Screen Shot 2013-03-27 at 9.28.39 PMI’ve already shared my vision for a (consumer) media landscape divided down the middle. On one side will be the linkbaiters, the SEO-ers, the aggregators and the slideshow-ers: all free, all supported by ads. On the other side will be the publishers, the journalists, the writers: all paywalled, all the time. Both sides will happily coexist, trading content for traffic.

It took them a while but finally it seems like major news organisations have realised that I’m (always) right. In the past few days, everyone from the Washington Post to the San Francisco Chronicle (via The Sun, The Telegraph and Andrew Sullivan) has announced plans either to erect a paywall for the first time or to raise the height of their existing wall.

There’s just one problem: most of those publishers have opted for, or apparently plan to opt for, a “porous paywall” — journalism’s equivalent of the “freemium” model.

[An important note: everything I know about the economics of journalism is limited to the consumer market. I know absolutely dick-all about the economics of trade pubs like PandoDaily, Variety or Sheep!]

In George London’s wonderful essay “You’re Doing Fremium Wrong,” London points out the logical flaw in companies giving away their core product for free while charging “power users” for extra features…

“…in many freemium startups, the free product is the real product and the “pro” product is just a bunch of random tacked-on features that might appeal to power users. Instead, startups should remember that the premium product is the real product, and the free version is just a conduit to make people aware that paying money will actually solve their problem.”

This is the same mistake being made by the porous paywall crowd: allowing the vast majority of their regular visitors to read their content for free, then charging power users (power readers?) for reading more than, say, a dozen articles a month.

In huge organizations like News Corp and the Washington Post, this fear of locking out readers is understandable, especially after the failure of walled gardens like The Daily. Limiting access to a property with millions of existing readers is always going to be a tough decision: will the subscription revenue make up for the loss of advertising, and the drop in visibility? My gut tells me that some newspapers (the Telegraph, the Washington Post) will decide that, yes, a smaller, paying audience is a sacrifice worth making to keep being able to do serious reporting — and will keep building their walls higher and higher. Others meanwhile (the Sun, the Chronicle) will continue to choose pageviews over paywalls and will ever return to free, or go out of business. Or both.

For startups, however, there’s no need to wait and see.

Porous paywalls for journalism make as much sense as a coffee shop giving free lattes to anyone who comes in just twice a week but then charging fifty dollars a cup on the third visit. That’s a hell of a loyalty scheme, and a great way to encourage people to settle for just a couple of free cups of coffee rather than drinking more and having to pay. Andrew Sullivan seems to have realised this as he’s just lowered the number of free “read more”s his visitors get before hitting his paywall. Keep reducing, Andrew. When you get that free content down to somewhere around zero you’ll have nailed it.

At NSFWCORP, we offer no — zero — free articles on our front page. Our entire archive is locked down too, as our our ebooks and our extra features. You can see titles and a brief summary, but that’s it.

In the couple of months after we launched, that strategy had brought us 3,000 paying subscribers, each paying $3 a month. In other words, is was a success.

But then, around November of last year, I got nervous. Subscriptions were still growing, but I had no way of knowing how many readers and subscribers we were missing out on by not being more visible. Maybe everyone else was right: maybe a porous paywall was the answer.

So, for three months, we lowered the wall. Suddenly the vast majority of articles were available to the world, but power users could still opt to pay the $3 a month to see everything, and for features like the ability to eavesdrop on our editorial discussions.

Guess what? Subscriptions flatlined. Flat. Lined. Not many people cancelled, but the number of new subscribers dropped to barely double digits a week.

But, yes, our traffic skyrocketed. Went through the goddamn roof. The world and his dog was reading NSFWCORP: but neither man, nor dog was paying a dime. And, because we didn’t want to play the SEO game or start writing about Justin Bieber, we stayed below the 2-3m unique visitor level that Bryan Goldberg argues is needed to create a serious advertising business. The worst of both worlds.

A couple of weeks ago, we ended our dumb, cowardly “freemium” experiment. With the announcement of our new Print Edition, we also announced the return of paywall. In fact there would now be two paywalls: a digital-only paywall for $3 a month and a print + digital paywall for $7.

The result: our subscriber count immediately started rocketing up again with our total subscriber base back growing by around 10% a week. Which is ridiculous. More ridiculous still is the fact that over 50% of those new subscribers are opting for the highest priced subscription level. And the people who cancelled? They’re coming back.

But what about those “super users” — the small but steady steam of readers who would gladly pay even more than just a subscription fee, either because they like what we’re doing, or just out of a general desire to support the future of journalism (with jokes)?

Last night we launched something just for them. And the results have been pretty damn remarkable.

We’ve called it Conflict Tower: a virtual skyscraper housing everyone who has paid us more than a standard monthly subscription. Investors, supporters, power-users… anyone.

As a journalistic organisation, we’re ethically obliged to disclose those (potential) financial conflicts of interest, so we figured we might as well turn that disclosure into something fun, and profitable.

On the top floor of the Tower you’ll find cartoon representations of all our investors — including full disclosure of how much they invested. Below that, are 97 more floors of rooms, available to anyone who wants one. Rooms start at $3, and increase in $3 increments, right up to the most expensive: $1452 for a place on the 97th floor (update: sold!)

Everyone who buys a room (even if it’s just for $3) gets a lifetime subscription to NSFWCORP in print and digital, their picture on the front of the Tower (clickable to show a longer profile, including the amount they paid us) plus five extra copies of our ultra collectable print edition. We’re also planning a calendar of Conflict-only events around the world.

Honestly, when we set the Tower live at 7pm last night, I had no idea if we’d sell more than a few $3 – $12 rooms to our hardcore fans. But nothing ventured, nothing gained, right? Anything we can do to avoid having to raise any more money from venture capitalists (God love ‘em) can only be a good thing.

We sold our first unit (to an existing subscriber who spotted a link in the footer) in less than three minutes; barely enough time to complete the payment flow. Within five hours we’d completely sold out the first ten floors. At around 1am the next morning we sold our first $1000+ room. (I actually yelped out loud when that happened, like a small dog.)

In the 24 hours since launching the tower, we’ve sold nearly $20,000 in rooms — and the rate of sales shows no signs of slowing. Some people are even buying multiple rooms.

What’s really surprising is how many first time visitors are buying rooms, just to show their support for independent journalism (of course, those people immediately become lifetime subscribers too). It takes a lot to make our cynical team feel humble, but so many people showing that level of support for NSFWCORP has reduced us all to blubbering piles of gratitude. If we sell out the Tower (which is actually starting to look like a possibility) it’ll bring in a little over $350,000 in revenue. Which means we won’t have to raise another dime unless we choose to.

There are four big takeaways from all this:

One. Subscribers are the lifeblood of any serious journalism startup hoping to succeed in the consumer market. Strict paywalls are by far the best way to reward those subscribers for their support and to encourage non-subscribers to take the leap.

Two. Even with a strict paywall, there are a number of things publishers can do to keep their content visible to the outside world. For example, we allow subscribers to create 48-hour temporary links for articles they want to share with friends — but that sharing power always stays in the hands of paying subscribers.

Three. Power users are your most important ambassadors and can be your biggest financial supporters. Offering them something special — a lifetime subscription, special events, public acknowledgement of their support — in return for their support is the perfect way to encourage and reward that behavior without alienating regular subscribers. (And apparently, if you do it right, you can even turn non users into power users right from the start.)

Four: Conflict Tower and subscriber-driven sharing are our solutions to the challenges of paying for journalism in the Internet era. You might be able to think of something far smarter. But surely we can all agree that porous paywalls which reward casual browsers while punishing fans can’t possibly be the right answer to anything.

Right?

Right.