Pulse vs. Flipboard: Which will win, subscriptions or ads?

In a one-two punch involving digital news-aggregation services, Pulse announced on Tuesday that it has formed a partnership with the Wall Street Journal (s nws) that will allow it to distribute the newspaper’s content through its app, less than a day after competitor Flipboard announced a similar partnership with the New York Times (s nyt). While Flipboard says it is committed to an advertising-based approach in its publishing deals, Pulse appears to be betting its future on subscription offerings like the Journal deal. If nothing else, publishers will get to see two very different models play out over the coming months.
As we reported on Monday, the New York Times arrangement with Flipboard is the first time the full range of the newspaper’s content has been distributed through a third-party service. Subscribers who already pay for the paper — either in print or digital format — will get access to the content through Flipboard’s mobile and tablet apps, and non-subscribers will see the top 10 stories and have the opportunity to subscribe. The manager of the NYT website said the newspaper made the decision to work with Flipboard after noticing that up to 20 percent of readers used it and similar aggregation apps.
The Flipboard-Times deal does not involve a share of subscription revenue, however. Instead, the newspaper has the opportunity to offer advertising within the content, and if it does so then Flipboard would share in the revenue from those ads — as other publishers such as USA Today who make use of the platform’s advertising engine do. It’s not clear what the revenue-sharing ratio is with these deals, but CEO Mike McCue said in an interview with my PaidContent colleague Jeff Roberts that publishers get over half the payout.

Pulse is betting on subscription revenue

Pulse, meanwhile, *is* sharing subscription revenue with the Wall Street Journal as part of its arrangement. The aggregator — which got some unpleasant publicity early in its life when its app was yanked from the iTunes store in 2010 due to a complaint from the New York Times, just hours after being praised by Apple CEO Steve Jobs on stage at the Apple developers’ conference — said it has launched a new tab called “Premium Sources” that will contain subscription content from the Journal and other media outlets it plans to sign deals with.

In the case of the Journal, readers can click and add specific news channels from the paper to their premium sources tab, including the Water Cooler (for 99 cents a month), the Political Report (for $3.99 a month) and the Technology Digest (for $3.99 a month). The exact revenue-sharing arrangement is not known, but in practice it means that any subscription revenue generated will actually have to be split three ways, since Apple (s aapl) takes its 30-percent cut of any revenue that comes from within an app.
Despite this, however, Pulse’s director of business development Cristina Cordova says that the company is committed to the subscription model, rather than the advertising-based approach Flipboard is taking. In response to a comment from me on Twitter about the differences between the two, Cordova said that the company is focused on trying to help publishers like the Journal increase their subscription revenue, rather than simply monetizing existing readers the way that Flipboard does with its advertising model:
[tweet https://twitter.com/cjc/status/217704464444948483]

Flipboard says it is committed to the ad model

Flipboard’s ad-based model got some unpleasant publicity on Monday when Ad Age magazine reported that both Wired and the New Yorker were removing their content from the app — both had previously provided the full text of articles from their websites — and reverting to short excerpts, although readers will still be able to click and view the content in Flipboard’s built-in browser. Comments from Wired made it sound as though the Conde Nast title saw the app as competition for its readers, a concern other media outlets have also raised.
In his interview with PaidContent, Flipboard CEO McCue suggested that Wired and the New Yorker were outliers, and that most of the service’s publishing partners were happy with the advertising revenue they were seeing — and optimistic that it would increase. Flipboard says it has hired a six-person team based in New York to help publishers work with the company to come up with better forms of advertising than simple banner ads, which are rapidly declining in value. But he says subscription revenue is not an attractive option for a number of reasons, including the split with Apple.
In some ways, the different paths the Wall Street Journal and the New York Times have taken with these deals are symbolic of the ongoing debate within the media industry over which is likely to be the savior of the news business — subscription paywalls or advertising? While the Times still has a paywall, there is at least the potential for it to take advantage of Flipboard’s distribution platform to experiment with mobile ads and different forms of monetization if it wants to, by modifying the way the paywall works.
The Journal, however, is clearly doubling down on subscription content, perhaps in part because financial news seems to be one of the few things that providers like it and the Financial Times or the Economist can get away with charging readers for. And meanwhile, both Flipboard and Pulse are busy trying to build what could be the digital magazine and newspaper library of the future — competing with their publishing clients even as they try to serve them.
Post and thumbnail images courtesy of Flickr user Zert Sonstige