A Layer of Free
In the 10 years during which free and fee models have jockeyed online, the formula for what people will and won’t pay for remains familiar: High value-added materials like trade journals or hard-to-find technical data still exact a fee, generally, and highly commoditized news and directory information for broad audiences can leverage their popularity to sell the ads needed to stay free.
However, curious exceptions now occur at both ends of that model. EINNews.com, for instance, proudly aggregates and resells otherwise free web-based news from 40,000 news sources. The subscription wall is set quite high at the site, where the headlines for each channel are visible, but any click brings you to a pay wall or a free trial offer. Grouped by nation and 16 industry channels, EINNews.com has more than 3,000 customers to its site licenses and $59 per month individual subscription. The value-add here is time. "We take about eight hours of searching and turn it into 30 minutes of news reading time over coffee and donuts," says director of development Tracy Dove. EINNews.com promotes itself successfully to businesses as a cure for search addiction.
"Google is like heroin," says Dove. "You can search all day and be exhausted and not remember what you read." Keeping the price substantial and the subscription wall high actually seems to have helped the company maintain its value and user-loyalty. In its free areas, the service promotes its expert editors and the headlines they choose that relate to the customer base and topic. Free trials work well to sell the full service, but generally the company keeps a tight lid on what it gives away. Even in a world of commoditized data, packaging, editing, and flexible delivery have value—but it is up to publishers to set the price. "We’ve learned free has no value," says Dove. "If you charge $9 a month they don’t take it as seriously as $59 a month." In some cases, such as EINNews.com, price helps determine value.
On the other end of the traditional free-versus-fee spectrum, last year Elsevier took a radical turn in models with its OncologySTAT portal, which gives cancer specialists full article access to more than 100 professional journals that libraries and institutions still pay thousands of dollars a year to carry. Supported by advertisers like Siemens and AstraZeneca, Monique Fayad, SVP and publisher, admits "there are definitely fears" in the company about letting such long-treasured content go essentially free. At issue is the fact that competitors like the free Medscape are pulling in eyeballs and the massive pharmaceutical ad dollars now pouring online. "Elsevier is a publicly traded company," she says. "We need to respond to users. We can’t remain a print company. We have to evolve."
A project like OncologySTAT essentially tries to redraw the value line for professional information. Fayad justifies charging some audiences and not charging others for the same content because the mode of delivery and access is different. Site visitors must register, so some exchange of value takes place. The site’s "free" content is only available via a keyword search on the last year of articles. Paying institutions have the full archive and can browse individual issues. Deep archives and the ability to browse the current state of the field as represented by a full issue structure is of special importance to subscribing institutions, she argues. Clinical oncologists, the target for the free site, are looking for free content when they go online. They either get mere abstracts or go to the competitor, Medscape. Even at this level of professional information, "You need to provide a layer of free," says Fayad. The site also becomes a vehicle for promoting new titles to the field that may ultimately get picked up by institutions. But in its main purpose, the site is already generating the critical mass it needs to attract five major advertisers: 62,000 registered users and 80,000 unique visitors. Within a quarter of operation, the site claims to have attracted about 7% of the registered oncologists in the U.S.
Both EINNews.com and Elsevier are pursuing a model in professional information that follows the evolving consumer side of digital media. "Consumers will tolerate and adopt most easily content that is underwritten initially by ads," says Keith Kocho, founder of Extend Media, a digital distribution and fulfillment platform for Hollywood studios and cable TV companies. "But some segments will either pay for a device, a DVR, or pay a service fee for not experiencing ads." While the business models are all in flux, Kocho admits, the trend across all media seems to be giving away a layer of free in order to up-sell more convenient formats, in this case DVD versions, portable versions, and ad-free versions. In this scenario, the user is paying for control, to experience and use content in the way they see fit. Control and context, not the inherent value of the content, are the new locus of value.
Not Business as Usual
Like Elsevier, other business publishers hope to leverage the web’s reach into new audiences that they either can monetize via advertising or use as a larger base from which to up-sell paid content. Alacra, which pulls more than 100 databases into data warehouses and workflow products for financial services firms, is adding its own "layer of free" in ResearchRecap. The site aggregates a combination of free and paid industry research from around the web and Alacra’s own service. "We didn’t want to make this for a narrow group accustomed to paying for research," says Barry Graubart, VP of product management. The multifaceted strategy surfaces otherwise proprietary research to search engines, but it also creates a blog readership that does not rely on the capricious algorithms of Google. Some users may want to pay for a full report, but that is not integral to the model. "Our goal is cultivating this readership community," says Graubart. The company is looking for high-level ad sponsorships of its content sections. But in a larger sense ResearchRecap is itself an attempt to advertise with a broader audience the inherent value of the specialist research category to that audience. "There is a gap in the market," says Graubart. "A lot of times the stories that become big in mainstream media are already topics people know about in their narrow niche but it takes time to reach a larger audience."
Reaching larger audiences with free content designed to feed a solid subscription business has been central to two veteran business information providers, EDGAR Online and Hoover’s. Both find themselves continuing to experiment with the location of the subscription wall and building new paths from free to fee. "2008 is our year of going heavily into free content," says Deborah Doane, VP of product marketing, EDGAR Online. After bringing the company public in 1999 and suffering through the dot-com bust in 2001, the popular conduit of SEC filing data retreated from its FreeEDGAR ad-supported business. "The pendulum has swung back the other way," Doane admits, but getting users to move from free to fee-based products is a key challenge. EDGAR is using a hybrid model in its low-end EDGAR Access product, where ad subsidization helps keep the subscription fee low. To grow its audience, however, EDGAR will also drill for niche audiences in more targeted landing pages and sites that appeal to specialized investors and managers. "There is very little movement between the two," she says. "It’s been a challenge to come up with ways to entice people up the food chain."
Shuffling users from free to fee has been the central business model at HooversOnline for more than a decade, where the ad-supported site gets 2.5 million unique visits and the paid content serves more than 300,000 company seats. More players in the space with free models are putting ever more pressure on companies, but so has a new generation of RSS and search capabilities that let customers easily perform the aggregation tasks they once paid others to do. "It’s still a quantity and quality game," says Chris Warwick, VP of product development. Now the emphasis for a company profile provider like Hoover’s is to add a layer of tools and function that sift the mountains of data into actual workflows in ways that Yahoo! Finance or a feed reader cannot do. For instance, Hoover’s corporate family tree product shapes raw company profiles into maps of a firm’s internal structure as well as its relationships with partners. A list building tool extracts data into a contact list. "This is where we see the future of the paid model heading," she says, "features and functionality on top of the information."
Increasingly, a blended model of free and fee requires that content providers become service providers, and this changes the game for many of them. "We have become more focused on the back end to drive business than in the past," Warwick says. Software teams that develop tools and analytical teams that understand audiences have become as important as reporters and editors in an age where publishers have to engineer new sources of value.