As costs increase, advertising revenues have steeply declined making it difficult for a business to survive by displaying banner ads alone. To cope with the increasingly difficult market, dot-coms are cutting their budgets by laying off or reducing salaries of their staffs. Many have already closed their businesses altogether.
As a result, online businesses are experiencing a mad scramble to find other means to increase revenues. NetZero, a free Internet provider, has reduced its free offering to 40 hours and introduced paid subscriptions. Bizland now charges for Web hosting it used to provide for free to small businesses. Salon.com, the online magazine, will now carry fee-based premium content.
What used to be free is now slowly changing to fee-based. The low ad rates and poor affiliate returns have forced many small entrepreneurs to face two options: to charge or go under. The state of running a free site only to earn $1 for every 1,000-banner impression per month can only last so long. With the current slump in ad market rates, a site generating 100,000 page views a month can only expect to earn $100 - an amount that is not even enough to cover dedicated server fees.
Many sites are seriously considering charging for access to their content, either through a monthly subscription fee or a one-time access fee. The success of WSJ.com in creating a subscription-based model has inspired both small and big publishers to explore the same approach.
Some publishers are looking to combine free content with fee-based content. A significant level of content will remain free, while paying members can have access to the best content with no banner ads and other "special" features. Using this strategy, the site can still generate the same amount of traffic overall, while subscribers enjoy special treatment and publishers earn revenue to pay for the bills and time spent developing the site.
For this model to succeed, however, a small site with no strong brand must cater to a niche market with information that nobody else has. Users will not like to pay the subscription fees if the site offers information similar to a hundred other free sites.
The site has to be dynamic, comprehensive, and the data needs to be accurate. It must provide users with a sense that they belong to something special in order to increase the perceived value of the site.
Proponents of this model believe that having 100 paying visitors per day is still much better than 100,000 free ones.
Over half a billion people worldwide now have Internet access, according to new research from Nielsen-Netratings. The research company’s latest study (Dec 2002) indicates that 580 million people have Net access, compared to 563 million in the third quarter of 2002. According to ITU the worldwide Internet population of 2002 is a bit higher at 655 million. Projected figures for Internet population for the year 2004 are 709.1 million (eMarketer) and 945 million (Computer Industry Almanac).