making money from user fees subscriptions

making money from user fees & subscriptions

For many years, conventional wisdom held that people wouldn't pay for anything online. There was an abundance of free information and services, and people were uneasy about using credit cards online. It seemed impossible to charge for anything.

But people are always willing to pay for things they need or want. And many online players from newspapers to software to games are now making a living through user fees and subscriptions.

3 ways to collect user fees:

• Subscription-only services

• Tiered services with free and premium offerings

• Pay-as-you-go services

subscription-only services Subscription services charge users an up-front fee for unlimited access to content or services over a set period of time; nothing is given away for free. Great work if you can get it!

But not many businesses can get away with a subscription-only model, because web users rarely invest money up front in an unknown quantity. Only deeply compelling services or established brands can pull it off. A success story: Both Consumer Reports and The Wall Street Journal bucked the industry trend in 1996 by establishing subscription-only content sites that continue to this day.

tiered services Tiered services put the psychology of salesmanship to work on the web. They offer users free access to a site or, rather, part of a site and then sell them premium services or content. This approach has worked for a wide range of businesses, including magazines, research services, software, and games.

what subscribers want

• Value. They'll pay for a service they need that they can't get elsewhere.

• A free sample. They want to try the product before committing to a subscription.

For instance, the financial information service Hoover's Online offers free access to its basic descriptions of companies and industries. But its premium services in-depth reports, competitive profiles, targeted searching require an annual subscription.

The tiered approach has also worked well for ESPN. Its sports news is available free, but users a-plenty pay to join fantasy sport leagues (baseball, basketball, and football) timed with each major league season. Sports fans pay around $30 per season to assemble and coach a team (based on pro athletes) and get a shot at the (fantasy) championship.

This model works for software, as well. Atomz provides a free, basic version of its site search engine, which brings search capabilities to sites with under 500 pages. Although customers can use this free service indefinitely, Atomz uses it as a lure for their full-featured services, for which customers pay a monthly fee.

pay-as-you-go services Pay-as-you go services allow consumers to sample a site little by little, paying only for the content or services they use. The fee may be applied based on the service rendered or time elapsed. Content sites, for example, may charge by the article, whereas game sites may charge by the hour.

The problem with this model is that the payment system really isn't there yet. Once consumers can make true micropayments a few pennies per article, for instance this model will become far more viable. (See online payment options, p. 76.)