excitement and enthusiasm has undoubtedly been building since the early part of the test phase. Don’t let the details or problems of the launch decrease that level of enthusiasm, both outside and inside your office. Unless you have deep pockets, gaining outside media attention usually requires imagination to get the most for your limited promotion dollars. Your goal is to simply and clearly get the message out about who you are and what benefits subscribers will gain from your website. You want to create a sense of community with your subscribers, partners, staff and investors.
A final word about your staff: remember that they are just people. Not only must their dedication and talent be tops, but their attitudes must be unerringly positive. Laughter and camaraderie, as any military veteran will tell you, is as important to winning a battle as strategy and tactics.
Don’t try to control every single aspect of your website—especially the content. For a startup, what makes a website special and good and true for its readers is that there is an editor who is focused solely on those readers and isn’t worried about other business considerations. The Internet also offers unprecedented opportunities for the subscribers to contribute content, which is the ultimate form of reader involvement.
Let the product be what its subscribers want it to be.
References and Resources