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Is the Premise of 'Free' Killing Us?

  |  December 15, 2000   |  Comments

"The Cult of Free" apparently hit a raw nerve among ClickZ readers last week. Andy shares responses from some who agree with his concern about the limited viability of the ad-sponsored business model for online publishing sites.

"The Cult of Free" apparently hit a raw nerve among ClickZ readers last week. I got responses from many of you who share my concern about the limited viability of the online publishing biz with advertising as your exclusive revenue stream.

I got one note from "Lynne" asking "Do you think this is in part due to the noncommercial development of the Net, which is now becoming extremely commercial? Don't forget the origins were government- and education-/research-oriented, with information freely shared." To which I say: Absotively! I'd go so far as to say that we as an industry blindly adopted the premise of "free" to such an extent that it damn near killed us.

My old friend Jeff Dearth of DeSilva & Phillips wrote to observe that it was really the VCs who made it possible for so many Internet companies to offer costly and expensive online tools and information for "free" because THEY footed the bill! He continues: "Now that VCs and public markets are no longer willing to subsidize any and all Internet enterprises, a lot of the 'free' content on the market will vanish or be consolidated. Scarcity will help drive value."

Jeff, you really know how to warm my heart!

Keith Savitz, CEO of B4Utrade.com -- a paid subscription site for financial information -- is unapologetic in his views:

"Paid sites will dominate for two reasons: First, as we've all seen over the past nine months, the typical 'free-site business model' which derives revenue from online advertising, is failing. Not doing poorly, FAILING. That's why we see the dot-com graveyard growing every day -- because banner ads don't work and, thus, people are not willing to pay for them. Thus, many of these free sites will either have to switch to paid-service models or suffer the inevitable consequences.

"Secondly, and this particularly pertains to financial content sites like B4Utrade.com, the increased market volatility over the past 12 months, in conjunction with the recent 50 percent decline in the tech sector, has made people realize that the relatively easy investment success they experienced for the past few years is over. Essentially, the random 'dart throwing' won't work anymore as Wall Street really dives into the revenues of companies and how soon, if they are not already, they will reach profitability.

"For these reasons, content sites like B4Utrade.com have experienced record traffic over the past six months, as the demand for streaming quotes and news, as well as the same institutional tools that the Buffets and Soroses of the world have at their fingertips, has skyrocketed. When it comes to the market, looking at delayed quotes or stale data is like watching a black-and-white TV set, and in this day and age, everyone wants the flat screen with the amazing color."

I think the mission-critical nature of investing your money wisely lends some weight to his argument, but I noticed as I went through my mail this week that most of the nonadvertising revenue models revolved around business and investing.

What about consumers?

One reader I'll refer to only as "Michael" (since his employers would be less than pleased with his views, apparently) feels somewhat entitled:

"I cancelled my sub to the Globe (I read it online); I get movies through an underground network and will soon cancel cable (I admit, that is illegal); I have cancelled most of my magazine subs, and I rarely buy CDs anymore..."

He continues:

"The sale of content is the 'old' way of making money. Sure, it costs to produce, and therefore somebody should pay for it. But in the old world, it had to be me. Now, I am empowered: I know I am a valuable customer to somebody's bottom line... I am spoiled. Sorry 'bout that. But I am the customer, so we as marketers need to find a way to make money while meeting these new attitudes and expectations."

It's scary folks, but Michael's views probably reflect the majority of twentysomethings out there. He may be right!

On the other hand, I got a number of emails pointing out successful examples of content that has been monetized not only by an ad revenue stream, but through sales of that content as well:

One reader pointed out the most well-known example, The Wall Street Journal. His comments:

"I subscribe to the print version (a couple hundred bucks each year), and I recently subscribed to the online version ($29 bucks per year for print subscribers). Why double up? For the longest time, I couldn't see a reason why. But I tried a 30-day sample and liked:

  1. The archive -- this has proven extremely valuable when doing research

  2. The ability to send e-versions of stories to friends, colleagues, and clients (you can't do this unless you subscribe)

  3. Email market updates throughout the day (very short, but [a] great way to know what's going on without having to log on to my DLJ Direct account)"

Robert Morton, a marketing guy at Fool.com, wrote to tell me about the company's new venture called Soapbox.com:

"The service is in its nascent stages, but there are encouraging results that speak to the question of free versus paid content you raise in your column. Soapbox.com authors create reports on personal finance and investing topics and then offer them for sale (at prices typically ranging from $5 to $30) on our site. By creating quality reports and helping folks learn about relevant topics, some of our authors are earning significant money (as much as $15K in a quarter) from their efforts.

Examples:

  • This author, Matt Tomkins, has sold more than 4,000 copies of his well-received 'Ten Companies' series.

  • Another top seller, Rob Bennett, has sold more than 1,700 copies of his report on 'The Secrets of Retiring Early.'

  • More than 700 people interested in fuel cell investing have purchased Tom Koppel's 'A Fuel Cell Primer.'

"While not yet conclusive by any means, we think the early response to this service suggests that folks will find value in and pay for relevant, well-packaged information delivered in a setting that allows them to deepen their learning through interaction before and after they purchase.

Perhaps in today's harried world, a 20-page, $20 report -- that's digestible, interactive, and covers an action-/opportunity-oriented topic -- can offer more value than a 350-page book on the same topic that no one can ever find the time to read."

Sounds like something WE should do, huh?

Ken Evoy from Make Your Site Sell! published a series of e-books that have proven quite lucrative for him:

"My own key decision with Make Your Site Sell! was whether to give it away or charge for it. We chose to charge the least amount possible that would still force some respect for the product.

"Result?

"A large number of raving fans instead of tons of freebie-hunters.

"Or, if we had chosen the high-priced route... We'd have a small number of merely satisfied customers instead of a large number of raving fans.

"Larger result? We ended up building a successful business that has just been acquired (although I'll be staying at the helm)..."

Joe Grasmick of Grasmick.com also took the e-book route to monetizing his content:

"At www.grasmick.com 'Canada to U.S. Business Immigration,' I offer a downloadable $145 PDF 'e-book' 'Grasmick's TN Handbook for Canadians -- How to Work in the U.S. Under NAFTA', which has been extremely successful. Updates to this perishable content are available only to Handbook purchasers. Digital Goods (ex SoftLock) handles the back end. I also offer half-hour telephone consultations which have also been extremely successful. Amazon.com z-shops handles the back end.

"I have had the web site since March 1995 and still 'give away' magabytes of unique information. I do not accept advertising."

Another reader wrote in to tell me about the Globe and Mail:

"The Globe and Mail ('Canada's National Newspaper') has today's paper and selected articles from the past seven days available for free on their site. For an archive of the full contents of the newspaper back to 1977, you need to pay for a subscription to InfoGlobe/Dow Jones Interactive, then pay an additional fee for each full article downloaded."

I've contemplated this model, but feared doing it for the loss of page and ad impressions. Would YOU pay to research and download articles on ClickZ if that were the only way they were available (that is, free for a week, $1 per article afterwards)? Email me, and tell me what you think.

Finally, there is an industry out there, preparing for the day when we have the courage to charge for access to our content. This, from fellow ClickZ writer, Trude Diamond:

"I write product reports for Gartner Group (who certainly knows how to monetize their online content as catnip for their subscription content). It so happens I specialize in the DRM (digital rights management) industry, which enables content monetization. You might want to check these DRM providers' sites to see who their clients are, because those folks are monetizing as we speak:

Next week, more on some of the roadblocks that we as an industry have placed in our own way that prevent us from becoming profitable.

Stay tuned...

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ABOUT THE AUTHOR

Andy Bourland

Andy Bourland was cofounder and former publisher and CEO of ClickZ. He and Ann Handley launched the site in 1997 and sold it three years later to INT Media Group. In columns he wrote for ClickZ from 1998 to 2002, Andy provided practical advice to online marketers and publishers alike, frequently weaving in takeaways from real-life on- and offline experiences. Andy launched his own blog, Bourland.com, in 2005, continuing to write about online marketing up until his disclosure that he was facing a terminal illness. He died Feb. 16, 2009, at the age of 53.

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