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Survivors replace first movers

It is only a matter of time before most content costs money. The question is, when? 11/19 ReleVents hed: Survivors replace first movers dek: It is only a matter of time before most content costs money. The question is, when? by James Mathewson

Two reports on our site recently raise the question of how content sites are doing in the wake of the dot-bombs. The first report suggested that it is now time for surviving content sites to change the way they do business. The report suggests that boutique sites such as ours should make ad buys much simpler and start charging for content. The second report suggests the contrary: There is still plenty of competition, so sites must struggle to survive in the dreadful ad market until competition is so thinned out that they are the only providers of certain content. Only then can they charge subscriptions.

The difference between the two studies is the time frame. The first report, which was up on our site on November 14th, pointed to a Web two to three years down the road, after the brutal ad market has already taken its toll and thinned the competition down to a few unique content providers. The second study, which was posted on our site on November 18th, was the result of a poll of current Web users. The fact is, right now, most Web users will look elsewhere when faced with a need to subscribe. But, down the road, they will have no choice but to subscribe to sites if they want unique content.

In the meantime, for sites like ours, the question is, how do we survive? The ad market has fallen as fast as our competion, making it just as tough to get advertising revenue now as it was 18 months ago even with the decreased competition. According to the first study, 60 percent of all ad buys occur on the top three sites on the Net-AOL, Amazon, and Yahoo! What the report doesn’t say is that 90 percent of all ad buys occur on the top 50 sites. Most of the remaining 10 percent constitutes affiliate advertising that gets almost zero return. Sites like ours, which rank lower than the top 50 in terms of traffic, are unable to get sufficient advertising to cover our meager costs.

We find ourselves in a difficult dilemma: If we start charging for content, we will send most of your traffic to other sites that offer similar content and services; if we don’t start charging for content at some point, we will find ourselves among the dot-bombs. The question is when do we start charging for content? The answer is, when we start offering premium content services that users can’t find anywhere else. A lot of sites have special subscription-only premium services. They offer a lot of free content, and some special insider content that subscribers can’t find anywhere else. For example, Salon is ramping up its subscription services. It is banking on reader loyalty to keep its traffic up in a paid-for-content model. It’s a big risk because Salon is likely to lose more ad revenue than it gains in subscription revenue.

Unfortunately, the kinds of content and services users would pay for are the most expensive to create, so we simply can’t offer them if we have any hope of surviving. The only thing we can do is hunker down and wait for everyone else in our category to fold. In the meantime, we will make the ad buying process simpler, focussing less on the quantity of impressions and click throughs and more on the quality of the audience we provide advertisers. We can only hope that advertisers will start to listen to the new message.

James Mathewson is editor of ComputerUser magazine and ComputerUser.com.

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