The leaders of the Internet world are rushing into the abyss, coming up with new ways to charge users for their once-free services every day. The latest entrant in the pay-to-play derby is Yahoo!, which will offer “premium” financial information for a monthly fee.
It’s a tempting strategy to follow. Who can pass up multiple revenue streams, however much of a trickle they may be at first?
But most Internet companies need to have the guts to stand alone. They should choose a different direction. They should adopt New Hamsphire’s state motto: Live Free or Die. If they do, they’ll be better off in the long run.
Of course, the current rush to charge for content and services is a direct reaction to the deflation of the advertising market. It’s true that Web advertising may never again be quite as big and bouncy as it once was. Hundreds of dot-coms, many with venture capital and IPO cash to burn, helped fuel the peak. Many are long gone, never to be heard from again.
But the online advertising market will recover from its current nadir and when it does, who will be in the best position to capitalize? That’s right, the free sites.
Naturally, a giant concern like Yahoo! can blend its offerings, charging in places where it thinks it can make a few bucks and keeping free the general stuff that draws the eyeballs, which in turn drive advertising income.
But other companies aren’t as fortunate and have to make a decision one way or the other on charging fees. It’s a decision that’s always been loaded with risk, but never more so than right now.
Wait a Minute
The new premium services from Yahoo! and eBay, not to mention the new pay-as-you-go Napster as well as AOL’s entrance into the music game, all come at a time when people are about to become better bargain hunters again.
If you had asked me a year ago to pay US$9.95 a month for stock quotes, I would have sent off my credit card number just to avoid the disruption of changing my online habits and moving away from my favorite brand.
But ask me now and I think, wait a minute. Stock quotes are something I’m pretty sure I can get elsewhere for free.
Sure, 10 bucks a month ain’t a lot, but as Yoda would say, clouded the future is. Suddenly, brand loyalty isn’t as important as saving a few bucks in case the next round of layoffs happens where you work. If Web sites start asking you to pay for content now, they are likely to drive you away.
Big and Small
Companies of all sizes are trying the charging bit. Bizland.com, a provider of sites for small businesses, has been alerting its members for weeks now that they had to choose a monthly fee program from its new pay-as-you-go menu or risk having their accounts shut off.
This was a company that boasted about its 1 million registered users and the like. Ask that membership question again in three months and see what kind of answer you get.
Because of economic factors, the drop-off will be steep. And getting those customers back, the customers that dot-coms spent five or 10 bucks a head to acquire back in the go-go days, is a non-starter.
We are told that customer acquisition is king. So why would you drive away someone already on board? Maybe your investors demand it or your financial survival requires it. But that doesn’t mean it will work.
Somewhere out there is the bottom of this elevator ride to hell. When the elevator starts going back up again, a lot of people who made short-term business decisions are going to be asked to step off at ground level.
Conversely, those who have kept the Web free might get a free ride of their own back up to the top.
What do you think? Let’s talk about it.
Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.
What an excellent article.