Apple, Facebook and Tick-Through Revenue in the Post-PC World

App-stores have broken the online payments psychology. Where free apps once lead the charge, commercial apps are finishing it. Users now expect to pay and crucially, want to pay for a higher quality experience. With a few notable exceptions, free apps are bombing whereas, apps which charge a reasonable price are flying high. They are the keepers.

iPhone App Store. Apple don’t provide number of downloads per app. However I have taken number of ratings given as an indicator of user interest. Comparing the top ten paid apps and top ten free apps on this basis is interesting.

That’s in the app-space but it can surely only be a matter of time before the same trend crosses over into the content and news space. Meanwhile, as content publishers are bleeding money the free web remains a big problem for the publishing business. Undoubtedly, for those who know how to exploit it, it is becoming an opportunity. But exploiting the opportunity will mean knowing how to generate not click-through but tick-through (transaction click-through - e.g. a transaction occurring as soon as a link is clicked, or one quick acknowledgement click after).

The App Store has shown, once there is a sizeable community able to pay for access to content and a system supporting micro-transactions, the user will pay. Micro-payments have, of course, been a solution sought for so long, now they are actually starting to happen the phrase has gone out of fashion. The secret to the new content marketing strategies will be, like for native-apps, to make the charge low-enough and the quality of the experience high enough. And that of course, is the major hole that can now be plugged by the confluence of web, tablet, app and HTML5. The opportunity for the incumbent old media content business is to leverage scale to increase production value beyond that which the smaller player can hope to achieve.

Of course, just as there has always been academic research, and so too there has always been a sophisticated early adopter audience happily and diligently curating their own news through twitter and who will want little else. But the commerce-repellant power of free content via self-curation through self-configured “friends” feeds is, IMHO, greatly overstated. Personal social news feeds will remain hugely important and will of course continue to provide a very important channel into free content but early adopters are by nature more analytical, thoughtful and dynamic than the majority. Much of the rest of the world wants simply to hang-out online with friends and get a bit of entertainment after work and for these users tick-through will naturally become an important portion of consumption.

As Zuckerberg already knows, there is value in exclusivity and once content is available behind an easy micropayment, many many friends will be all too eager to cough-up just to be in the know, stay in the club and share the super-produced experience. Whoever can deliver content, engage and entertain the audience, will succeed. The holly grail will be to establish a brand with sufficient pull and low-enough prices the user will tick-through, along with the community of friends, as easily as sending a text. The adroit marketeer will lead regular tickers to ultra-easy to join subscription packages. We can expect to see many new high-production value content properties emerge, supplementing free to access content with highly produced lead-ins to the paid for content.

Of course, a potential tick-through payments facilitator with enough stored-energy to dwarf even iTunes in this brave new world is Facebook. Indeed, stopping Facebook is, in my view, the primary driver behind the structure of Apple’s 30% content revenue cut. All the time Apple are king of the micro-payment facilitator hill, they can’t be ignored and the universal price requirement means they can’t be under-cut.

Currently the big four facilitators are:

1. Apple (via iTunes) the current doing-it-for-real king
2. Amazon, also doing it for real but not yet as a subscriptions micro-payment solution
3. Facebook, huge, huge, huge potential but not yet with enough data on plastic
4. Google (via Android App-store) - shouldering their way into the party but still the new boy

And there are some outside bets as well:

1. Microsoft xBox Live - transformation and broadening of brand positioning a certainty methinks
2. Twitter - If only they can figure out how to get the data off your plastic
3. Netflix - Making a head-start with original, high production value content - a key emerging strategy, with a sniff of a chance of becoming a universal facilitator

In my judgement the most important sources of tick-through generation (and I’m willing to bet increasingly, in the content business, little else will count) are in order of importance:

1. Social site referral
• Facebook
• Twitter
2. Curated content hub
• News
• e.g. Huffington post
• Traditional news media on the web
• Social curated
• OTT TV
3. Web search
• Google
• Bing

I have put web-search in third place and don’t include advertising at all due to a combination of fact and logic. Social is now top in hits. Search implies people have something to find, but as old style web-time gets transformed further into entertainment and social time we used to spend exclusively in front of the TV and with friends, the known “branded content” hub will become increasingly the site of first recourse. From the tick-through standpoint, content hubs will triumph (poor Yahoo! getting on the party-boat departing 13 years before the time on the invite). Advertising doesn’t figure because advertising click-through is a tiny fraction of clicks from social referral, curated content and search results and so as a source of tick-through generation will hardly count (though paid positioning in a content hubs will count - so perhaps we should call it “new advertising”).

As a final thought, Apple, by implementing their 30% rule, have ensured a vicious competition for exclusive content is bound to break-out. Exclusive content will be hot property desirable for its ability to draw users onto alternative micro-payment facilities and hand over the details on their plastic.

Paul Lancefield on Twitter