Online Business Models: One Size Doesn't Fit All

Mileage may vary. No one size fits all. Those two phrases encapsulate a lesson publishers must learn about charging for content online.

Too many publishers ask, “What’s the online business model?” as if there were only one universal business model for online publishing. That’s like asking, “What’s the only topic to publish content about?”

As different topics require different types of publications, so publishing different topics requires different business models. In this column, I’ll outline some of those differences.

First let’s take a broader perspective. One observable difference between print and online publishing is print business plans are commutative and online business plans are associative. Remember those terms from basic high school algebra?

Print publishing business models are commutative. If a business model works for one publication, it works for all. If The Wall Street Journal can charge consumers $1.00 per print copy, the Wyoming Business Report can, too. If The New York Times can prosper by selling printed ads adjacent to news stories, so can The Chronicle of Willimantic, Connecticut.

Online publishing is different. Just because The Wall Street Journal can charge $79 per year for access doesn’t mean the Wyoming Business Journal can, too. Nor can The Chronicle of Willimantic prosper online by selling ad banners the way The New York Times can. Online business models are associative. A plan’s methods and success are directly associated with a publication’s specifics and aren’t necessarily communicable to publications elsewhere.

During the past two weeks, I’ve attended two conferences at which panels of representatives from The New York Times, Los Angeles Times, The Financial Times, The Wall Street Journal, and Forbes were asked to state what business plan works for online publishing. That’s like asking the skippers of aircraft carriers and the Queen Elizabeth II what nautical advice they’d give the average barge captain. However interesting, plans and anecdotes from behemoths with enormous crews, giant budgets, and huge scopes aren’t applicable to most users.

Another example of no one size fits all is the clear dichotomy between business-to-business (B2B) and business-to-consumer (B2C) publications.

B2B publications are trade journals: Variety, ADWEEK, Aviation Week & Space Technology, Footwear Daily. Because they can advance their readers’ careers, business journals can easily charge for their content online. Most B2C publications, such as the Milwaukee Sentinel or People magazine, cannot.

B2C print publications charge consumers a subscription or newsstand price to subsidize printing and delivery costs, charge nothing for their actual content, and profit by selling advertising. Their publishers have attempted to transplant the print business model to online. As online has neither print nor direct delivery costs, these publications continued to charge nothing for content, attempting instead to profit by selling banner ads.

But online publishing is fundamentally different from print (for the basic reason why, see my NetMedia 2001 presentation), so the print business model transplant won’t succeed. Its failure is now causing many B2C publishers (also distressed by the current recession) to demand their Web sites begin charging for content. The refrain goes, “If the advertisers won’t pay, let’s switch to charging consumers!”

Those publishers fail to understand consumers have never paid for their content (not even in print), already pay ISPs for online access, and don’t find most B2C publications to be worth paying anything near the monthly $4 to 15 these publishers want to charge for any level of access. Hardly any consumers (generally under 1 percent) have been willing to pay what these publishers want.

Not only are these B2C publishers asking too high a price, they’re forgetting a variant of no one size fits all: No one price fits all.

Most that charge apply one price for access to all their content. That’s almost always a mistake. Answers to today’s crossword puzzle are worth more to most newspaper readers than today’s news from the state legislature. Why charge the same rate to access both?

Charging a single rate for all types of content is a mistake. Some content on a site might be worth a large amount, some only a little, and some or most not worth charging at all. “Free content is the river from which we draw our paying subscribers,” is how AmericanGreetings.com Chairman Charlie Fink responded to a question during the recent Jupiter Online Media Conference and Expo (Jupiter is a unit of this site’s parent corporation), addressing why his successful paid subscription site offered so much content for free.

Because no one size fits all and mileage may vary, the mechanics of charging for online content, as well as minefields to avoid when doing so, are complex. I spoke on this subject at the University of California at Berkeley’s Graduate School of Journalism. There’s a free Webcast of the lecture if you’d like to learn more.

Meet Vin at ClickZ E-Mail Strategies in New York City on May 19 and 20.