Show Me the Value: At SIIA, the Debate over Free vs. Fee Content Continues

Users taking control was the theme of this year's Software Information Industry Association's (SIIA) Summit held in New York City January 31 and February 1, 2006. However, another underlying current flowed through the event: a shift in the business model to leverage the appeal of free content.

It comes as no surprise that users like free content, but at the SIIA Summit, there was a lot of talk about building a business model around this predilection. For starters, the most important thing is to draw people to a site. "If there's no traffic, there's no money," says Patrick Spain, chairman and CEO of HighBeam Research, Inc. "In order to get customers, you have to provide content for free." A great deal of discussion arose over enticing customers to subscribe to fee-based offerings through free content, alongside looks at advertising-supported models. In the end, according to Spain, "what's right for the user is what wins."

However, the focus on free content shouldn't be interpreted as meaning that the future for paid content is bleak. According to a 2005 survey by Jupiter Research, users spent $3.8 billion on paid content. By 2010, Jupiter predicts spending will reach $8.9 billion. "There will be select instances where the consumer is interested in paying for premium content," says Dennis Miller, a general partner with Spark Capital. "I think it will be difficult to get people to pay for something on the Internet that they can find elsewhere on the Internet for free."

Consider a Google query for motorcycles. The results list will show links to Web sites of motorcycle makers including Harley-Davidson, Honda, and Kawasaki. This suffices for someone simply looking for a list of motorcycle brands. However, someone seeking to make a significant investment in a motorcycle or in a company that produces them may well be willing to ante up for higher-value content.

When a user pays for content, they do so under the premise that they're getting a better value for that content than if they got similar content elsewhere at no charge. The question, according to Mark McLaughlin, SVP and GM for the naming and directory services business unit at VeriSign, Inc., is, "What value can you actually add to get a user to pay for content?" At the same time, Michael Kelly, president of AOL Media Networks, says, "Businesses will always pay for competitive information. I can't imagine offering that information for free."

Consider the search for motorcycles again. Performed at a site like Hoover's, the results list offers the user free industry-specific business information including a company's overview, key numbers, and key people, including streaming video interviews with the CEO. An enterprise user can subsequently take this information from Hoover's—along with a wealth of premium content if they are a subscriber—and tailor customized reports. This type of search is more than search, however. "It's really the whole process of research," according to Spain from HighBeam. "It's for a user who wants to get smart in a particular subject area."

Many attendees at the Summit stressed that it's at least as important to give users a choice when proffering content. "We help publishers sell their information in very versatile ways," says Jonathan Lewin, CEO of eMeta Corporation. "We've been doing that for a while but I think it's more important than ever right now."

Harold McGraw III, chairman, president, and CEO of the McGraw-Hill Companies, discussed the "knowledge economy" in the opening keynote of the conference, emphasizing that any successful business needs to listen to its customers. The growth of the Internet has created a proximity between user and content provider, according to McGraw, which can work for or against them. If providers don't pay attention to users' feedback, they may be sealing their own doom. "Today's society is about opening markets," says McGraw. "Tomorrow's society is about the free flow of information so all of us are on an equal basis." And while users may want that free flow to be cost-free as well, content providers must continue to add value in order to justify placing a price tag on information.