Pay up
Give it away for free and you start to get a reputation. This is especially true for Web sites: free news, free e-mail, free shipping, free Net access, free freebies. So how do you make your best customers pay after you've been such a floozy?
After all, pay they must. In case you haven't noticed, the Internet's give-it-away business model sends an e-company up in flames faster than a wooden outhouse being struck by lightning. Think about it: Perhaps a half-trillion dollars have vanished over the past year just because a few dot-com entrepreneurs overlooked details like how to earn revenue.
Wherever you put the blame, the free ride for surfers is over. In December, AltaVista axed some 3 million users from its free Internet access service, having watched in horror as smaller no-cost-access companies went belly up. My.MP3.com has begun hitting up customers for premium services. Even Napster, the poster child for the free Internet culture, plans to start remanding dues.
So exactly how do you gussy up an erstwhile free Web site so that it becomes a profitable proposition? Answer: very carefully. A few companies are pointing the way.
Juno Online Services, which built its name on free Internet access and e-mail, has begun nudging its 2.6 million users to upgrade to a more sophisticated service at $10 per month. Every time nonpaying users go online, Juno seduces them with promises for more dial-up phone numbers, a toll-free service number, and merciful reprieve from the floating advertisements inflicted on the freeloaders.
At the end of last year, Juno had converted some 750,000 of its users to paying customers. The Pentecostal Church should enjoy such a conversion rate.
Key to Juno's two-tiered strategy is recognizing that customers' habits change over time. Newbies don't mind the floating ads as long as they get free service. The company would be crazy to end the no-cost option. But many surfers who spend more than 10 hours a month online will pay not to be pestered. Juno is happy to oblige them.
Yahoo's FinanceVision, which launched last spring, showcases another way to pluck a buck from the kindness of strangers. With online advertising in the tank, the content site has begun pioneering new forms of sponsorship.
As talking heads deliver free market coverage or interviews of CEOs on one part of your screen, another section lets you view financial videos. These present at least one revenue stream. The same window could let advertisers sponsor an event such as the Consumer Electronics Show, which gets scant attention on TV. FinanceVision can also snatch a cut from the financial services sold on its site.
Another approach is to partner your way to respectability and profits. Having helped more than 8 million people build no-cost Web sites for everything from weddings to fly-fishing businesses, Homestead.com has collected an enviable customer base. It could sell customer names to spammers—or blitz users with banner ads. But these tired techniques only irk and clutter. They don't pay the rent.
Instead, the company has negotiated alliances with industry big-shots like Amazon.com and MarketWatch.com. Homestead provides a way for its customers to include links to these sites on their pages. Everyone benefits. Customers choose only the links they deem appropriate. The links bestow clout and visibility to piddly sites. And big-shot sponsors are happy to share revenues with Homestead and its customers.
Granted, none of these strategies will catapult you into the black. But when you've been giving it away for nothing, the road to respectability isn't glamorous.