Slate killed its $19.95 paywall after a year — and traffic tripled within months

What was changed

Barely three years after launch, Slate — then a Microsoft-owned 'number one internet magazine' — put up a paywall in 1998: $19.95 a year for the full site. Between 20,000 and 25,000 people subscribed, bringing in almost half a million dollars. But acquiring each subscriber cost $50 to $100, so the magazine lost money on every sign-up. Operating costs ran about $5 million a year against 220,000 monthly uniques, most seeing only the free 'front porch' sliver. 'We had no advertising prospects,' publisher Scott Moore recalled.

Eleven months in, the paywall fell. Within three months the audience had tripled; in the following nine months it tripled again. A year in, Slate drew as many uniques as the Washington Post, a few hundred thousand behind the New York Times. The economics had flipped to what Moore called radio economics: production costs fixed no matter how many read. 'Slate costs us the same to produce today with 5 million readers a month as it did two and a half years ago, when we were subscription-based with 200,000,' Moore said in 2001. 'But our revenue has gone up about tenfold.'

Free distribution became the foundation of every later Slate business model: standardized ad units brought the site its only profitable quarter under Microsoft in 2003; the 2004 sale to the Washington Post Co. for $10–20 million followed; and by 2016 sponsored content through Slate Custom produced about half of ad revenue, while Slate Plus membership — 17,000 strong — and podcasts supplemented a business still more than 90 percent advertising-funded.

Why it worked

Acquisition math was upside down: paying $50–$100 to win a subscriber worth $19.95 a year meant every sign-up deepened the loss.

A paywall cut against the web's core advantage over print — boundlessness — and stranded most readers outside a tiny free sliver of the magazine.

Production costs were fixed regardless of readership, so scale converted directly into advertising inventory and revenue.

Advertisers were only beginning to accept internet ads; a bigger free audience was the argument that could change their minds.

What can be applied

If marginal subscribers cost more than they pay, the paywall is a ceiling: in digital media, giving the product away to build scale can be the profitable move.

Aftermath

Kinsley had warned in 1999 that web readers surf and rarely linger; the free site grew on exactly that behavior. Slate turned its only Microsoft-era operating profit in 2003, was sold to the Washington Post Co. in December 2004, became profitable again in 2013, and by 2016 was still hunting for revenue beyond advertising — but on an audience that only going free had made possible.