As my GigaOM colleague Laura Owen notes in her post on the announcement, Sullivan has been hosting an ongoing discussion on his blog about the changing economics of content, including the influence of tablets and the decline of traditional models based on advertising revenue (we are going to be talking with Sullivan about these and other topics — including his latest move — at our paidContent Live media conference in New York on April 17). And his former employer has been a perfect symbol of the kind of destruction these forces can create, having just shut down Newsweek magazine, which the Beast merged with two years ago.

In his blog post announcing the move, Sullivan makes it clear that his decision is about more than just his own welfare: he said he is trying to prove that a new-media model based on direct reader funding — something he tried for several years before allying himself with Time and then The Atlantic — can work for others as well:

“If this model works, we’ll have proof of principle that a small group of writers and editors can be paid directly by readers, and that an independent site, if tended to diligently, can grow an audience large enough to sustain it indefinitely.”

Can Sullivan survive on reader subscriptions alone?

In a sense, this is the same kind of transition the New York Times and other media entities are trying to engineer, where reader subscriptions become the primary method of monetization rather than advertising. But while the NYT has been having some success in that department, the jury is still out on whether that model will work for others — or whether, as the authors of the recent Tow Center report on “post-industrial journalism” argued, the Times is such a unique proposition that it can’t be imitated by more than a select few (and at least one observer has said that Sullivan himself is the blogging equivalent of this problem).

The state of journalism as described by the Tow authors — media theorist Clay Shirky, journalism professor Chris Anderson and Tow Center head Emily Bell — is a landscape where the major media entities in virtually every field are being disrupted and unbundled, and where smaller players targeted at specific niches stand the best odds of success. It’s an almost Darwinian view of the industry, with slow-moving giants who are gradually replaced by more nimble and flexible species. And it’s also a more personal and human-sized approach, one that Sullivan clearly sympathizes with:

“We believe in a bottom-up Internet, which allows a thousand flowers to bloom, rather than a corporate-dominated web where the promise of a free space becomes co-opted by large and powerful institutions and intrusive advertising algorithms.”

The model Sullivan is banking on — which features a $19.99-per-year subscription, free incoming links from blogs and social media, as well as a “pay whatever you want” donation option — is similar in many ways to the freemium or membership models other sites have staked their future on, including Mike Masnick’s tech-opinion and analysis site Techdirt and Josh Marshall’s political news and opinion network Talking Points Memo. But while those sites are offering extra features for members (such as member-only discussion forums and access to extra content, etc.) Sullivan says non-paying readers who merely follow links to his content will get exactly the same thing paying readers do.

Do paywalls work better when they are for individuals?

In other words, Sullivan is betting that his personal brand and goodwill with his readers is enough to convince a substantial proportion of them to fund his writing — a more sophisticated version of the “tip jar” model. And within minutes of his announcement, dozens of prominent Twitter users and other Sullivan fans had announced that they had already signed up. As Laura Owen notes in her post, this could have a potential impact on The Daily Beast’s attempts to launch its own subscription model: what proportion of its readers would rather donate directly to support an individual writer, rather than have a blanket paywall around all the magazine’s content?

In a sense, Sullivan’s approach — if it works — poses a potential threat to traditional media entities that have built their businesses on strong personal brands: there has already been speculation that statistics superstar Nate Silver of the 538 blog might quit the New York Times to go it alone, and other name-brands at that newspaper and others might decide to take a similar route. Just as a growing number of authors have been cutting out the middleman by self-publishing their books, a membership model could mean independence for columnists who have traditionally been shackled to a large media entity (although some skeptics believe Sullivan’s move is more about self-interest than about a principle).

Even that model contains its own problems, however. How many individually paywalled or subscription-based sites will readers want to sign up for? Every Sullivan-like success story could make it increasingly difficult for others to follow in his footsteps. But for now at least, the Daily Dish blogger’s move is a very prominent thumb in the eye for traditional media players — and a flag of hope for every writer who has dreamed of building his own mini media empire.

Post and thumbnail images courtesy of Shutterstock/Africa Studio and Flickr user jphilipg

So what should the new editor do to try and right the ship? Put up a paywall like everyone else? Lay off a few hundred more staff to try and cut costs? Buy something shiny that can give the Post some online credibility? Here are a few things I think Baron needs to do if he is to avoid disaster:

Figure out what the Post wants to be

This is probably the hardest question that Baron, the former editor of the Boston Globe, is going to face — next to the ever-present paywall one, of course. As media blogger Erik Wemple notes in one of his columns about the paper (which he writes for), the Post has literally spent years debating whether it should be a regional paper for Washington and the surrounding area, or whether it should try to challenge the New York Times for the national and international market.

There are arguments to be made for both: the Post is to some extent hamstrung by its past glories, including the famous Watergate scandal, and can’t seem to give up the idea that it is a national or even global player. And perhaps it shouldn’t. But the reality is that there’s probably a far better business opportunity — advertising-wise, at least — in focusing on serving local readers rather than trying to match the NYT for national and foreign reporting. The point is that the Post has to pick one, and dive headlong into that market, rather than trying to do both at the same time, because that road leads to perdition.

Commit to the anti-paywall strategy

Publisher Katharine Weymouth and CEO Don Graham have both talked openly about how they don’t believe a paywall will serve the paper or its readers, for a number of reasons — primarily because they appear to believe (as I do) that the benefits of remaining open and free outweigh the short-term financial benefits of putting up a paywall. But it’s not enough to just make the occasional comment about how this seems like a good idea: if the Post is going to get its staff on board, it needs to be shouting this philosophy from the rooftops in the same evangelical way that Guardian editor Alan Rusbridger does.

The reality is that the Post looks like the odd man out when it comes to paywalls, and the consensus that seems to be emerging — pushed by the Columbia Journalism Review, among others — is that it is going to fail because it is fiddling while Rome burns. If Graham and Weymouth believe that this isn’t the case, then they need to embrace the idea of open journalism as much as The Guardian has and double down on that strategy: release an open API, make videos about their passion for openness, launch some ambitious crowdsourcing projects, etc.

One thing the Post could do is to try and build a membership-based or “reverse paywall” approach, the kind that was suggested by its former managing editor Raju Narisetti (now at the WSJ).

Push the innovation meter to eleven

It doesn’t get written about that much, but the Washington Post is probably one of the most innovative large newspapers out there, thanks in part to Don Graham’s embrace of social platforms such as Facebook (where he was an early advisor to CEO Mark Zuckerberg) and its willingness to experiment with new ventures such as Trove — the recommendation engine that it built on top of an acquisition, and uses to fuel its “frictionless sharing” app on Facebook and other enhancements to its web and app versions. That needs to become a much bigger part of what the Post does, not some side project for nerds.

The same goes for Social Code, the advertising and marketing operation that is run by Graham’s daughter, Laura O’Shaughnessy, and designs campaigns for Facebook and other social platforms based on an understanding of how content works on those services. That kind of DNA needs to be spliced into what the Post does online with its news as well. Whether it’s an advertising message or a news story, content lives and dies according to the same principles now, and Baron has to understand that and get his newspaper to understand it. The problem is that no one at the paper is going to see this as being as important as a beefed-up foreign bureau.

Make “digital first” a core mandate

It’s easy to forget, but The Washington Post at one time was at the forefront of online innovation, back when simply having a usable and frequently-updated website qualified as innovation — and in part that was because the online unit of the paper was a completely separate operation, based in a different building, with a mandate to do whatever it took to succeed at being digital. That’s the kind of model that disruption expert Clay Christensen has argued makes the most sense for newspapers, and it was one that worked surprisingly well for the Post for a long time.

Unfortunately, a lot of that innovative spirit and drive seemed to get watered down when the paper decided to merge the online unit and the paper unit — something former and current Post staffers saw as a victory for the “printies” who wanted to focus resources on the paper, rather than making digital a core value. That looked like not a bad strategy when the Post‘s Kaplan education arm was producing truck-loads of cash to fund the paper, but that’s not the case any more. Digital is the only road to salvation, and Marty Baron had better send that message to the troops.

All of this advice depends, of course, on Baron being a) interested in changing the Post, b) aware of the value and necessity of doing so and c) capable of following through. Whether any or all of those things are true remains to be seen. But time is running out.

Post and thumbnail images courtesy of Flickr users Zert Sonstige and Giuseppe Bognanni

Reddit’s relatively new CEO, former Facebook engineer Yishan Wong, posted about the site’s needs on the Reddit blog on Thursday, saying the growth of the community — thanks in part to the success of its Ask Me Anything discussions with celebrities and newsmakers like President Barack Obama — has led to higher costs for servers and other infrastructure needs, and that Reddit doesn’t want to have to resort to boosting the number of ads it carries on the site. As he described it in his post:

“In October 2012 alone we were up to over 3.8B pageviews and more than 46 million unique visitors. Our server costs also continue to grow, so we have a choice to make: we can start running a bunch more ads, or we can give you, the community, more reasons to support the site with your own money through reddit gold.”

Advertising ruins the experience

Reddit Gold has actually been around since 2010: the site launched it as an attempt to keep up with costs when it was still a subsidiary of Conde Nast (it has since been spun off as a separate entity, although Conde still controls it), and at that time it had less than 300 million pageviews. Now it has over 10 times that amount. In a thread on Reddit, the CEO said that a lot of users seem to assume the site’s success and growth mean that it is profitable, but it is not — and Wong said he didn’t want to boost the amount of advertising because it would ruin the user experience:

“The problem is that if your site is funded primarily with advertising, then you are beholden to your advertisers. If your users choose to post something politically or culturally controversial, you come under editorial pressure from advertisers to remove or modify it, because advertisers like bland, well-lit spaces. This eventually results in a watering down of the true, authentic content on the site [and] personally, I feel that’s not the best way to serve the community.”

In the Reddit discussion, Wong also says that this attempt to woo advertisers was one of the reasons that Digg failed. Although that was arguably just one part of the site’s downfall, the Reddit CEO is right about one thing: those kinds of decisions, along with other design-related moves that Digg made, arguably poisoned the site’s relationship with its community to the point where many core users left — in many cases for Reddit — and the site’s long slide into irrelevance began (the name and other assets were bought earlier this year by Betaworks and later relaunched).

Strengthening the relationship with your community

The necessity of a strong relationship with a community is most obvious with sites like Reddit and other services that rely on user-generated content, including Fark — which has a membership model called TotalFark — and Metafilter. Some hybrid news and commentary sites such as Techdirt and Talking Points Memo have also launched similar attempts at community fundraising that are based on membership benefits rather than a paywall: both Techdirt and TPM, for example, offer members access to discussion groups and forums that non-paying readers don’t have access to.

For Reddit, the membership layer includes a discussion forum, a way to turn off advertising (a feature I think more newspapers and other media companies should experiment with), and something called “gilding,” which allows members to give Reddit Gold or credits to other users who have posted comments that they like. Whether this results in the kind of gaming that other reward-based systems have encountered — including one that Gawker Media experimented with before revamping its comment system — remains to be seen.

There’s no question that being a community already gives Reddit a better chance of success with this kind of thing, but it is a model that I think more media companies could implement as well, instead of just putting up a blanket paywall around all of their content. This is the idea behind what Wall Street Journal managing editor Raju Narisetti and author Jeff Jarvis have both called a “reverse paywall” — which provides benefits to loyal users and readers instead of charging them — and it seems like a much better fit if what you want to do is build a relationship with your community.

It’s also worth pointing out that the way Wong responded to the ongoing discussion about Reddit’s plan in the thread on the site also shows a kind of openness that more CEOs would do well to imitate.

Post and thumbnail images courtesy of Flickr user Christian Scholz

Ryan Chittum’s piece in the CJR takes issue with a recent Washington Post story on Facebook for a number of reasons, including the fact that he doesn’t think the paper really understands the social network or its finances. But he also finds it ironic that the newspaper — one of the few major metropolitan media outlets that hasn’t implemented a paywall, primarily because of chairman Donald Graham’s opposition to the idea — is castigating Facebook for pinning all its hopes on a free platform that is monetized by advertising, when that’s exactly the same model that the Washington Post is built on (Chittum recently catalogued some of the Post’s financial woes in a separate piece for the Columbia Journalism Review). As he puts it:

There’s all kinds of irony about the Washington Post slapping a company for a ‘give-it-away-free approach’ that has hurt share prices… But mostly it’s that the WaPo, instead of looking in the mirror, uses an extremely profitable company to frame a story about how hard it is to make money without charging on the Internet.

Does a paywall help you get to know your readers?

As Chittum notes, Facebook is currently making billions of dollars in advertising revenue (although that still isn’t enough to make many investors happy, considering the fact that the company has close to a billion users, and the social network continues to struggle with low engagement rates for its ads and skepticism on the part of advertisers). But why is Facebook profiting from this kind of model while newspapers like the Washington Post and New York Times continue to see ad revenues decline? One big reason, apart from the sheer size of the Facebook user base, is that users spend orders of magnitude more time on Facebook than they do at the average newspaper website or even with the average newspaper mobile app.

In a recent post about the news industry and metrics around journalism, media developer Stijn Debrouwere made a good point about how the media business tends to look at its users, by comparing it to the early days of both Twitter and Facebook. As he describes it, in the early days of Twitter the company was concerned about how few users they had, while Facebook paid more attention to the amount of time and the levels of engagement it was getting from its users, rather than the sheer number. The lesson to be learned, Debrouwere says, is that:

“Optimizing for retention is what allowed Facebook to become what it is today. The news industry is like early Twitter when we should be like early Facebook.”

So how do you optimize for retention? I’ve argued in the past that simply throwing up a paywall around all (or even most) of your content is no way to encourage a relationship with your readers, unless you want them to see you as simply an impersonal transaction. Instead, why not try to figure out what your readers or users are really interested in and then find a way to give it to them in a way that is appealing to them — so appealing that they might even volunteer to pay for it? This is the idea behind what former Washington Post managing editor Raju Narisetti and media analyst Jeff Jarvis have both called a “reverse paywall.” Instead of just hitting readers with a “pay me or else” notice, you offer them rewards — doesn’t that sound like a better foundation for a relationship?

Get to know them, and then sell them things

In a post at the Nieman Journalism Lab about the New York Times, digital-content veteran Rex Sorgatz outlines some of the things that the newspaper could do to build more of a membership approach — or what I’ve called a “velvet rope” approach — to its business rather than relying solely on the blunt instrument of a paywall. Whether it’s ebooks or live events or discounts on venues like the Museum of Modern Art, there are all kinds of ways the paper could get to know its readers and what they like, and then find ways of charging them for it. Newspapers like the Times of London are already doing this, and The Guardian seems to be moving in that direction as well (and we know that the NYT has looked into it before as well).

The best part of this model is that it doesn’t just try to replace advertising revenue with a paywall or subscription revenue — getting to know your readers and their interests better can also help a newspaper or any other media entity target advertising better. One of the reasons why advertisers are so enamored of Facebook and other social networks is that they can target specific niche groups or demographics or locations within the broader market, like expectant mothers or high-spending seniors. What do newspapers know about their readers? In most cases, very little, other than the vague generalities that phone surveys produce.

The sooner newspapers start to think about their users as partners with whom they have a mutually beneficial relationship — rather than as an undifferentiated mass of wallets who hit the paywall at some random moment and then get out their credit cards — the better off they will be.

Post and thumbnail images courtesy of Flickr users Montecruz Foto and Giuseppe Bognnani

Longreads offers membership for $3 per month or $30 per year and until now the only perk has been the good feeling that comes from supporting the site. In addition to exclusive content, members will “have the chance to recommend future Longreads Member exclusives. Tell us what you want to share with your fellow members (it can be a story, an excerpt, or something completely different), and if we like it too, we’ll find it and feature both you and your pick.”

“Our paid membership is still relatively small compared to the size of our overall community,” Longreads founder Mark Armstrong — who is also the editorial director of read-it-later service Pocket — told me, “but it’s grown enough over the past year that we wanted to start sending more perks to our members as a thank-you.”

The first exclusive is chapter six from Charles Duhigg’s bestselling book The Power of Habit. Longreads is licensing the chapter from Duhigg’s publisher, Random House, and will license future exclusives as well.

Other websites are also experimenting with content perks for paying members. My colleague Mathew Ingram recently wrote about tech commentary site Techdirt, which gives paying readers early access to blog posts, as well as other membership benefits.

The site, which is run by founder Mike Masnick through a company called Floor 64 (Full disclosure: I consider Masnick a friend) has had an online store for some time now where readers and fans could come and buy the usual type of swag many publishers offer, including e-books based on the site’s coverage. But the store has now been updated with some new features, including the ability to buy lunch with Masnick (for $250) and to do a Google Hangout with him.

There’s also a couple of humorous offerings aimed at critics of the site — including one that allows the buyer to shut the site down completely for 24 hours, for only $1 million (shutting it for a year will cost you $100 million).

Techdirt has also expanded an interesting offering called Crystal Ball: originally launched in 2009, it gives readers who sign up for a specific level of membership access to blog posts before they are published. The new version expands the amount of time they have to read — and even comment on — these posts, to two hours instead of one. And readers who pay can now see posts that are in draft mode, before they even reach the stage where they are ready to be published. Do many readers sign up for this feature? Masnick says there have been about a thousand since it was first offered, which isn’t huge but is still noteworthy.

I criticized a similar idea that Felix Salmon of Reuters came up with earlier this year, which was that the New York Times should charge hedge funds for early access to market-moving news stories — but the crucial difference is that Techdirt provides almost exclusively commentary and analysis, not breaking news. So why couldn’t the NYT take a page from Techdirt’s playbook and offer expanded access to things from writers like Nick Kristof or Paul Krugman? I think there could be a pretty big market for membership-level access to that kind of thing, and the NYT has already moved in that direction by offering enhanced commenting features to members.

Members get credits for voting on comments

Techdirt also launched a new commenting feature for paying members: called “First Word/Last Word,” it allows members to acquire credits with which they can vote up comments that they think are worthwhile and vote down those they don’t. Reinventing comments is something plenty of publishers are trying to do, including Gawker publisher Nick Denton — who tried a membership-based voting model and then more recently abandoned it for something he hopes will turn the site upside down and make comments the most important part of the content, as opposed to the posts from writers and editors.

As Masnick notes in a blog post announcing the new offerings, the site is trying to follow the advice that it often gives to musicians and other artists (copyright and the death of traditional content business models being one of the site’s favorite topics). That advice is to connect with fans, and then give them a reason to buy — so instead of relying on CD sales or record deals, Masnick advises artists to take an approach like independent musician Amanda Palmer did recently, in which she Kickstarter-funded a new album and tour with a campaign that raised over $1 million in a matter of days.

In a lot of ways, what Masnick is offering readers is a similar kind of model, but without the help of Kickstarter. It’s the complete opposite of the approach most traditional media companies take, which is to charge their readers a blanket fee for their content, regardless of what that reader might be interested in. Some publications take a membership-style approach, including magazines like the Economist, and The Guardian — which is adamantly opposed to paywalls — has been experimenting with offering certain features for pay, such as a new “freemium” approach to photos as my paidContent colleague Robert Andrews described in a recent post.

The new CEO of the New York Times may not want to offer Google Hangouts to readers any time soon, but I think there is a lot of value in treating your readers like members of a fan club rather than just a homogenized sea of faceless readers whose only option is to pay a monthly fee. Offerings like Techdirt’s may not generate billions in revenue, but they help to cement the bond between a content producer and his or her fan base — and that can be a very valuable thing indeed.

Post and thumbnail images courtesy of Flickr users Montecruz Foto and Giuseppe Bognanni

As traditional media revenues continue to fall off a cliff thanks to the precipitous decline in print advertising, there seems to be a desire on the part of media companies to somehow find a single solution that will magically cure this problem — hence the increasing popularity of paywalls. But as media industry analyst Ken Doctor points out in a recent post at the Nieman Journalism Lab, it is far more likely that success for media entities of all kinds will come by making smaller bets on a number of different things. The big problem for the industry’s traditional players is that they have spent decades getting good at doing one thing. But now not as many people want that thing, and experimentation and rapid innovation is not in the media companies’ DNA.

Doctor says that after years of hoping the rise of the Web and digital media would not decimate the industry, followed closely by the hope that digital ad revenue would somehow arrive and close the gap, print executives are finally starting to understand that both of these hopes are futile:

Until recently, the holy grail was summed up in two words: replacement revenue. Now the jig’s up. No matter how fast you shovel digital dirt into the chasm of print loss, you can’t recreate the past; you can’t fill the hole.

Stack those digital dimes as fast as you can

John Paton, the CEO of Media News Group and a leading advocate of the “digital first” approach for newspapers, has said that the only possible response to the problem of digital dimes’ not making up for the loss of print dollars is to “stack those digital dimes” as fast as possible. In other words, accumulate as much as possible from as many sources as possible (while also reducing costs to try to stem the bleeding). In his Nieman post, Doctor notes that Meinolf Ellers, the managing director of German multimedia agency dpa-infocom, made a similar point at a recent conference of news executives:

What we all see — newspaper publisher or news agency — is that the bundle is eroding, losing its power. The more we see the bundle losing market share and reaching the end of its lifecycle, the more we have to work on smaller, fragmented products that, not each by each, but overall, can compensate. That’s the strategy.

This reminds me of a phrase that David Weinberger, a fellow at Harvard’s Berkman Center for the Internet and Society and co-author of the book The Cluetrain Manifesto, came up with to describe how the Web works: He called it “small pieces, loosely joined.” One of the things I took from this is the idea that the Web allows for individuals and small groups or entities to have almost as much power as — and in some cases more power than — established players. The barriers to entry, and the barriers to discovery, are so much lower now, thanks to the Web’s “democratization of distribution.”

We have seen the impact of exactly that phenomenon in the media industry in spades over the past few years, with the rise of digital-first entities such as the Huffington Post, TMZ, Politico and others, as well as the rise of individual media sources’ using social tools to become the equivalent of media entities in their own right or hybrids such as Andy Carvin of NPR and his one-man Twitter newswire model.

What will readers pay for other than just a paywall?

In his discussion of what media outlets can do to make a number of smaller bets instead of one or two big ones, Doctor refers to a number of things, including “in-sourcing” — using printing presses and distribution chains to provide services to others who need those skills — as well as providing marketing services outside the traditional newsprint platform. These are also things that Paton has focused on while trying to remake the Journal-Register Co., a chain of papers he took over after it emerged from bankruptcy.

But the things that really interest me are the ones that fit the kind of “velvet rope” model I have argued for as an alternative to a hard paywall around content: the ones that encourage a kind of membership approach, where new features or ways of packaging content or experiences related to that content are offered to readers. So live events, for example, which both the Texas Tribune and the Atlantic have been using to their advantage, or e-books, which are a different way of packaging content, can be remarkably profitable, even if that content has already appeared on the Web for free.

Unfortunately, many traditional media companies simply don’t have the kind of culture that allows for random experimentation or rapid iteration and prototyping: in other words, a startup culture. Some papers such as the New York Times have a skunkworks or research lab, and others such as the Washington Post have experimented with new features such as the Trove recommendation engine or the Facebook social reader. But many of these still feel like afterthoughts or side projects rather than a coordinated plan of attack on multiple fronts. The ones that are trying the hardest always seem to be the digital natives, or the ones with the gun to their head.

Post and thumbnail images courtesy of Flickr user See-ming Lee