Paying for Web Links: Get Used to It

By: Steve Outing

As an operator of a Web site, would you pay another organization or Web site to link to your site? While that hasn't been a widely used model in the past, it's about to become a more common one, and the Internet service provider (ISP) industry is among the first to try out the approach of pointing its customers to Web sites that are willing to share advertising revenue with ISPs.

Concentric, a Silicon Valley-based ISP with about 200,000 customers, is among the first to experiment with the concept. Concentric customers who use its home page as a launching point to Internet sites are being directed to sites that have a monetary relationship with the ISP.

The idea, explains Concentric's director of online strategies, Kristine Loosley, is that an ISP can direct a lot of traffic to a particular Web site -- and there's monetary value in that.

Concentric customers receive browser software upon joining that includes a default home page maintained by Concentric. On that home page are links to various sites on the Web: news, weather, stocks, medical, sports, shopping, etc. Concentric's home page, the reasoning goes, generates a sizable amount of traffic to other Web sites that those sites otherwise wouldn't receive. Hence, they should pay for that traffic.

By default?

At first blush, the idea might sound a bit dubious. Do ISP customers really use the ISP home page? Won't most people just turn off the default home page of their browser, or change it to some other starting page?

Loosley concedes that experienced Internet users will often change or turn off the Concentric home page. But according to research conducted by Concentric, 75% to 90% of its customers stick with the default home page and use it as a starting point for cruising the World Wide Web. A large portion of Concentric's customer base are novices on the Internet, and these "newbies" are not likely to muck with the default page.

Indeed, Loosley says, they actually use the page. Earlier research determined that much of the churn experienced by the ISP was from people signing on to the Internet for the first time, then not knowing how to navigate the Web and find interesting stuff -- so they dropped out. To solve that problem, the ISP realized that it must provide a succinct navigation guide to what's available on the Web. (The default page also includes a daily update of the ISP's network status. Only Concentric customers see the custom page, which is different from what a non-customer visiting the Concentric site would see.)

While ISPs could be nice and point to sites that they think their customers would like to see, without charging publishers for the links, economic realities suggest another approach. Loosley points out that all ISPs are desperately trying to come up with incremental revenue streams to make up for the shortcomings of the $19.95 per month, all-you-can-eat access plans that most companies -- including Concentric -- offer to consumers.

The average Concentric customer uses the network more than 20 hours per month. While an ISP can probably survive on making $1 per hour, per user for use of its network, usage times are creeping up as newbies get more experienced and more and better content is available on the Web. For the ISP business, it's find new revenue streams or die. The key for ISPs is to retain at least that $1-per-hour rate in the face of increasing usage. Incremental revenue streams can include offering premium access accounts (never-busy access, 800-number technical support, etc.) and advertising revenue shares from linked Web sites.

"This is a pretty obvious model," says Loosley of the charging for links scheme. "It's not rocket science." Neither is it a new model, but ISPs are just now starting to embrace it. ISPs like Netcom and BellSouth.net, for example, also are experimenting with a similar concept of asking Web sites for a share of advertising in exchange for referrals.

Price quote

Concentric charges sites that it links to on its default home page between 20% and 50% of advertising revenue that is generated by Concentric-referred site traffic. So, if the ISP sent 10,000 page views (and hence, ad impressions) to a site and those 10,000 eyeballs brought in ad revenue of $250 at a rate of $25 CPM (cost per thousand), the Web site would pay Concentric $50 to $125.

The rate charged to a Web site depends on the type of link on the Concentric pages. A button or a browser default bookmark will cost more than a standard text hyperlink; links are priced based on position (first, second, third, ...). Loosley says that buttons and especially default bookmarks are proving to generate a lot of traffic to third-party sites.

So far, Concentric has paid-link deals with Match.com (Electric Classifieds' online matchmaking service), Classifieds2000, Infonautics (and its Electric Library site), WhoWhere, Yahoo!, Excite, Lycos and Search.com. The search button on the Netscape browser received by Concentric customers defaults to one of the search services doing business with Concentric -- rather than Netscape's default search engine referral.

Loosley also has crafted deals with Tune-up.com (a PC diagnostic service) and Connected.com (an online hard disk back-up service). Those companies' banner ads are placed in otherwise unused ad space, and Concentric is paid a commission for referred business; Concentric customers also are offered a discount on the services.

Of course, all links on Concentric's default page are not sites involved in sharing revenue. Loosley says that for best-of-breed sites that Concentric customers should know about, links may be included without a business relationship in place. But if two similar sites want a link in a particular category, and one is willing to share ad revenues, you can guess who's going to get the link.

Loosley says that Web publishers have been generally accepting of the concept. "This is not something we're trying to shove down anyone's throat," she says.

Web publishers can expect to see more such deals. The days of free links from ISPs may be coming to a close.

Contact: Kristine Loosley, kris@concentric.com

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