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Tracey E.Schelmetic

[May 1, 2002]

Dot Com Commerce

By Tracey E. Schelmetic
Managing Editor, CUSTOMER [email protected] Solutions

But Would You Pay For It?

It's no secret that Web sites that offer information -- news, editorial, consumer information, research, medical information, music, fiction, humor, etc. -- have been having trouble generating enough operating revenue from online advertising (if this is news to you, welcome back from Jupiter). The logical next step for many of these service-oriented Web businesses is to toy with the idea of pay-for-content. The business and technology news media seems torn on the subject. Half of the articles I've seen in the last six months about e-business have been about whether Internet users would open their minds and their wallets to paying for content. "Yes!" shrieks Salon.com, citing their admittedly surprisingly successful venture into pay-for-content with its Salon Premium service, which in its first year has logged an astonishing 36,000 paying subscribers.

"No," scoff most surveys on the subject that poll a cross-section of Web surfers. "No way, never. Probably never." Forrester Research cited the number of people willing to pay for content lurking dismally in the neighborhood of seven percent. Seems most people feel that they can go elsewhere and find the same information for free. The parable goes that once you get used to something for nothing, you'll never pay for it (funny, this was the same advice my grandmother gave me about dating). The Salon thing and other successes, according to this camp, must be aberrations. It's been wisely pointed out that people feel like they are paying for Internet content already when they write their monthly check to their ISP.

Fortunately, I know the true answer to the question of whether Web surfers will pay for content, and it's a resounding, unqualified "maybe." The point is, not all content is created equal. Will people pay for a generic, archived news item announcing a 1998 scientific report about global warming? Not on your life. Not only would I never pay for something I'm not sure contains what I'm looking for, but a search on Google.com or another search engine would net me the story from another source and might even include a copy of the report itself (London Times and Business Week, are you paying attention?)

The Oxford University Press (OUP) recently announced it will make available its extensive reference materials for the very first time. In order to make an undertaking this complex possible, OUP has announced from the get-go that users will have to pay for the privilege of accessing its breathtakingly large collection of works. Individuals will need to shell out $250 per year; multi-user organizations (such as libraries) will be asked to pay up to $3,000 per year, depending on the size of the establishment (one presumes that the library in Point Barrow, Alaska would not access the service as much as the New York Public Library, for example. But hey, you never know.) The OUP is confident its pay-for-service will fly. They have reason to bethey are offering a high-quality product in the form of extensive, cross-checked and referenced research materials. Most important, it's not available elsewhere online.

If you can't yet see the point at which I'm trying to arrive, let me summarize: pay-for-content will only work if the content is perceived to be worth paying for. Seem obvious? It's not. Ask the e-card companies -- such as Blue Mountain -- that started using a fee model as opposed to a free model, none of which are doing very well at the moment. Who in his or her right mind would pay for an electronic birthday card? I still haven't figured this one out yet.

Valuable content such as translation services, high-quality research materials, MP3 files, graphics, well-assembled sports information, e-books and video content will work in a fee service. Commodities such as weather info, syndicated columns, general news items, clip art, press releases, movie reviews and recipes probably won't.

Of the Web sites now attempting to migrate to fee services, it's not hard to offer some guesses on whether they will succeed or fail. Yahoo.com hopes to begin charging subscribers for stock quotes and late-breaking news (all of which could be viewed for free in dozens of other places). Variety magazine is now charging subscribers for its online version, and though most of the actors who subscribe to Variety have no money, their bartending jobs pay pretty well and it's info that isn't easily accessed elsewhere (auditions, etc.) In addition, it's content that once paid for, will hopefully pay for itself, in this case, in the form of an acting job. The Wall Street Journal's online version has been charging subscribers for yearspeople are willing to pay for it, and a lot of these more than 600,000 subscriptions are likely being charged back to readers' employers. Consumer Reports has been extremely successful with its pay-for-service modelsubscribers perceive an enormous value in this particular service, as a good purchase decision will save money in the long run, as the conventional wisdom goes.

Though few of the other articles about the success or failure of fee services mention it, charging for content has been practiced successfully for years by adult sites, who practically pioneered the concept, and who, by all reports, make more money than they know what to do with.

In my opinion, the success or failure of a pay-for service also depends on the audience. Business users are more likely to pay if they can kick a subscription fee back to their companies, particularly if it's for a service that is perceived as saving time and money (a language translation engine is a good example). In some instances, consumers will probably be less likely to reach for their personal credit cards at home, though I am a great believer that consumers will shell out money for entertainment purposes, particularly if it means not having to drive to the video store or the bookstore, or walk to the library. (One of the primary rules of doing business successfully in America is understanding that you can always count on the average American consumer's laziness.)

So far, the most notorious candidate for pay-for-content has yet to fully embrace the model, despite the long-standing rumors of its intentions to do so. The legally beleaguered Napster has long declared its intentions, though a pay-for-download version of the galactically popular and hugely vilified (by the entertainment industry, anyway) file-swapping service has yet to emerge. As a devotee of Napster, I can assure Mr. Fanning et al. that I would pay to subscribe to Napster, even if I would pay for no other service (come on, guys, I'm getting bored with my existing MP3s).

In the long run, it's a question of perceived value. It's not enough that material on your site is desirable. What does finally make the consumer reach for his or her Visa card is the perception that doing so will save money or time in the long run by not having to drive to the mini-mall to rent a movie, by avoiding the purchase of a lemon stereo system, by not having to drive to a university's library and wait for a reference book that someone else might be using.

And the final element that might drive us ALL over the edge into pay-for-content the blessed absence of pop-up ads. Show me where to sign up.

The author may be contacted for free at tschelmetic@tmcnet.com.

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