Avoiding The Content Apocalypse?

ObligatoryUserName asks: "Recently, a gaggle of Amazon Honor System, and PayPal logos (or cheeky text equivalents) have been proliferating on a number of great, beloved and/or famous/infamous web sites. While still other sites are turning to membership programs. The advertising model seems to have failed (or is in the process of failing) and according to yesterday's great interview, micropayments aren't going to work out either. So, I was wondering, how can we save these sites? Is the major cost bandwidth? (Sites with bandwidth sponsors seem, so far, less likely to ask for micropayments.) Is most of the money going to the salaries of content creators? If some non-profit organization or the government (as per PBS) were to pay for bandwidth for exceptional/popular sites, how much would it help?" It's a decent question, and one that I keep bringing up because a workable solution has yet to present itself. Before, the chorus was micropayments (as the minor chord chimes in with the yet-to-be-tested Street Performer's Protocol). With micropayments in doubt, what other routes can sites follow for the funding they need to exist?

Comments

Advertising model is NOT failing

[NineNine]

The advertising model is NOT failing. What is failing is these top-heavy companies with huge staffs and outrageous expenses. Again, look at the porn industry. There is HUGE evidence there or advertising for revenue working just fine. That's because most people who run adult web sites run them aggressively, and keep costs low. You don't need hundreds of people to run a content web site, period. You don't need scads of marketing and other random management people. You don't need huge, glamorous offices in the most expensive real estate market in the world. You don't need TV ads.

Many excellent adult sites are bringing in VERY large amounts of purely advertising revenue. If non-adult websites would simply follow this business model (it usually takes them a few years to catch up), then we wouldn't see as many failures. Advertising works fine. There's plenty of room in the world of non-adult websites for ad-drive, content sites, if they are run with an eye on the bottom line.

Too Many Visitors!

[ps]

I currently work for a company that has several large websites. Our goal for last year was 300 million visitors. Unfortunately (!) we had 1.6 billion visitors. This nearly killed us. We had the bandwidth, but the *cost* of that bandwidth was huge. The ad sales just don't cover the costs.

How did we fix it? We haven't. The higher ups set the goal for this year of 300 million visitors (again). So we have to try to find a way to keep people away from the site, but not drive everyone away. It also means trying to co-brand with other companies (where they pay us), and not updating the content as much).

Oddly enough for today's climate, our eCommerce activities are actually making money, and keeping the rest of the sites afloat.

Will we be able to make it? We'll have to see...

Confusion on Micropayments

[TOTKChief]

Ask most any content producer what they want to get paid with, and they'll reply, "Micropayments." But it's because we use the term the wrong way.

After carefully reading Clay Shirky's comments on micropayments, he makes sense: paying before you're sure about the quality of something is a bad idea. Even with a respected content producer, how are you sure that they will maintain standards?

Case in point: Tom Clancy. I haunt alt.books.tom-clancy, and much discussion has raged there about the declining quality of his novels. Some have stated that they will never again rush to their bookstore on release day and pay full price for a first-edition hardback. I am almost to that point myself--because the quality hasn't been maintained.

What most of us content producers want is to charge, but not charge highly. We can't do it with credit cards--most folks know about the charges there. [What, you think Visa stays solvent just with our high balances? =) I wish.] So "micropayments" is our answer, although the traditional micropayment method [pay $0.NN for my bit o' content] isn't really what we want.

Here's where we are probably going:

1. Maintain our public archives for N months--probably a quarter. IOW, you can see stuff from 01/2001-03/2001, but you're screwed before then.
2. Maintain our email lists as no-charge subscriptions for those who don't wish to pay. Place ads on those lists.
3. Offer access to six years of articles in the archives if you're a subscriber. [Cost: $2-5/mo. That range is broad because we haven't done market research yet.]
4. Offer ad-free email lists if you just want the straight poppo. [Cost: $5-10/mo, depending on the list, market research, and how much it costs us in lost revenue. We probably wouldn't seek to make up all the "lost" ad revenue--probably offer a break of, say, 20-25% over what we'd bring in with ads.]

If anyone has comments on this system, I'd love to hear them. Since we're an ezine, we can try to adapt the magazine business model to the Internet, all the while trying to kill the notion that information and storage are combined. My rationale on charging for archive access is just like asking us to store your old copies of Sports Illustrated--as long as you don't mind if we peruse the swimsuit issue. [Carol Alt: yowza!]

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Follow the adult industry, as usual

[aiken_d]

If there's one thing history has shown us, it's that adult entertainment leads the way in both technology adoption and maxmimizing revenue. So let's look at the current state of the adult internet industry as a model for where everyone else will be in a couple of years.

The reason the adult industry is always ahead of mainstream industries is the complete lack of "wishful thinking" business plans. Well, that's not entirely true. How about, "the complete lack of funding available for 'wishful thinking' business plans"? There is nobody to give you $20 million in the adult industry; if you want that kind of money, you have to get it the old fashioned way: by earning it.

For that reason, bad ideas die quickly... whereas in the so-called real world, bad ideas can persist for years if the people responsible have the right connections and are good with powerpoint.

So let's move on to how people are really making money on the net.

The adult industry is stratified into two key market segments: pay sites and free sites. Pay sites charge membership fees, usually between $9.95/month and $29.95/month. The subscriptions are typically auto-renewing. General stats show an average of about 3 months/signup, or revenue on the order of $80/signup (gross).

Free sites act as feeders to pay sites. The sole purpose of a free site is to send traffic to one or more pay sites, in return for a percentage on sales. Free sites run banners for the affiliate programs they participate in, and want to minimize free pageviews before sending people to the pay sites.

See what's going on here? Pay sites don't *pay* anyone to run banner ads. It's a market solution, where free sites are constantly hunting for sponsors who have higher conversions, pay out more, etc. It is up to the free site to generate pageviews (preferably by good content and word of mouth, but all too often by spam and fraud).

However, free sites are really the entry level of the industry. There are a few that make some real money, but the fast majority make hundreds to the low thousands of dollars a month; not enough to support a real business.

Still, there are thousands and thousands of hobbyists making those hundreds to low thousands of dollars, and they in turn generate huge traffic volume for pay sites, where much higher revenues are concentrated among fewer players.

Why does it work that way in the adult internet? Because the people involved are running actual businesses that depend on cash flow and profitability.

What we're seeing in the mainstream internet is the crash and burn of the "lose money on every pageview, but make it up in volume" approach. And the "we'll lose a fortune, but people will really like our site" approach.

Bottom line: it costs real money to create (most) content, and it costs *real* money to operate a real business. That money can either come from the business itself (profitability), or from outside investors (funding, loans, selling stock). The first approach is what energy folks would call renewable; the second approach is basically just buying time.

The mainstream internet is already starting to evolve to more colosely resemble the adult industry. Community sites (like /.) can generate huge amounts of pageviews, and (hopefully) make money by getting percentages on revenue they drive to advertisers, either hard goods or for-pay content sites.

Cheers
-b

Re:Follow the adult industry, as usual

[acroyear]

Why does it work that way in the adult internet? Because the people involved are running actual businesses that depend on cash flow and profitability.

And because "adult entertainment" is a sure bet -- people WILL pay for it, especially if its served up in a way that maintains their privacy. They have for centuries; and they have for every new media since radio.

Nothing else available on the 'net is stuff that people, personally, absolutely will pay for. All you can do is hope. Trouble is that everything else people buy, they aren't (necessarilly) ashamed to buy in public.

You can buy CDs and VHS/DVDs in a store, with the gratification of taking it with you; the 'net can't do that. You can buy software in a store, and have the books with you right away, as opposed to having to read on the screen or waste 100s of pages of paper to print them. Books are the same way -- if there's a store that carries what you like on a regular basis, then you hit that store, and take it with you. Ditto magazines, newspapers, etc...nothing they have you couldn't get some other way.

Yes, you could get "porn" the old fashioned way, but you'd rather do it in total privacy and not deal with the anxiety of funny looks from people in or outside the "shop", or the postman delivering your "descrete plain brown wrapped package". Porn on the 'net is value added -- the value added is privacy in a form never before seen. No other market needs that particular "value added". The only anxieties 1) your sig-other looks at your visa bill, 2) your company actually looks at its web-logs, or 3) you do it so much that you exceed the download limit of your ISP, and they start charging $1/meg (back to said visa bill).

So the problem is that e-commerce will not and never will be the internet's true "killer app". Shipping costs and times are prohibitive compared to the convenience and experience of walking into a store and walking out with product, regardless of the extra availability of items online.

The "killer app" of the 'net is what it was made for -- communication mechanisms like slashdot and groups.yahoo.com and stuff like that. Only that stuff is so easy to make (relatively speaking -- especially with so much free software to build it on), nobody thinks its really worth paying for. Egroups, listbot, onelist all just finally (and cleanly) automated the process that majordomo and listservs have had (and that required a lot of "administration" for far too long) for years; my reaction was "about time".

The idea that free sites leads to pay sites in "information" sites just isn't going to work. People will too quickly content themselves with the free, because the "value added" from the pay site usually just isn't enough. As comment 19 states, most content out there isn't worth paying for.

"Net Taxes" won't work either, as it will create an entity like the ASCAP, which will unfairly redistribute its collected fees to the point that only a small portion of the sites out there will get a large portion of the cash, and most sites get nothing. ASCAP does exactly that with regards to all of its site-licensed based income like from broadcasting sites and stations, and public merchants. It goes to the top radio airplay artists, regardless of what the broadcaster is actually broadcasting.