Tue, Jul 31, 2007 - Page 9 News List

From subscription to free and beyond

More publishers are raising money via advertising, but many are also hoping to sell premium services to users of free online products

By Kate Bulkley  /  THE GUARDIAN , LONDON

Traditional media companies face a very modern dilemma: Should their Web sites be free or paid-for?

The trend recently has been to plump for the free model and bring in revenue via advertising. This has meant that Web sites that were subscription-funded have started to move to the ad-supported model: big media groups such as CNN, The Economist and even the Wall Street Journal have started to pull down the subscription "paywalls" on their Web sites.

CNN.com is the latest to abandon the paid-for model and go free. Last month The Economist and the Wall Street Journal did the same thing, with the Journal's Web site launching a much-expanded free home page aimed at new customers sitting alongside its original and robust pay site.

This move by media groups reflects the way online communities are maturing, as well as a growing understanding by publishers and broadcasters of how the Web works: Online and print customers consume the products differently.

Ben Edwards, publisher of Economist.com, says his print subscribers treat the print version of The Economist in very different ways from online users: "Offline is a luxury good; people use the magazine as a ritual pleasure -- reading it at the weekend and spending over an hour doing it -- but the online product is used at work and, instead of browsing, users are very task-orientated, researching a trip or helping put together a presentation. They stay six minutes and then leave."

According to a recent survey by Accenture, media executives increasingly believe that free sites with ads that provide the bulk of revenue will be the most prevalent business model online. Last year, 38 percent of the top men and women in media, from WPP's Sir Martin Sorrell to CBS' Leslie Moonves, said that ad-supported sites were the best revenue model, but this figure leapt to 50 percent in this year's survey.

The maturing of the online world is helping convince everyone that subscriptions are old hat. Millions more broadband connections are driving Web sites toward making money from advertisers rather than users. In the UK, which boasts one of the most active online ad markets, the Internet's share of all advertising revenue was 11.4 percent last year -- equivalent to about ?2 billion (US$4 billion), according to the Internet Advertising Bureau.

And the growth curve is steep: UK online advertising revenue grew 41 percent between 2005 and last year, says Guy Phillipson of the bureau. Accenture predicts that globally, the online ad market will reach US$30 billion in the next 12 months.

"When AOL decided to open up its site [last August], that created a tipping point in the advertising industry," says Gavin Mann, part of the digital media team at Accenture. "It has a very large consumer base and it creates a change in consumers' minds, but also in advertisers' minds."

For CNN -- also a part of the Time Warner family that includes AOL -- the move to converge its TV and online efforts took 15 months. During that time, the free CNN.com site -- which offered free downloadable video -- existed alongside a now-defunct paid-for site called CNN Pipeline which offered streaming video.

"We know that online consumers do not want to pay for content, but the cost of serving up live video was too big a cheque to write," says Susan Grant, executive vice-president of CNN News Services, which oversees CNN's online and digital businesses.

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