In a previous article I mentioned that portal sites will increasingly be looking for new ways to make money, rather than relying exclusively on the advertising model.
Will Internet users pay for premium information in an environment in which everything is 'free'?
This will be driven largely by a proliferation of boutique sites that will compete for the same ad-spend pie. In the next few weeks, I will discuss a few examples of developments in this area, drawing on some comments from IDC`s Rick Miller, in Practical Portals: Beyond the Web`s Front Door.
The first area portal sites are exploring is the possibility of charging for information, rather than giving it away. Some of the obvious questions arising from this are:
- Will Internet users pay for premium information in an environment in which everything is "free"?
- Will viewers visit a site where nothing is free?
- Can a mix of premium content and free advertising-supported content generate profits?
- If sites do charge for content, should they charge on the subscription model or on the pay-per-view model?
Although most hard-core Netizens immediately associate these dilemmas with well-known Web publishers like C-Net, CNN, thestreet.com and the Wall Street Journal`s online edition (www.wsj.com), the question of charging for content has been pondered for years by pure pay information publishers like Lexis-Nexis.
Lexis-Nexis, Dow Jones and others are members of an industry that generates in the neighborhood of $30 billion to $40 billion per year from selling proprietary and aggregated information to a clientele of institutions and professionals. It is an industry that was supposed to die with the advent of the World Wide Web and the onslaught of free content.
The information publishing industry did not die, however. Although it underwent a shakeout and a period of mergers and acquisitions, information publishers are surviving. They`ve just had to make a few adjustments -- adjustments pure Web publishers will have to adopt in one form or another if they wish to escape the pure advertising revenue model.
Information publishers are combining their databases of information with knowledge management tools to offer higher forms of business intelligence, and are capitalising on years of branding. The Wall Street Journal has capitalised on a century`s worth of strong brand recognition by charging for all of its content. CNET and CNN might be hard pressed to try such a strategy as page views would likely diminish and advertisers would flee in droves. However, with personalisation software and some simple knowledge management tools, Interent publishers might create a service valuable enough for the general public to pay for.
The approach of a widely accepted micropayments platform may signal an even greater opportunity for Internet publishers to decrease reliance on advertising. IDC believes subscription revenue models are somewhat counterintuitive to the nature of the Internet because users have not widely adopted the Internet as a push medium (like television). Even though subscription services don`t have to push content, once users have paid their annual subscription fee, the balance of power in the information exchange has shifted to the publisher. Micropayments give end-users complete freedom to choose the information that is most valuable to them.
The important issue that Internet publishers and information publishers have to grapple with is this: information and technology are no longer separable entities. Technology adds the value in value-added information, and publishers that capitalise on technology will capitalise on the opportunities their respective markets provide.
This article has just begun to explore the possibilities of alternative business models and revenue streams for portal sites. Next time we will look at a few examples of companies focusing on the "niche industry vortex" model.
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