Wednesday
The Challenges Of Implementing Paid Content
BY NIKI SCEVAK
With a depressed advertising market, many online publishers are introducing subscription based content programmes. The task is not to be tended to lightly however, with a number of potential pitfalls becoming increasingly evident.
An interesting argument put forward by Jason McCabe Calacanis (editor of the Silicon Alley Daily) is that the second greatest (he believes the banner ad was the greatest) mistake of the Internet was to give content away for free.
Publishing executives reasoned that since distribution costs online were so cheap, content could be given away for free. The greater reach achieved by the lower cost of distribution meant that advertising would become even more lucrative. The flaw in the argument was obviously the assumption of a strong online advertising market.
Although the medium is becoming more and more viable for advertisers, it would be unreasonable to assume a mature market at this stage. Indeed, the first instance of online advertising was only in 1994. To its credit, in a relatively short amount of time, the online advertising industry has grown to $US5.7 billion world wide according to Jupiter Media Metrix. In Australia the estimates for online advertising vary from about $40 million through to $80 million per annum.
The chief impediment to paid content is the technical and payment infrastructure needed to administer subscription programs. Yesterday at Internet World Australia, Danni Ashe - CEO of Danni's hardrive - described the three greatest challenges to paid content from her perspective. Interestingly, two of the three were infrastructure related, with the free culture of the Internet the third.
Over the six years that Ashe has operated her soft pornography site, she has spent a significant amount of money on credit card processing and fraud detection. Being in such an industry, Ashe said that during the early days of operations a large percentage of transactions her site processed were fraudulent. Having to pay for the unauthorised transactions, Ashe quickly invested ways to detect any wrongdoing. The development is now at such a point that Ashe sells her payment processing engine to other sites. Interestingly, she expects around 50% of her revenue to eventually come from licensing her technology.
The major problem in turning consumer sentiment towards paid content is the number of free alternatives available. Listeners will be unlikely to pay for music for instance, if applications like Napster and Gnutella still exist.
A model that is becoming increasingly discussed at the moment is 'content cartels'. The prime aim of each cartel is to band together a number of sites with the same vertical focus (e.g. finance news) and centrally manage access to the network.
The benefits are twofold. Firstly, it enhances the value proposition to the consumer and secondly, from the publisher's perspective, it eliminates the majority of free alternatives.
The consumer maintains one billing relationship, so there is no need to manage multiple subscriptions and process multiple micropayments. For publishers, the group stance toward subscription based content gives them a stronger negotiating position with readers.
Whatever the model, publishers across all forms of media have ignored paid content up until now. Although there will inevitably be teething problems and mistakes made, a commercially viable will emerge before long.
BY NIKI SCEVAK
With a depressed advertising market, many online publishers are introducing subscription based content programmes. The task is not to be tended to lightly however, with a number of potential pitfalls becoming increasingly evident.
An interesting argument put forward by Jason McCabe Calacanis (editor of the Silicon Alley Daily) is that the second greatest (he believes the banner ad was the greatest) mistake of the Internet was to give content away for free.
Publishing executives reasoned that since distribution costs online were so cheap, content could be given away for free. The greater reach achieved by the lower cost of distribution meant that advertising would become even more lucrative. The flaw in the argument was obviously the assumption of a strong online advertising market.
Although the medium is becoming more and more viable for advertisers, it would be unreasonable to assume a mature market at this stage. Indeed, the first instance of online advertising was only in 1994. To its credit, in a relatively short amount of time, the online advertising industry has grown to $US5.7 billion world wide according to Jupiter Media Metrix. In Australia the estimates for online advertising vary from about $40 million through to $80 million per annum.
The chief impediment to paid content is the technical and payment infrastructure needed to administer subscription programs. Yesterday at Internet World Australia, Danni Ashe - CEO of Danni's hardrive - described the three greatest challenges to paid content from her perspective. Interestingly, two of the three were infrastructure related, with the free culture of the Internet the third.
Over the six years that Ashe has operated her soft pornography site, she has spent a significant amount of money on credit card processing and fraud detection. Being in such an industry, Ashe said that during the early days of operations a large percentage of transactions her site processed were fraudulent. Having to pay for the unauthorised transactions, Ashe quickly invested ways to detect any wrongdoing. The development is now at such a point that Ashe sells her payment processing engine to other sites. Interestingly, she expects around 50% of her revenue to eventually come from licensing her technology.
The major problem in turning consumer sentiment towards paid content is the number of free alternatives available. Listeners will be unlikely to pay for music for instance, if applications like Napster and Gnutella still exist.
A model that is becoming increasingly discussed at the moment is 'content cartels'. The prime aim of each cartel is to band together a number of sites with the same vertical focus (e.g. finance news) and centrally manage access to the network.
The benefits are twofold. Firstly, it enhances the value proposition to the consumer and secondly, from the publisher's perspective, it eliminates the majority of free alternatives.
The consumer maintains one billing relationship, so there is no need to manage multiple subscriptions and process multiple micropayments. For publishers, the group stance toward subscription based content gives them a stronger negotiating position with readers.
Whatever the model, publishers across all forms of media have ignored paid content up until now. Although there will inevitably be teething problems and mistakes made, a commercially viable will emerge before long.
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