Online Economics, Ads, and Crash Landings
March 29, 2009
A number of articles have been sent to us here in the mind drainage choked goose pond in the last couple of weeks on the subject of monetizing electronic information. Our official view is that getting cash for online content requires a rethink of the available business models. The pay by the drink approach and the subscription approach don’t work very well in our experience. You can make these work if you have high value, scarce, hard to get information. Other types of information don’t have magnetic appeal so the connection between the user’s credit card and the vendor’s bank account doesn’t stick.
For a case example of how this fails as a business model, you may want to read and save Joseph Tartakoff’s “Tracking The Online-Only Seattle P-I: Traffic Down 20 Percent” here. What struck me was that without the hard copy paper acting as a sales flier, users are not going to the dead tree outfit’s online only service. Without traffic, online advertising becomes less attractive. Over time, the Seattle Post Intelligencer will realize that its online play won’t pay the bills. Without the cash to create the hard copy version, the marketing of the Web site becomes job one. The problem is that marketing is expensive. Ergo: the business models in use at this moment can be tracked casually by anyone with a yen to read news about the Seattle P-I revenue adventure.
I don’t want to quack harshly, but the glib words about online revenue underscore the lack of understanding about how online economics work in the real world. Google borrowed a useful model and now provides an example–or as the entitlement crowd of azure chip consultants likes to say–or a use case. Whatever lingo you prefer is fine, but the fact is that declining traffic means that ad and subscription models are not likely to pull this site out of a steep nose dive. Fasten your seat belts.
Stephen Arnold, March 29, 2009
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