Can a local deals membership sell paid subscriptions for a local news site?

Think about premium credit cards. You pay $700 a year, but you get $300 off Uber, a free hotel night, and something like $3,000 in value. Why can't we do that locally?

Or think about Costco. Costco doesn't care about making money on the products. It makes its money on the membership. That's the model I keep coming back to for local media: the newsletter, website and social stay free, and a paid membership opens up the deals and giveaways.

How would it work?

1. Price it low. My latest version is around $10 a month or $100 a year.
2. Load it with value. Go to each local business and ask for a $10 gift card for every member. Thirty businesses and a new member gets $300 in gift cards on day one.
3. Gate the deals. The newsletter promotes them. Only paying members can claim them.
4. Pitch it to businesses as a foot in the door. A $10 gift card is a cheap way to get a new local customer through the door.

The numbers have moved around as I've talked this through over the past year and a half. Earlier versions were $25 a year with about $150 in restaurant gift cards at signup, roughly $10 each from 15 restaurants. I've also said $25 to $50 a year, or $30. With one operator planning a paid tier, I suggested asking $60 a year and making sure members get at least $100 back. The price changes. The rule doesn't: members get more back on day one than they paid.

"Make the deal so obvious that users of course should pay because they're getting way more value than it costs."

Why would a restaurant hand out free gift cards? Because the people using them will spend more than $10. The card costs the restaurant almost nothing and puts a new customer at a table.

Didn't Groupon prove this fails?

Groupon had two massive problems. First, it had exactly one way to make money: take a cut of the deal. Merchants gave 50% off and then paid Groupon something like 40% on top. The cost was too high for businesses.

Second, it had adverse selection. The only people who go to Groupon are people proactively looking for deals, and those aren't the customers businesses want. They want upper-middle-class people.

A local media brand fixes both. We don't have to charge for the deal at all, because the money comes from members. And our audience is upper-middle-class people who came for the news, what opened this weekend and what events are happening. Deals are a subset of that. Groupon's newsletter is only deals. Nobody asked for Valpak. People ask for my newsletter and choose to sign up.

That makes a flywheel. Businesses with good offers get better customers. Readers are happy. The audience grows, and you charge the businesses that don't have good offers, like insurance agents, roofers and attorneys, for that attention. That's where you make your money.

On the business side, another version I've pitched skips gift cards: a business pays a flat $50 a month to post deals, and we take no cut at all.

How do you get businesses to say yes?

• Don't ask for money. Tell them: you don't pay us anything, but you have to offer something good enough. A legit deal, not 10% off. I'd ask for 30% minimum.
• Start with names people know. A publisher I work with went to national chains that would never buy local ads and asked for a tiny member perk, like free chips and salsa or a free drink. They said yes all day because there was no ask. Those logos made the program easier to sell to local businesses.
• Trade value for promotion. One example I've suggested: get a photographer to do free family Christmas photos for the first 30 members, in exchange for running ads for them.
• Use unsold event tickets. A venue with 30 extra tickets wants bodies in the door. Give those tickets only to paying members. It costs you nothing and helps the venue. That one isn't my idea; I heard it from someone it was working for.

Do readers even want deals?

Yes. In my own welcome survey, 98% to 99% of people select at least one deal or activity they're interested in. I use that number as proof when I talk to advertisers.

Wanting deals and paying for them are different things, though. My guess is you'd never get more than 10% to 20% of readers to pay. At a low price that's fine. It's recurring revenue you didn't have.

Are other publishers doing paid perks?

Versions of it, yes. A publisher I know in a county of about 50,000 people sells a $25-a-year membership. He pays a photographer to shoot high school football games and other events every couple of weeks and puts the professional photos behind the paywall. Parents who want great photos of their kid pay. From what I've heard secondhand, he has a thousand-plus members, and his business makes about half a million dollars a year all in.

Tad Moore of NWA Daily told me on my podcast that he sold a dining card: 10 restaurants each offered one 20% discount, for $30. It made several thousand dollars in its first year, and the restaurants paid nothing. Justin Gordon told me he charges about $30 a month for a membership with discounts to his events.

What can go wrong?

• Small-business deals are hard to sell. You have to go negotiate with a lot of smaller businesses, which is much harder than a few big ad deals.
• Staff won't track it. Most local businesses don't have proper tools or tracking. As I said to Tad on the podcast, "I can barely get my employees to wear the right clothes and not curse at customers." Tad said some staff didn't even know about his card. Keep instructions dead simple.
• You need real tech. Redemption gets messy fast, and the operator ends up solving the problems, not the businesses.
• Being new hurts. I told John Apolinar on my podcast that a restaurant VIP card seemed like more work than it's worth until you're a name brand in town. A town of 50,000 where nobody is doing it may be easier than a crowded market like Scottsdale.
• Asking for money costs subscribers. Yes, you will lose thousands when you start asking people to pay.

I still like pushing ahead anyway. Ready, fire, aim. Launch it, then fix what breaks.

Where do you sell it?

On the offer wall, right after the welcome survey. Even if most people don't buy, and most won't, you've put the offer in front of a fully attentive new subscriber. They now know what you have and what it costs, so later pitches land with people who already know it exists.

What's the honest status?

This is my pet model, not a proven one. I've wanted to build a local version of AARP or AAA for over a year, and it's still version three or four for me. Get the free newsletter and ad sales working at small scale first. If you're just starting, I wouldn't stress about getting paid by readers yet.

I didn't have paid-plan data of my own when I pitched it, and I'd learn from the first publishers who try it. For pricing a membership more generally, see how to price a local membership.