With business-to-consumer (B2C) Internet businesses showing promise again, more and more content providers are finding success in switching once free content or services to a paid subscription model, eliminating the need to rely on a stagnant ad market. In media, premium content has always come at a cost, and it's becoming more apparent that many content and service providers find it easier to simply bill their users, even at the expense of traffic that was once so coveted.
Sources of free content will always exist on the Web, but the quality or credibility of the information may be inferior to that of a paid source. Those sites that launched with free services and later switched to paid usage have had the luxury of starting with a larger traffic base. A good example is Blue Mountain e-greetings, once the most popular (i.e., highly trafficked) Web greetings service. It's incredible to watch the traffic ratings drop precipitously very soon after a service begins to charge. Blue Mountain currently resides at about a third of its peak levels. But, billing $11.95 per year for usage -- you do the math and see if the trade-off makes sense.
When it switched to the paid subscription model, Blue Mountain's traffic dropped, but the percentage of users who remained pay service fees that contribute toward the bottom line. There are plenty of free e-greetings services, but Blue Mountain's cost (aside from revenue generation) has created an illusion of premium service.
Another interesting free-to-fee case is Microsoft's recent aggressive push for Hotmail account upgrades, asking users to increase their limited storage size for $30 per year. Hotmail's free service created a huge market. Microsoft is not eliminating the free service, but it is sending users regular messages when their accounts' file size approaches the 2 MB mark. Constant reminders (bordering on threats) encourage users to upgrade.
The company's timing could not be better. Its subscription base has grown large just as more users are sending large file attachments, such as pictures, to one another, using up allowable storage space. It's a great time to push the upgrade.
This not-so-new trend of charging users applies to content sites as well as to online services. The cost of supporting content is astronomical. Unless your site can produce a rare, desirable niche audience or an impressive reach, it's difficult to support content costs with advertising alone. The porn industry realized this quickly, charging since the early days of the Web.
I imagine users would also pay for online mapping services, such as MapQuest, which (when accurate -- ever end up on the wrong side of town for your meeting courtesy of these guys?) is a highly powerful service. Fees don't need to be astronomical, but a few dollars a year could pay a lot of bills. These are usually good services, and I imagine a frequent traveler or salesperson on the road could easily justify the cost.
Perhaps the most desirable feature of the Web is the free content, research, and information. These areas are facilitated primarily by free search engines. The search business has gone through many changes. Search technologies compete for power and accuracy. Advertisers, needing a way to drive qualified users to their sites, are ready to buy. For this reason, two patterns have emerged:
Two major players have the momentum in the search game, Google and Overture. Google, of course, is the preferred search engine among Web users. Overture leads pay-per-click search advertising (although Google recently launched a similar program). With search engine results skewed by Web site optimizers as well as search engines' inclination to actually make money by incorporating new revenue-generating features such as paid search links, search engine accuracy is declining.
Google is the premium brand search engine, boasting some of the best results on the Web. Though its technology is not beyond regular optimization strategies, it withstands them better.
It's not inconceivable that a major search provider will emerge with a paid service justified by either superior technology whose results cannot be optimized or a directory service with a large editorial staff that manually accepts submissions and categorizes them by topic and dates (like in the old days). In fact, that happened just yesterday. Google introduced Google Answers, a service allowing users to enlist the help of real, live human researchers for fees ranging from a couple of bucks up to $50.
To a savvy researcher who depends on the Internet regularly, a search engine subscription cost would be easily justified. A regular user might justify a few dollars a year for a premium service that's superior to the norm.
I believe this scenario is a little premature but fully possible, considering how inferior many search engines results have become over the past two or three years -- and the resulting traffic decline. I'm not saying they've gotten so bad people would pay immediately.
Google's search (not including the pay-per-click service) remains on the rise in popularity (33 million American and 4.3 million Canadian unique visitors in March according to Jupiter Media Metrix Canada), mainly because it provides excellent, unbiased results. That makes it a good candidate for introducing user fees.
Looking at traffic data from services such as Blue Mountain, even with a sharp usage drop-off, a small fee would easily justify decreased traffic. Paid search service may be on its way. If it were mandatory, would you pay $5 per year to use the best search around? I want to know.
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Adam Posman is a strategic planner with BAM Strategy, a leading digital agency with offices in Montreal and Toronto. BAM's core services include strategic planning, media buying, creative production, online contests, email marketing, and customized marketing technologies.
March 19, 2014