Content, or Malcontent?

London-based Rafat Ali has a unique perspective about charging for online content.

Each weekday, Ali surfs the world’s publications, press releases, blogs, and conference speeches for news, events, insights, and developments about paid content. He also travels the globe in search of it, recently returning from a 40-day, three-continent tour of conferences, events, and interviews.

Ali’s the founder, editor, and publisher of PaidContent.org. He launched his one-man blog last February, after the New York New Media Association where he worked as a business and technology journalist folded. Within six months of its launch, PaidContent.org, while focused on a business niche, won “News Weblog of the Year” from the prestigious NetMedia European Online Journalism Awards. The publication provides Ali with more income than he ever earned working as a journalist for other companies.

You’ve probably read many year-end or year-start roundups about online industry issues. But none asked Ali for his unique perspective about where charging for online content was in 2003 and is going in 2004. Although he reports daily about paid content, Ali rarely talks about annual trends and themes he sees. According to Ali:

We seem to be coming full circle this year. In 2002, there wasn’t much money to be had from advertising, so the question became whether or not people would pay for online content. The first half of 2003 showed that many would, but the debate was still on about whether or not most would.

The second half of 2003 — particularly after the launch of Apple’s iTunes — showed that most would, if the price was right. But also in the second half of 2003, the advertising market came back, and many of these sites are now back trying to make most of their money off advertising. They keep shifting focus.

In strategic terms, the most insightful thing I’ve heard in the past 12 months were the remarks this past Saturday by Philips Electronics CEO Gerard Kleisterlee at the Consumer Electronics Show (CES) in Las Vegas.

Kleisterlee said the technology industry developed technologies to serve its own needs, rather than those of consumers. “The first guiding principle should be that the consumer always comes first. If a product requires a manual, maybe it’s too complex,” Kleisterlee said.

Ali thinks this is also the common failing of many publishing Web sites, and not only those from large corporations. “The amount of ‘bloatware’ content offered online is astonishing. Shoveling everything online isn’t the answer. Most publishers’ sites need lots of streamlining.” He also thinks personalization, as overarching concept, will occur.

I asked Ali for an overview of how the various sectors of the publishing and broadcasting industries are doing at charging for online content:

Multimedia is proving to be big. However, just shoveling traditional TV content online isn’t really working. A good example of this is at Yahoo, which is probably now realizing that its [Yahoo Platinum] paid content service, which aggregates traditional TV content online, probably wasn’t such a good idea. RealNetworks likewise probably realizes that holistic packaging [of traditional broadcast content] might not be the way to go. However, FeedRoom might be making money off aggregation.

The financial content sector is going well at charging, but its content has become too much of a commodity online. So many of the big players are trying to find differentiation. CBS MarketWatch.com is banking on speed. Yahoo Finance is going the aggregation route. But there is plenty of speed and aggregation about. I see a shakeout coming soon.

Sports also has become a solid play for charging, but primarily when done by the teams and leagues themselves.

Newspapers and magazines are still in pretty bad situations online and should be panicking. The only buzz about them this past year had been their potentials for paid search in local classified, but they’re now getting killed there by Google and other big players.

Much of Ali’s work nowadays is monitoring European and Asian developments in paid wireless content.

“Sports and entertainment are big, but news is not,” said Ali. “Most of the paid content in wireless are phone ringtones or downloadable music or content about hobbies or sports. Sex content may already be very big in Europe paid wireless content, but [it’s] hidden and not well reported.”

With one notable exception, Ali said paid online archives are making money, primarily from professional researchers, not consumers. “The $2.95 price of a story from The New York Times’ online archive is too high for most consumers.”

The exception is comic book content. “It’s a cult and rather niche market, but paid online comic book archives are heavily used.”

Ali believes proper online-content pricing is still a common problem, part of which is the lack of micropayment use. “What’s weird was that 2003 was a real yo-yo year in that sense. There is real money there to be taken from micropayments. But only Apple has really tried,” he said. “This past year saw six or seven U.S. companies launch micropayment solutions that are very different and better than those launched by companies during the Internet boom years. But all those new companies are struggling for a foothold.”

He tends to agree with New York University Professor Clay Shirky’s conjecture that buying anything online, even if the price is very small, creates a friction that tends to make consumers balk. Ali believes the type of content makes a big difference.

“Music is different than text. Users who want to buy music online have probably heard the entire tune before and know its value to them,” he said. “But users who want to buy a text story or report online probably haven’t read the text before, are uncertain about its value to them, and will probably be much more reluctant to buy.”

Another much-talked-about technology Ali has been watching is rich site summary (RSS). “RSS is getting quite common and is about to be built into many Microsoft and Yahoo applications,” he said. “But it yet has no real revenue applications. It’s only good is pushing people to your Web site, like email marketing does.”

Nor does Ali yet see much success in charging for blog content. His site and newsletter offer free, ad-sponsored content.

Ali concludes, “The big problem this year is a lack of strategic thinking. Everything everyone is doing is simply about tactics. Most are only pursuing whatever is considered to be the ‘next thing.’ Most publishers are focusing on just one thing; not enough are trying to diversify their revenue streams.”