| No more Freebies on the Net |
Net users are likely to have to start paying or paying more for a lot of other internet services. With a softening of the advertising market which appears incapable of supporting the entire web, plus the launch of several sophisticated services like free long distance calling that save consumers serious money, several popular on line sites seem to be considering a shift from a free to a fee based model. For example yahoo unveiled several free voice features from internet content over telephone to voice mail and long distance calling, where it saw plenty of potential to charge for some of the services. America Online is also deciding to add new fees to its engine. E Bay-the famous auction site has added a premium fee of $19.95 on top of a modest listing fees to sellers who want to reach a larger audience. The net seems to have realized that the days of relying solely on advertising revenues has finished and that they need to shift to newer more realistic revenue generating models. Having built a customer base and large following the sites are now attempting to generate revenue streams from the same.
In the near future downloads like music, films, text and software from the net are likely to become taxable. The OECD (Organisation for Economic Cooperation and Development), an international body comprising 20 countries is expected to provide guidelines to all its members on the ways and means to tax such transactions. A software is going to be developed which will help the tax authorities to keep track of all such transactions. And may be the software will be empowered to deduct taxes from payment to the supplier automatically.
The net has evolved a number of revenue generating models like Subscription fees. The idea is to get customers to pay upfront for access to certain services or content. The principal innovation in the last few years has been the drive to use free trials to capture a customer's attention. AOL's financial power of 20 million people paying $20 a month or more demonstrated the power of this business model to Time-Warner. A subscription fee is billed monthly, giving the Web service provider current contact and payment information. A bad account can be cancelled immediately. A customer who wants to cancel a traditional online subscription often finds that the process takes considerable effort. Many subscription services find the monthly payment more important than a simplified cancellation fee. Cancellations mean churn. Adding new subscribers is an expensive, time-consuming business.
Per-use fee. Per-use fees have been reincarnated as payment "by the drink". The idea is that when a person consumes information, the customer pays only for what is viewed or downloaded. There are many schemes to protect the information that has been copied in digital form. The most successful implementers of the per-use fees are the aggregators who provide access to costly business reports or scientific and technical documents. The customer does not need to subscribe to Thomson's First Call or other high-end financial information. A report or a single "page" of data may be purchased from an authorized reseller or directly from Thomson.
License fee. This is a term once reserved for use by commercial database companies to refer to a fee paid to provide an organization's or institution's users with unlimited access to a specific database. "License fee" now includes software, right-to-redistribute text and non-text content, and the nuances of a "subscription". A license fee, in practice, is calculated. License fees are usually based on a number of variables. The customer wants to pay one price and be relieved of responsibilities for complying with restrictions that may be impossible to enforce. The content provider, on the other hand, usually wants to create the most complex algorithm possible in order to maximize return. In a corporate setting, a license fee means five or six figures for branded content. For individuals, a license fee in practice is an annual fee of $100 or more paid up front.
Invisible fees. The term that is used frequently to describe this charging mechanism is "microcash". Technology exists to track a user's actions within a Web site, and certain clicks carry a fee. Intended as small, perhaps less than a penny, these are opt-in charges, which means that a person agrees to be charged for clicks before entering the site or the microcash zone. Digital debit cards make the buying process automatic. Once the card is activated, the charges are deducted from the user's account instantly and without further pop-up alerts or dialog boxes. Barriers like entering credit card numbers or clicking "I Agree" boxes have a negative effect on a user's buying. The fees, therefore, are not invisible, just easy to overlook. The most common implementation of microcash does not affect the customer. A click-through allows the referring Web site to receive a bounty on qualified users entering another site. The fees range from a penny or less to as much as 30¢ or more.
Upfront or activation fee. Internet service providers specialize in this type of charge. The idea is that setting up an account or access requires extra effort. In reality, the upfront fee is a variation of the license fee. Depending on a customer's degree of sophistication and the need for the information, upfront fees can be routine or rip-offs. From the Web site operator's point of view, cash in hand is a desirable outcome. Dun & Bradstreet was at one time a master of the activation fee. Its brilliant variant was to include in the upfront fee a specific number of uses. In order to continue to have access to valuable credit reports, additional "units" could be purchased. As many customers discover, an upfront fee is money wasted. The service may be accessed only a handful of times.
Advertiser fee. Moreover.com, a U.K.-based service with offices in San Francisco, provides content that is free. However, in order to display the content on a Web site or use it within an organization, the customer must agree to display advertising messages on the Web page with the content. On the surface, the content comes at a bargain price. A moment's thought reveals that the cost is sustained by advertising. Variations of this appear in the sale of words like "airline" in search hit listings, so a particular Web site is ranked at the top of the hit list and in the banner advertisements. The variations for advertising-supported content are rich and varied. They range from annoying popup boxes (Netscape) to banner advertisements (Excite) to complex blends of links, icons, messages, paid backlinks that pay commissions to the referring site, and hundreds of other clever monetizing gimmicks. On public portal sites featuring rich content, it is difficult for an outsider to separate the sponsored message from the content that is generated by the site operator without direct compensation. In the broader Internet arena, business models have emerged that seem to make sense. One of the most talked about innovations is the group-buying model. The idea is that as more people commit to buy a particular product, the manufacturer offers a greater discount. Customers can buy at whatever price point seems reasonable to them at any time during the offer. Those waiting until the lowest price is achieved can save 10%, 15%, or more off retail prices. When the supply of "on offer" products has been exhausted, that product special is closed.
A user who finds "free" content may balk at paying for "extra cost documents". If the route around the revenue path is too tricky, customers may become suspicious. Brand loyalty could be negatively affected.
When the information is "must have" information, customers pay. Traditionally lawyers, patent attorneys, pharmaceutical research scientists, and investment analysts in the midst of major deals pay the going rate.
The obvious challenge ahead for the net economy is to
generate the revenue stream from the customer base. Though pricing of the service will be
a very difficult exercise, it is a must in the new web economy!
Aru Srivastava
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