“From Freemium to Premium” – Features That Convert Freemium Users into Paid Subscribers in Digital News Services – Case Helsingin Sanomat

Abstract

The newspaper industry is on the verge of definite change as print circulations are collapsing and digital subscriptions still only seem to cover a fraction of total revenues of news media. Thus, news media is in search for viable business models to monetize for their digital services. In early 2000s most news sites used to offer online content for free and relied solely on advertisement revenue. This has led to the main challenge of the digital news industry: how to make users pay for content that used to be free? Consequently, freemium business model has become a prominent revenue model for digital news services as it enables offering both free and premium versions of the service simultaneously.

This thesis provides an overlook to the freemium business model in digital news services and examines various digital features in order to find correlations with customer value and willingness to pay. The topic is examined from the perspective of a leading Finnish news publisher, Helsingin Sanomat, that utilizes freemium business model for its digital services. The study uses mixed research methods of quantitative conjoint analysis jointly with case studies from other major news publishers operating in similar markets as Helsingin Sanomat. The main data collection of this study was deployed with an online survey and resulted with a total of 3,268 respondents including both current subscribers and non-subscribers of Helsingin Sanomat.

The results of the study suggest that the forerunners of digital news have shifted towards freemium hybrid models – a combination of freemium model and metered paywall. Data-based methods such as adaptive paywalls that enable more accurate user segmentation and personalized communication are also becoming more common. The results of the empirical analysis indicate that personalization and selected distribution channels have a positive effect on users’ willingness to pay. In addition, distribution channels is also the most preferred feature category including features such as e-replicas, news archives and newest articles view. According to the findings of this study, the average timeframe for converting from a free user into a paid subscriber in digital news services is around 49 days after opening the mobile news application for the first time.