Paywalls are here to stay, but they’re closing off the internet. Crypto can fix that

Today, the web is more like a crowded city with checkpoints on every block. You might be able to peer into a few store windows, or even be allowed to take a quick stroll, but it won’t be long until someone asks you to identify yourself and buy a monthly pass to stick around. In practical terms, this means it’s become harder to read about everything from major news events to a sports columnist’s clever take on last night’s game.

This isn’t a bad thing. After years of giving away valuable content for free—and later hoping Facebook or Google would share a few crumbs in advertising dollars—web publishers finally gained the confidence to ask readers to pay for their labor. And that in turn has provided a revenue stream that directly funds quality journalism.

The problem is that readers are getting cut off from more and more of the web. Even as more people are willing to pay for their favorite websites, no one can be expected to shell out in response to the dozens or even hundreds of paywalls they encounter over the course of a year. Worse, many digital publishers are acting like record-of-the-month clubs of the 1980s—roping users into subscription models where re-signing feels like a hostage negotiation.

The upshot is that websites are cutting off a growing number of readers who might pay a small amount to read an article, but don’t want to engage with aggressive subscription tactics or who may simply lack a credit card in the first place. The result is that both sides lose: Publishers are leaving money on the table while casual web surfers turn to free websites that are often cesspools of viral crap.

This is not a new problem. The mixed blessing of paywalls has been debated since at least 2007 when the New York Times deployed and then scrapped its earliest version, TimesSelect. The difference today is that technology has taken a giant leap forward, offering new tools—based around blockchains—that could make the web feel like the open, freewheeling place it used to be while also letting publishers make a living.

‘Original sin of the web’

Julien Genestoux, a software engineer and self-described “fan of the open web,” worked at the popular blogging platform Medium in 2017 when it launched a paywall that allowed users to become “members” and access a variety of content by different authors.

“It was awakening to realize membership could have been the business model of the web the whole time,” says Genestoux, adding that the failure to build in a payment model was “the original sin of the web.”

He points out that the original designers of the web did envision a native payment tool. This is reflected in the existence of a browser error message describing a 402 error, which is analogous to the ubiquitous 404 error (“page not found”) but reads “payment not found.” But unlike the 404 error, the 402 message is still “reserved for future use.”

The existence of the 402 error page reveals that the web was supposed to have a native payment mechanism—one that let users pay for content without disclosing much in the way of personal information—but that for whatever reason it never got deployed.

Genestoux has been hard at work trying to redeem this original sin with a service called Unlock. The site uses non-fungible tokens—unique digital tokens registered to a blockchain—as a way for readers to access content on different websites without the fuss of repeated credit card signups.

Unlock’s model relies on blockchain smart contracts to verify whether an NFT owner is in good standing and, if so, to grant them access to the participating publishers’ websites. Unlike a traditional website subscription, the membership can be transferred or sold. The publishers, meanwhile, can divvy up the revenue from NFT sales and resales by means of a smart contract or an offline arrangement.

In the future, Genestoux believes, web users will use NFTs to access bundles of content tailored to their interests—perhaps one that lets them read dozens of sports or entertainment sites. He adds that, along with convenience, the permissionless nature of NFT ownership reduces the potential for censorship. Specifically, controversial publishers like pornographers or radical political sites would be less at the mercy of payment providers like Stripe or Visa cutting them off.

Unlock isn’t alone. A company called Coil received $250 million from the crypto company Ripple to expand a service that lets readers pay $5 month to “stream” content from various websites. The service is free for publishers, who get paid a rate of 36 cents per hour for every user on their sites—a tiny sum, to be sure, but one that would becomes significant if multiplied by thousands or millions of users.

The latest company to attempt a crypto-based subscription model is the news and research site The Block, which encourages loyal readers to buy and stake tokens in exchange for full access to its content. A company called Civil attempted a similar model five years ago, and the project went down in flames—in part because readers, and even its own employees, found it confusing—but The Block is likely better positioned for success given its crypto-native reader base, and since overall knowledge of crypto and tokens has increased exponentially in recent years.

Yet despite this burst of activity to bridge crypto and media subscriptions, there is little evidence the idea is taking off with consumers. The trade publication The Defiant conducted a detailed survey of available services last year and concluded in a glum headline: “Micropayments for Content Refuse to Take Off and Crypto Isn’t Helping.”

What’s the problem? While it might be tempting to blame the complexity of crypto or its dodgy reputation among many consumers, the biggest obstacle to adoption lies elsewhere—with publishers themselves.

‘Not a tech problem’

Trevor Kaufman is the CEO of Piano, a company that made $80 million in revenue last year supplying paywall technology to hundreds of media companies, including the BBC, TechCrunch, and Fortune. He says Piano has experimented with micropayments and crypto for years, including a system where publishers could barter with one another to provide content access to one another’s employees.

But he discovered publishers wanted no part of this.

“Believe me when I tell you that there are no [Piano] customers around the world saying, ‘Hey, Trevor, it would be great if there was a micropayment option,'” said Kaufman.

He notes that there are non-crypto options that could make it easy for readers to purchase individual articles—such as PayPal wallets or Apple Pay in the Safari browser—but publishers have shown no interest in adopting them.

“There are ways to charge a little amount of money for short-term access, but it’s not a tech problem. The concern is that they’ll be cannibalizing sub revenue,” said Kaufman.

He explained that many publishers are finally enjoying a significant revenue stream from subscriptions, which not only put money in their pockets but provide a predictable cash flow against which they can borrow. Having finally developed a business model outside the vagaries of online advertising, they’re reluctant to meddle with it.

Indeed, some of the biggest paywall success stories are reluctant to even discuss micropayments. Both the New York Times and Dow Jones (publisher of the Wall Street Journal) politely declined to be interviewed about the topic.

This reticence is understandable given that publishers are emerging from a brutal two decades in which the internet destroyed their print-based business model, and Facebook and Google sucked up most of the advertising dollars they used to earn. But it’s hard to see how the current landscape of paywall silos, which sees a third of readers cancel their subscriptions within 24 hours, is sustainable.

“Consumers want a Spotify model,” Kaufman acknowledges—even if publishers don’t want to supply one.

It’s worth noting that other industries, notably the music and TV giants, bitterly fought against streaming services that offered up new types of content bundles but, in time, came to appreciate the value of services like Spotify or YouTube TV. It feels inevitable that web publishers will one day come around to a system that makes it easy for readers to pay for their stories across different sites, using crypto—or maybe something else.

In the meantime, Kaufman predicts that NFTs and other types of crypto payment probably won’t catch on for the foreseeable future, but that he remains open to it.

“Figuring out business models for content on the internet is one of the most important societal challenges we have,” he added, “so the more innovation the better.”