Znak it! Pywall Strategies Feb 2012

by Znak, Inc.Paywall or Not To Paywall:Alternative SolutionsRevenue Trends, Warsaw April 2012All presented here materials, ideas and business concepts are confidential. They are the property of Znak, Inc.,a Delaware corporation; and, they cannot be used, copied, distributed nor shared in any form and means(the appropriate US and international laws apply). Znak it! Is a registered trademarks owned by Znak, Inc. TheZnak it! business idea and a micropayment solution are protected by the USA and international patent laws – NewUS Provisional Application No. 61/046,623 1

2011 The Rise of the Paywall? “The metered wall is the coolest thing since the beginning of the WWW.” Steve Brill“The NYT paywall is working……it’s a dream.” Felix Salomon Copyright (C) 2009 by Znak, Inc. 4

Lessons LearnedPaywalls can be: Expensive to start;  It took the NYT two years technologically challenging; and $25 to $45 Million to costly to run/market. launch its „metered wall;‟ Bloomberg, paidContent  Additional $13 Million to promote it in 2011 alone; New York Times  Given the 390,000 new subscribers at the end of 2011 -- $97 to $148 to acquire one subscription  Loss of traffic and ad revenue Copyright (C) 2009 by Znak, Inc. 6

Lessons LearnedPaywalls can be: Expensive to start;  Before paywall the NYT technologically challenging; traffic was about 39 - 41 costly to run Million uniques per month (US traffic only); Require large scale; conversion rates slow down &  Down 20% in Dec 2011; plateau; „silo effect;‟  With 390,000 subscribers – 1% visitors signed up;  Subs growth slowed from 124% Q1 to 20% in Q4 Copyright (C) 2009 by Znak, Inc. 7

Lessons LearnedPaywalls can be:  Long-term commitment Expensive to start; with up-front payment and technologically challenging; low 34% renewal rate, costly to run compared to 55% (print); Magazine & Newspapers Circulation Institute Require large scale; conversion rates slow down &  Substantial cost if multiple plateau; „silo effect;‟ sources/subs desired; „Walls,‟ after all – barriers to  Registration (ID/PIN/cc readers‟ access & engagement info) – can be lost/stolen;  50% apps have problems recognizing sub ID/plans; Copyright (C) 2009 by Znak, Inc. 8

Lessons LearnedPaywalls can be:  One-way „engagement‟; Expensive to start; technologically challenging; costly to run  You pay, we deliver what WE want, incl. “free” or undesired content; Require large scale; conversion rates slow down & plateau; „silo effect;‟  Only 20% of subscribers download content; Magazine & Newspapers Circulation Institute „Walls,‟ after all – barriers to readers‟ access & engagement  Reliance on (exploitation of?) the most loyal (local) Media/publisher-centric readers; passers-by a second category? Copyright (C) 2009 by Znak, Inc. 9

What is it? For whom? Znak it! – an integrated premium content curation and monetizationContent Providers platform Znak it! – a frictionless, safe and private way to access premium content as-you-go Web Users Znak it! – a direct-to-userMarketers & promotion channel and marketAdvertisers research tool Copyright (C) 2009 by Znak, Inc. 12

A Win-Win-and-Win Solution Web users can buy Znaks (credits), using credit cards, PayPal, bank transfer, etc. Or, they can earn Znaks through Marketers‟ ECOSYSTEM sponsorship. Marketers – the Third Winner “Free” or ad-sponsored Znaks earned in exchange for a clickthrough (CTR) or an action (CTA), e.g.1 Znak = $0.01 or an answer to a mini-equivalent in other currencies survey/market poll. Copyright (C) 2009 by Znak, Inc. 13

Business Model Options & Benefits Paywalls vs. Paygates such as Znak it!  SaaS -- no set up and system maintenance Expensive, low ROI; costs; up to 94% return; Require large scale;  Also for the “long tail;” truly World Wide; divide users into categories  Technology- and portal-agnostic;  Flexible, a la carte, on-demand access; Create „silo effect;‟  Supports different payment methods, incl. Closed, rigid, might donations and ad-sponsored access; cannibalize other sources of revenue;  User-centric, payment as social engagement, content sharing & recommendations; Media/publisher-centric ,  Private, intrinsically safe; can be used for not engaging anonymous access – without registration; frictionless Copyright (C) 2009 by Znak, Inc. 14

Znak it! Market Niche 120% Znak it! Payment Niche Cost of Znak it! as compared to 100% 102.90% PayPal charges Znak it!Percentage Commission 80% PayPal Regular PayPal Micropayments 60% 52.90% 40% 27.90% 20% 21.67% 17.90% 8.85% 6.00% 5.40% 3.90% 0% $0.3 $0.6 $0.9 $1.2 $1.5 $1.8 $2.5 $5.0 $20.0 Transaction value Copyright (C) 2009 by Znak, Inc. 15

An Example – Online Newspaper Examples of Znak it! embeddable links and widgets – as payment gateways. Customizable shapes. Easy, copy-and-paste insertion of Znak it generated codes by Publishers.For the User: two mouse clicks to getaccess to and pay for selected content.Payment authorization and fundtransfers done by the system in realtime, SSL-encrypted, safe. Copyright (C) 2009 by Znak, Inc. 16

Publish on Third Party‟s sites Examples of Provider‟s content submitted to Znak it! Agenda for additional distribution & monetization Also, in soc nets Facebook or Twitter Can be self-administered; Access to Agenda via customizable Admin PanelData mining and reports Copyright (C) 2009 by Znak, Inc. 17

Ecosystem Benefits to Content Providers Marketer or Advertiser and Users In exchange for User‟s data or action; High CTR and competitive CPC/CPA Much higher conversion rate than when using paywalls Copyright (C) 2009 by Znak, Inc. 19

Samples of Successful ApplicationIn April 2011, we developed a new version – won the Florin Awardfor the most innovative online transaction service(EPCA, Amsterdam)The current platform was launchedin August 2011 (public beta) – in thefirst three months, 320 contentproviders and 52,000 users have registered.Now, we run several pilot projects with various contentpublishers, incl.:  two regional news/magazine publishers  a photo sharing and media site, similar to Flicker  an online music service and soc net  global producer of video content: sports, fashion & entertainment Copyright (C) 2009 by Znak, Inc. 21

Pilot Cumulative ResultsBased on the first month of each of the 5 pilots(Nov 2011 – Jan 2012) No of Content Price/piece in Types of Content Supported Pieces ZnaksVideo clip (sports) 15 199Music file (MP3 download) 90 99Article bundled w/photos 60 49Single article, free lead 30 39Crossword puzzle 30 25Photos 120 10 Total/average 345 52 1 Znak = $0.01 Copyright (C) 2009 by Znak, Inc. 22

Pilot Cumulative Results Price/piece in Type and No of Content Qualified Clicks Clicks/piece Znaks Video clip (sports) 15 199 678 18.0% 45 Music file (MP3 download) 90 99 1,297 34.4% 14 Article bundled w/photos 60 49 465 12.3% 8 Single article, free lead 30 39 397 10.5% 13 Crossword puzzle 30 25 169 4.5% 6 Photos 120 10 761 20.2% 6 Total/average 345 52 3,767 100% 11„Qualified clicks‟ equals content purchases – 3,767 out of 43,299 visits, or 8.7%.Assuming quality/user interest, etc., are all equal, music was most popular overall;however, sport video clips generated the most clicks per unit. Copyright (C) 2009 by Znak, Inc. 23

Pilot Cumulative Results Revenue/ Price/piece Qualified Revenue Type and No of Content piece in Znaks Clicks in Znaks in ZnaksVideo clips (sports) 15 199 678 134,922 43.0% 8,995Music file (MP3) 90 99 1,297 128,403 41.0% 1,427Article bundled w/photos 60 49 465 22,785 7.3% 380Single article, free lead 30 39 397 15,483 4.9% 516Crossword puzzle 30 25 169 4,225 1.3% 141Photos 120 10 761 7,610 2.4% 63 Total/average 345 52 3,767 313,428 100% 918The average is $9.18 per piece of content; however, the revenues vary a lot between thetype of content with video clips generating nearly $90/piece Copyright (C) 2009 by Znak, Inc. 24

Pilot Results, by Gender & Age Based on a sample of 43 299 Unique Users 13.8% 24.2% 18 to 2441.1% Males 16.5% 25 to34 35 to 44 58.9% Females 45 to 54 55+ 22.4% 23.1% The sample represents gender and age distribution typical for online sites with high=quality news/magazine content, with a majority of users being male and older. Copyright (C) 2009 by Znak, Inc. 25 / 11

younger When compared to the Buyers Population, the distribution shows a considerable shift – younger users are more likely to be Buyers. 65.3% 58.9% Number of Unique Buyers – 1 281 41.1% 34.7% 29.0% 20.6% 21.0% 23.1% 16.5% 13.8% 16.5% 22.4% 12.9% 24.2%Males Females 18 - 24 25 - 34 35 - 44 45 - 54 55+ Unique Users Unique Buyers Copyright (C) 2009 by Znak, Inc. 26 / 11

Revenue Per Transaction and Buyer $2.79 $3.06 $2.45 $2.49 $2.36 $2.20 $2.18 $1.79$0.83 $0.79 $0.92 $0.85 $1.00 $0.73 $0.75 $0.85Total Males Females 18 - 24 25 - 34 35 - 44 45 - 54 55+ Revenue per Transaction Revenue per UB Copyright (C) 2009 by Znak, Inc. 27 / 11

Conversion Rates by Gender and Age Conversion rates 9 to over 15.6% 14.5% 15 times higher than those generated by metered 10.3% paywalls (1%) 8.7% 6.4% 8.2% 6.3% 3.0% 5.2% 3.3% 4.4% 2.5% 3.3% 2.7% 2.2% 1.6%Total Males Females 18 - 24 25 - 34 35 - 44 45 - 54 55+ Conversion Rate (Buyers/Uniques) Conversion Rate (Buys/Uniques) Copyright (C) 2009 by Znak, Inc. 28 / 11

In Summary Technology Can Make Payment Transactions Easy & FairTechnology Can Help Publishers Generate Online RevenueOpen, On-Demand Payments – like Znak it! – Work Better than Paywalls, esp. with Younger Users Znak it! Shows about 9x Better Results than Paywalls In Certain Age Groups Even 14 - 15x Better SO,… ZNAK IT! Copyright (C) 2009 by Znak, Inc. 29

2012 The Year of the Dime & Nickel?“As the economy sputters along, look for sites helping you sellalmost anything you can imagine and making you a “fortune”–one micro payment at a time.” Lance Ulanoff, Mashable Copyright (C) 2009 by Znak, Inc. 30

Znak it! Pywall Strategies Feb 2012

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