If you look at the latest report from the Online Publishers Association (OPA) covering online paid content, you might well think that online information is a hot commodity. Surfing around the reaches of the Internet, consumers spent $748 million for content during the first and second quarters of 2003, a jump of 23% over the same six months in 2002, the OPA says.


Jupiter Research, an international research outfit, predicted earlier this year that spending on online content will grow by 30% in 2003 – to $2 billion from $1.6 billion in 2002. By 2007, Jupiter says, payments for online content will be $5.4 billion.

Meanwhile, some newspaper chains with web presences also offer rosy numbers. Knight Ridder Digital reports that in the third quarter of this year, revenues reached $21.5 million, up some 51% over the comparable 2002 period. Operating income was $5.4 million, a decided improvement over the $2.8 million loss in the same 2002 quarter. For its part, New York Times Digital says that third quarter revenues in 2003 climbed to $21.8 million, a 19.7% improvement over last year’s $18.2 million. As a result, operating income reached $5.7 million, just about double the $2.8 million for the comparable 2002 period. Content that people pay for on media websites range from archived news stories to crossword puzzle solutions to articles bundled together around a particular topic.

“Consumers are slowly opening their pocketbooks for paid content,” says David Card, vice-president and research director at Jupiter.


Are they? What do people mean by ‘paid content’? And when online content providers report glowing revenue figures from online customers, they often don’t mention profitability. Is anyone actually making money selling content?


Indeed, some of the figures cited above – and those of the OPA in particular – have been met with a degree of skepticism. Vin Crosbie, president and managing partner of Digital Deliverance, a Darien, Ct., consulting firm that helps clients market content online, thinks the Publishers Association’s numbers are “questionable.” The figures, he says, include sales of things like music, professional wiring reports from the Institute of Electrical and Electronic Engineer’s web site, and all those greeting cards people send each other online at sites such as Blue Mountain Arts, not to mention information on former high school buddies sold by Classmates.com.


According to Anne Holland, founder of MarketingSherpa, a marketing consulting firm and the publisher of MarketingSherpa’s newsletters: “You have to read those numbers carefully because they add in things that may or may not be (true content), things like dating services. There are different definitions of what information is and what people are paying for. It’s very confusing.”


Skeptics cast a dubious eye even on the figures reported by some newspaper companies since the numbers include items such as the sale of old articles on third-party services like LexisNexis. When Crosbie analyzes the online divisions of newspaper corporations, he “backs out” these kinds of earnings because, strictly speaking, they are not coming from the Internet operation.


Crosbie and others also note that in some cases newspaper companies attribute part of the revenues from their newspaper’s print classified advertisements to the revenues earned by their web sites – on the theory that some of the ads are read online when browsers look at the paper’s electronic edition or are duplicated online as part of the paper’s web site. “If a newspaper says that its online service generated $60 million, but $20 million of it is an accounting transfer,” then that can skew the actual revenue picture, Crosbie says.


Anne Holland, for her part, suggests that revenue reports such as the one released by the OPA miss many of the real marketing success stories in online publishing because the researchers concentrate only on the “big, famous” sites. “But loads of successful subscriber and for-fee content sites fall under the radar, in particular business-to-business sites. They don’t show up in the reports because they don’t have millions of people paying a few dollars a month.” One example cited by Holland: Hrnext.com, which targets human resources professionals. The site, which charges almost $500 a year for membership and also sells reports, “is doing extremely well,” Holland notes.


Googling for Free Information

The argument over the validity of some of the numbers notwithstanding, the debate over the willingness of consumers to pay for their information or content fix is far from settled.


During the Internet boom a vast number of sites lured Internet surfers by offering them lots of free information – news, business data, sports statistics. But with the bust of the dot.coms, much of that free information disappeared. Some surveys show that consumers who once feasted on no-cost data are not necessarily resigned to paying for it now that it has a price tag attached. In one such survey, conducted by Jupiter Research in 2002, more than 60% of the respondents said they would not be willing to pay a dime for online content they liked if the free versions were to disappear. The belief is still strong among many Internet surfers that they can Google their way into finding what they want for free somewhere among the billion-plus web sites still out there. 


But experts – and owners of information – are convinced, more than ever, that the tide has turned and that information and content will, increasingly, carry a price tag. Wharton professor of marketing Peter S. Fader says that may be especially true for consumers and businesses seeking highly specialized information and for those who need run-of-the-mill information, but are willing to spend money to get it because they don’t want to invest time and effort in online searches. Sites –   ranging from Insidedigitalmedia.com, which sells transcripts of interviews with digital mavens, to Rpiratings.com, which sells esoteric data about men’s and women’s basketball statistics – are finding success selling the information they own, according to Fader. “We are seeing providers put up dollars against content, with little pushback from consumers. For (many consumers) it’s not ‘What can I steal?’, but ‘What can I get in the form I want because time is more important to me than money?’”


The flip side to the declining resistance to paying for information may be that increasing numbers of businesses generating information are concentrating on very specialized content that is difficult, if not impossible, to get easily elsewhere. And that may be the right way to go, according to eMarketer, a research firm. In late 2002 eMarketer, using data collected by the OPA as well as several independent research companies, rated the three-to-five-year revenue growth potential for 15 categories of paid online content. Eleven of those categories – news, adult information, diet and health advice, personal investment and financial information – have only so-so potential for revenue growth potential. Just four sites – including those offering educational and reference material and those with unique content and services – have a high revenue growth potential, according to the research firm.


Online publishers who know how to add value to mundane products are also best poised to generate meaningful revenues online. Take Congressional Quarterly, which has been a must-read for Washington, D.C. politicians, political insiders and others for almost half a century.


When CQ decided to also publish online during the mid-1990s and charge the same price for its Internet publications as for the printed ones delivered all over Washington, the reaction and the revenues realized were underwhelming, says Keith A. White, Sr. CQ’s vice president and general manager.


The failure of CQ’s online effort to add to the bottom line was especially ironic. Beginning in 1984, long before the world wide web turned the Internet into a public phenomenon, CQ was making a tidy sum gathering free printed government documents and then charging for making them available to its customers via what was then a far more restricted Internet. When the world wide web became more available to all, federal bureaucracies began posting their documents online, easing access for everyone at no charge. “That cut into our electronic revenues severely,” says White.


But the fact that CQ’s customers had once been willing to pay for what became freely-available data was not lost on CQ. At the end of the 1990s, the Y2K bug loomed. Though it would have been easy to just spend money on updating its computers, CQ decided that it would use the opportunity to expand its technological capabilities. The result of that decision was the acquisition of a unified data repository, including a massive computer-based collection of public documents. A story about a bill pending in Congress, for example, is studded with an array of hyperlinks that take the reader to relevant documents such as an analysis of the bill and a full version of the proposed legislation’s text, not to mention amendments that have been offered, accepted or dropped. Says White: “For people who are following Congress, that is a powerful tool.” In other words, CQ has, once again, found a way to use free government documents to its advantage, this time to add value to its online proprietary products and pump up its flagging online effort.


As a result, CQ’s online business now generates 50% of its revenues, compared to 20% in 1999. White declines to give a dollar figure, noting that CQ does not make public any financial details.


Has the online effort cannibalized the print versions of CQ’s publications, which cannot offer as much? Yes, says White. But he is far from worried. In addition to already existing online publications, CQ can now turn on a dime and make available, for a fee, special reports geared to developing events. Thus, during the creation of the Department of Homeland Security, CQ was able to put together an online package that included, among other things, the proposed budget for the agency and the regulations promulgated for it in the Federal Register. “The repository allowed us to respond to the market with a robust product,” White says. “That is the future for us, to create and expand high-end government information.”


Of course, not all businesses seeking to market content online can create the sort of added-value Internet packages that give Congressional Quarterly a more secure future on the Internet. But even content providers with run-of-the-mill products can prosper if they are smart about their marketing, says Anne Holland of MarketingSherpa. “Companies that do well all invariably have executives that came from a marketing, direct-response or mail-order background,” she notes.


What the marketing-driven executives know, Holland says, is how to test online products; how to constantly revise headlines, colors and wording on their web sites; and how to track, through an endless series of spreadsheets, ways in which the changes affect the willingness of browsers to start paying for content. This approach has worked for sites as different as consumerreports.org and classmates.com, she says.


As Holland puts it, “You have to know what to test, how to test, how to make your offers, how to compare a regular page against a tweaked page and to tweak and tweak again until you get a higher conversion rate.”