Get Rich by Giving Content Away Free?

By: Steve Outing

If many publishers are struggling with creating successful business models on the Internet, it's no great surprise. Internet publishing is somewhat akin to broadcast television, where content is (almost always) given away free; consumers pay with their attention to advertising.

And although the Internet is still a fast-changing publishing environment, with each passing week it seems to gravitate more toward the free model. It may be disconcerting for publishers used to the idea that information has cash value (in the form of paid subscriptions or newsrack/store sales), but the trend is now obvious. With the rare exception, most publishers doing business on the Internet must figure out how to profit by giving content away free. Certainly this applies in the consumer publishing markets, but also often in vertical markets as well.

Says Monique van Dusseldorp, a Dutch Internet consultant (and project manager at Wegener Arcade in Amsterdam), "No matter how painful this seems for many publishers, sometimes the best way to get rich is to give things away."

The unstoppable train

van Dusseldorp has been pondering the idea of an increasingly free Internet content marketplace, and she has come to some interesting conclusions.

1) The information glut (written about eloquently in David Shenk's recent book, "Data Smog") shows no sign of slowing. Because the Internet allows anyone and everyone to publish, "The consumer no longer needs to buy information from a publisher to inform or entertain himself," van Dusseldorp says. "Information gets shared, and entertainment is to be found in the interaction with like minded others." As information continues to flow into the Internet in mountainous quantities, publishers with something to sell increasingly are undermined by the growth of Web content.

And this trend is being played out beyond the Web, too. More and more media products, traditionally sold by publishers, are becoming "freebies" to promote other wares, she says. Examples include Internet service providers, search engines and directories giving away news coverage or classified ads, or audio software packages giving away free music.

2) The value of information is dropping fast. In an information-flooded market like the Internet, the problem is not to get the message out, but rather to get and keep the attention of the consumer, van Dusseldorp says. And as Shenk points out in his book, too much (quantity) input leads to less attention to every message. The result, then, is increasing competition for the attention of the consumer, which leads to more and more information that would seem to have significant monetary value being offered for free. "The electronic environment turns out to be a gift economy, in which the spirit of gift is a hard economic reality," says van Dusseldorp.

Again, this principle is playing out even beyond the Internet. Take the example of Metro, a Swedish newspaper that is offered free and distributed throughout the city of Stockholm's mass transit system. Within its first two years of operation, Metro has become the nation's fifth largest newspaper. And it is profitable enough that its parent company is looking to export the concept to other large European cities with subway systems.

van Dusseldorp also points to the introduction in Europe of free phone service, in which consumers can make calls free but must listen to periodic advertisements that interrupt a conversation. To sign up for the service, consumers must fill out a questionnaire about their interests, so that they can be fed targeted ad messages.

Indeed, she says, the information-overloaded environment of today is causing some desperation on the Internet, with experimental services like CyberGold being created which pay Internet users to read Web ads. Should this trend play out further, we go from the content-is-free model to offering money in order to get a consumer's attention.

The danger in this situation is that advertising money for the Web -- although growing significantly over time -- may not be enough to support the continuing growth in content. Competition for ad dollars is likely to get more intense, price pressure could force ad rates down, and schemes like cash-for-viewing-Web ads could proliferate. "(Web) ads will go to whatever venture will deliver the target audience and convert it into sales, for the least amount of money," says van Dusseldorp.

What to do?

You can look at this situation as either "the glass is half full" or "the glass is half empty." But van Dusseldorp takes the optimistic view, pointing to the National Academy Press, a book publisher that boldly put its current titles on the Internet in full text, so that anyone could read them for free. In its first year after this experiment, its sales were up by 17%, due in part to Internet readers who had glanced at a book online then ordered a paper edition.

Tomorrow's successful publishers will be gathering mass audiences more and more on the basis of offering free information and services, van Dusseldorp believes, and selling access to that audience. Indeed, the audience itself can become the major producer of free information. (This is the idea behind some "community publishing" systems -- from companies like Koz and Zip2, and home-grown systems -- that allow Internet consumers to contribute content to a news site. Yet to date, few publishers have gotten far in implementing the concept.)

van Dusseldorp says information that is given out free must be part of a value chain, in the same way that a Walt Disney Co. movie makes a large percentage of its money by generating the sales of movie-theme toys. Giving away free news and entertainment content on the Web -- which she believes is an inevitable fact of life for Internet publishing survival -- can be what attracts large audiences who are exposed to related paid offerings.

Contact: Monique van Dusseldorp, m.vdusseldorp@wegener.nl

Steve

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This column is written by Steve Outing exclusively for Editor & Publisher Interactive three days a week. News, tips, and other communications may be sent to Mr. Outing at steve@planetarynews.com

The views expressed in the above column do not necessarily represent the views of the Editor & Publisher company