It is the envy of the dotcom world. WSJ.com, the Wall Street Journal's Internet site, has been charging subscriptions to users since it was launched in 1996. And, while almost all its rivals quickly abandoned their attempts to do the same, WSJ.com is actually planning to charge its 600,000 or so customers more.
"It seemed to us fundamentally illogical to charge a substantial amount of money to print customers [each copy costs US$1] but to provide all that plus more in a different medium and assume it should be free," said Peter Kann, chairman, chief executive and publisher of the Wall Street Journal.
No doubt many of its rivals originally shared the same philosophy, but they have been forced to change their minds. The Financial Times' Web site, ft.com, initially intended to charge subscriptions. In fact, it quickly dropped charges for searches -- despite the fact that users can search through rival papers as well as the FT on the site -- and now rules out ever charging for the basic service.
Likewise thestreet.com has abandoned subscriptions for its US service, although it closed its British site within months of launch and does charge for realmoney.com, aimed at active investors.
The Guardian and Observer have 150 staff producing dedicated content for guardianunlimit-ed.co.uk, all currently free. Users of hemscott.net, a financial Web site, initially had to either subscribe or use Hemscott as their internet service provider -- netting it telephone revenues.
Now, almost everything from comment on results to a full archive of stock-exchange announcements is, free although like thestreet.com, it does charge for premium services for active investors.
So how has the WSJ succeeded where others have failed? One reason may be that it is relatively cheap: subscriptions cost just US$59 a year, or US$29 if you already subscribe to the print edition. Contrast that with the US$850 a year asked by breakingviews.com, which started charging for its daily selection of opinions a few months ago, yet it has nothing like the range of services or archives available on wsj.com. It has not yet disclosed how many have signed up since it started charging in February but founder Hugo Dixon says he is "reasonably happy" with the conversion rate from free to paying users and that subscriptions "continue to rise."
But price is just a small part of the story. Kann cites four key reasons for WSJ's ability to sustain a fee-based model. Subscriptions are Kann cites four reasons. It has a strong brand and it owns much of the content so, says Kann, "it is not commoditized." Much of the information on the Web site also has what Kann describes as a high degree of essentiality. "It is a must-read or need-to-use."
But the fourth reason is perhaps the key to WSJ's success in charging. The WSJ is owned by Dow Jones, whose news wires are the leading providers of news in the US and the second biggest in Europe and Asia. That gives it access to more than 800 journalists who are already churning out news as it happens, news that can be immediately included on wsj.com.
"That is important as it means it is a dynamic, not static, site. The alternative would be to ask our print reporters to file their stories six times a day, which is not appealing, or to hire a sizable staff for the internet edition, which is very costly." In fact, it has about 100 dedicated staff.
Dow Jones has never revealed what its investment in the Web site has been, nor what losses it is making. But Kann claims that the total investment over the five years since it launched is "less than the published numbers for some other Web site losses in a single year."
He claims the losses are currently "modest" -- indeed, he says, if advertising was as strong now as it had been last year, it would now be close to being profitable.
Like other internet businesses, wsj.com has suffered from a downturn in advertising, although this has been less severe than on free sites -- just as advertising in paid-for papers is at a premium to freesheets, so subscription Web sites can charge more for their clicks. Even so, the proportion of revenue from advertising will fall to 40 percent this year from 60 per cent last.
Kann believes others could, and should, follow its subscription route. "A year or two ago, we tended to be seen as eccentric. Now, we get lots of questions about how to do it."
He admits, however, that "once you go down the free route, it is hard to go back the other way."
Not many appear to be planning to try. The FT says it never intended to follow WSJ's lead as it lacked both the subscriber base and its news wires.
Instead of charging for the basic service, therefore, it aims to get revenues from syndicating its content, for example through deals with the Hoover's network or factiva.com, the web-based news and business information service which is owned by Dow Jones and Reuters, and through charging for premium services -- such as FT Mobile, which will bring the site to a Wap phone -- and specialist searches. It is also examining other e-commerce opportunities.
Despite the lack of a fee, and the fall in advertising revenue, the FT has promised that its site will break even by the end of next year. WSJ is making no such claims. "The goal is to be in profit. Whether that is this year or next is irrelevant so long as the trend is in the right direction."
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