It seemed like a good idea at the time. Set up an internet
business, blow wads of cash on building the brand online, lure customers
around the world with free information and services - then wait for the
ad dollars to flow in. But the hope that such generosity would be
supported by advertising proved to be in vain. Instead, the pure-play
web companies left standing are frantically re-evaluating their business
models.
The problem with the internet hasn't been so much a lack of bright
ideas, but a lack of bankable ones. Believing that "content is king",
the industry pumped it out as fast as it thought consumers wanted
information. We've had free music, email, newsletters, art, videos,
news, games and so forth.
Anything that had a price in the old economy came complimentary courtesy
of the world wide web. With dotcoms falling thick and fast, the question
is: can the survivors "monetise" information that has always been
free?
If they succeed, will only be a good thing for the internet's future,
especially as the foundation to build sustainable businesses.
In China, the portals, including Chinadotcom, have said they will charge
for services like email. This will put pressure on smaller portals,
holding an excess of ad space inventory, to follow suit. It may even
speed up consolidation of the industry. Again, that can only be a good
thing.
However, whether paid content will save struggling portals, charging for
information will require a huge shift in consumers' mindsets. It's not
going to be easy to get them to now fork out for something they
previously enjoyed for free. We can also expect structural obstacles -
China's low credit card penetration rate - to trip up portals as they
deal with payment issues. These challenges notwithstanding, charging for
content makes strategic sense if you're going to build a sustainable
business. A business model based on paid services is transparent and
investors appreciate this.
Indeed, there are already clear signs that the free rides we've had on
the web won't extend to the wireless realm in Asia. For a wireless
internet business to give away free content would mean it would have to
depend heavily on wireless marketing, portal fees and transactions. But
the simple fact is that revenue from marketing - wireless and digital -
is limited today, and will remain so for some time to come.
The challenge now is to change consumers' mindsets and that is going to
require some very creative thinking. No matter how delicately a company
tries to introduce fees, it should expect a backlash. Even if users are
willing to pay, they should brace themselves for an attrition in
customer numbers. Some service providers are rightly offering a
combination of paid and free content from the start, charging on usage
and subscription; basic content is free, with a charge levied for
additional content. This at least puts a price on information, while
telling the customer early on that the service is worth paying for. More
importantly, it ensures companies earn from the outset.
