Making the Leap From Free to Fee

Hello, readers! It’s good to be back.

After turning management of ClickZ over to Rebecca Lieb and Pamela Parker last May, I’ve watched from the sidelines as online businesses folded, slashed personnel, or sold off assets at fire-sale prices.

For online publishers that based their revenue models on ad sales exclusively, 2001 was indeed a brutal year (and from my perspective, not a bad time to be bench-warming). CPMs plummeted to single digits and lower. Cost per action (CPA) became an acceptable alternative to desperate publishers. Demand dried up. Bottom-feeders prevailed. If it was no fun to watch from the sidelines, it was far worse for those of you in the trenches.

From mid-2000 on, in articles such as “The Cult of Free,” “Is the Premise of ‘Free’ Killing Us?,” and “The Challenge of Online Publishing: Content Worth Paying For,” I banged the drum for publishers to reconsider their business models.

So here we are: It’s March 2002, and I’m heartened to see steady movement away from publishers relying exclusively on ad revenues. Increasingly, I see them moving toward paid-subscription models, premium content, and fee-based services.

Moving from “free” to “fee” is risky. If you offer content that’s simply “nice to have” rather than “vital to have,” chances are your audience won’t pay you a dime. If you have a bunch of competitors offering similar content for free, you’re not likely to succeed in charging for what your readers can get elsewhere for nothing. If your audience is ill-defined or if the solutions you offer are only a modest improvement over the status quo, they won’t open their wallets, either.

We need to keep in mind that for the past five years, Web surfers have been spoiled rotten by free content and services. Of course, the cost of producing that content and offering those services wasn’t at all free. But it was paid for willingly (and generously) by gung-ho venture capitalist and investors. It’s a tough mindset to overcome.

That’s where this column comes in. Right here — every other week — we’ll take a closer look at various online businesses that have successfully made the jump from “free” to “fee” (or at least have a working plan in place). We’ll ask questions about their business models, how they addressed the issue with their constituents, how they priced their content or services, and what impact it might have on their bottom lines.

This is mission-critical information and could spell the difference between success and failure for the future of many online entities. So I hope you’ll check in for every installment.

For other views on the issue, I’d encourage you to bookmark Anne Holland’s ContentBlog, Evan Williams’s “The End of Free,” and my own blog and discussion site, Bourland.com, all of which examine free-to-fee developments.

As always, if you’re aware of an online business whose story might interest readers of this column, I hope you’ll email me directly.

It’s great to be back, and I look forward to exploring this vital issue with you in the months to come.

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