Factiva CEO: News will cost in two years

Consumers will be coughing up for all online media content by 2004 according to Factiva CEO Clare Hart--as online ads aren't paying all the bills.

Consumers will be coughing up for all online media content by 2004, according to Factiva CEO Clare Hart, who sees a two-year turnaround for ISPs to get with the paid-for-content program.

Since the dot-com boom collapsed, it has become increasingly clear to publishers that online advertising isn’t going to drive as much revenue, and more and more online media moguls are charging for largely selective content.

“In order for publishers to continue to pay journalists they’re going to have to start charging, and that’s a good thing. Valuable information has a price,” Hart told ZDNet Australia on a recent visit to Sydney.

According to Hart, consumers do not want to pay for online content because they have been trained not to, whereas business users are used to putting their hands in their pockets for particular information.

“I think that the media has trained the online consumer that there is no value in what they publish,” Hart said. “In two years we will see a turnaround in the consumer market. It’s going to take some time for publishers to build the infrastructure to bill consumers. In the meantime, consumers are going to learn that they have to pay, business users on the other hand have know this for a long time.” Analyst group AMR Interactive said media companies are almost as unanimous in their insistence that paid content is the only way forward as Internet users are in their unwillingness to come up with the cash.

Fifty-seven percent of online Australians can't understand why anyone would pay for content on the Internet and 72 percent have never done so, according to recent AMR Interactive research. AMR Interactive senior consultant Jason Ross claims there are three reasons why this is the case. Firstly, for most of the history of the Internet content has been freely shared between geeks and academics, who believed everyone should have access to everything. This was followed, he said, by online businesses, which operated an “eyeballs at any cost” strategy. Finally, Internet media companies hooked on to the advertising revenue models.

“This combination is making it difficult for media companies to now convince consumers that they should pay for a service that is already free. On top of that, the slow uptake of broadband means that few consumers catch sight of the kind of enhanced value that paid content can provide,” Ross said.

“Media publishers clearly need to revaluate their revenue models and be creative about how they can add value on limited production budgets and convince consumers to pay for it.” Luring users online

According to Hart, publishers around the world are starting to migrate their users to the notion of paying for content and the next two years are just going to be the transition period. When consumers are unable to access certain information, they will quickly learn to pay for the electronic version, she believes.

The Wall Street Journal, Hart pointed out, never gave the paper away for free having elected for a subscription model from day one. The South Morning China Post is also now a subscription service, and parts of the New York Times are fee-based.

Customization and personalization, Hart said, are two ways to entice people to still come to the Web site. Once they’re there, if they want real value, they will have to pay for it, she said.

Factiva, a 50:50 joint venture between Dow Jones and Reuters born in 1999, aggregates 8000 commercial sources and posts 120,000 new articles every day of which some customers might just want two or three articles that that are relevant to them. Business people, Hart said, are paying for the convenience of being able to source particular areas of interest. Personalizing content is one way to convince users online material is worth paying for, she said. “Factiva wouldn’t be in business if the content and value we add wasn’t worth paying for,” Hart said.

Factiva, which has 1.5 million customers worldwide and staff in 47 cities in 28 countries, is in the process of changing its business model slightly--selling more technology and services to help organizations manage external and internal content.

The Factiva Professional Services division--the company’s consulting arm which is not quite two years old – is a growth opportunity for us, Hart said.

The professional services team covers three main areas; enterprise knowledge assessment--working with organizations to understand their external and internal needs and bringing all these together for them; editorial consulting – which better organizes a company’s internal information; and developer consulting – which looks at software development such as the construction of effective user interfaces.

Moving forward this will be the fastest growing area of the business, Hart said.

However, whilst market research company Simba estimates that that the paid content business market will see a compound annual growth rate of 7 percent between 2000 and 2005, and IDC anticipates a 10 percent annual growth rate, Hart says that given the global economy is growing at 2-3 percent this is a bit of a stretch.

“Companies will continue to invest,” she said, “but at a slower rate until the economy picks up.”