Searcher
Vol. 10 No. 5 May 2002
FEATURE  
From Free to Fee: The Next Trend in Web Site Development
by Barbie E. Keiser Consultant
Table of Contents Previous Issues Subscribe Now! ITI Home
Several readers have questioned what goes into the decision-making process as a Web site begins charging a fee for what formerly was free, including how site owners set pricing schedules. In the case of some search engines and other popular sites, target Web sites can pay to improve their positioning in search results or, sometimes, must pay to guarantee inclusion in any form. The consumer may end up paying in more than money, but in lost quality of search results. In any case, the trend is worth exploring.

In his January 28, 2002, article "Search Me/Doom Ahead for Search Engines That Charge Listing Fees," Hal Plotkin [hplotkin@sfgate.com] notes, "Many Web surfers probably haven't realized it yet, but most of the big online search and directory firms (with the notable exception of Google) recently started asking for money from sites that want to be included in their indexes or listings. The charges range anywhere from roughly $80 to $300, payable annually."

Less than a month after Plotkin's article appeared, Google launched a new premium advertising program, AdWords Select. "Adwords text ads appear on search result pages when a query matches the keywords purchased by advertisers. They appear to the right of search results, in small boxes labeled 'sponsored links.' The AdWords Select program gives Webmasters an unprecedented level of control over both placement of an ad, and the amount of an advertising budget spent to maintain that placement.... Unlike other programs where the highest bidder takes the top placement, Google measures click-through rates, or popularity to help determine the position of an ad" ("Google Launches AdWords Select," Searchday, no. 208 [February 20, 2002]; Internet; Available at http://searchenginewatch.com/searchday/02/sd0220-adwords.html].

Last October, Overture Services, Inc. (formerly GoTo), the leading provider of Pay-for-Performance search to Web sites across the Internet, announced that it would provide additional search results to the users of Ask Jeeves [http://www.ask.com]. Up to five of Overture's relevant search results would be placed in a more prominent position on the Ask Jeeves results page, presented under the heading "You may find these sponsored links helpful."

AltaVista [http://www.altavista.com] offers four different types of listing enhancements (logos, icons, custom taglines, text links) that Webmasters can purchase for an entire site or just for specific pages. Benefits and pricing for the subscription service are described in Figure 1 from InfoSpider.com [see http://www.infospider.com/av/app/about_les or http://www.altavista.com/sites/search/listing_enhancements].

The recent decision by Northern Light [http://www.northernlight.com] to eliminate public access to its search engine (i.e., free searching) and focus its efforts on enterprise customers was driven by strategic direction as much as economics. A variety of joint venture activities, including those with governmental and quasi-governmental agencies such as In-Q-Tel [http://in-q-tel.org], the Central Intelligence Agency's independent, nonprofit company, should keep the firm busy. (Early this year, Northern Light was acquired by Chicago-based Divine Inc. [http://www.divine.com]; it remains to be seen how this will affect the product's development and direction, but offices in Cambridge, Massachusetts, have already closed and operations moved to a higher plane.)

Try to open up WorldlyInvestor.com [http://www.worldlyinvestor.com] and a pop-up message will appear on your screen: "WorldlyInvestor is no longer available as a free site. However, the WorldlyInvestor columnists and investment perspective will be offered as a paid newsletter ... if investors like you are willing to purchase a subscription." You can begin a 3-month trial of the biweekly e-mail newsletter for $7.50 per month.

After February 14, 2002, access to The Motley Fool [http://www.fool.com] discussion boards will cost $4.95 per month, or $29.95 per year. Thirty-day, read-only trial memberships will be available. To assure that the active and vibrant discussions continue from Day One, "over 1,000 complimentary memberships to community members who have distinguished themselves in the past" will be offered. The site will feature several enhancements, though those listed thus far appear minor adjustments in terms of the number of recommendations someone can make on any one day and the positioning of promotional links. The creators assure members that dues will support the continued provision of high-level service and the introduction of new enhancements to the site over time.

For a comprehensive and somewhat tongue-in-cheek analysis of why Netsurfer has shifted to subscriptions (and how it settled on $20 per year), see "For-Pay Netsurfer Subscriptions: Why We Did It" at http://www.netsurf.com/why_subs.html.

The move from free to fee is often a gradual process. To test the waters, selected content is sometimes made available to all and the remainder, often labeled "premium," restricted to "subscribers only." Transitions are enabled by the introduction of reasonably priced tools, including password protection, list management, and secure transaction processing. This article will explore the transition process in general, with an illustrative case involving The Dismal Scientist.
 

Everything Is on the Web for Free, Right?
How many times have you heard, "Just look for it on the Web, it's free"? Well, even if the information was there before, it may not be now, or if it is still there, the site may not allow you to access it. According to Peter Lyman and Hal R. Varian of the University of California, Berkeley, School of Information Management and Systems ("How Much Information?" http://www.sims.berkeley.edu/research/projects/how-much-info/internet.html], the rate of growth for the "surface" Web is 7.3 million pages per day. Some remain "as created," with no further enhancements or even basic maintenance.

Each year, sites leave the Web (e.g., Contentville), not including subsites that all but disappear as the parent organization is acquired and/or the content of Web sites is merged. Domain names are not renewed or URLs change to something quite different. How many times have you seen, "With much regret, we've decided to close ____________.com, now posted at http://www.watchamacallit.com"?

During the past year, several industry publications eliminated print editions, but, for the time being, still maintain their Web sites. The Industry Standard suspended print publication in August 2001, but the site remains available at http://www.thestandard.com. How long before those sites become stagnant or are removed from the Web? If you used a Web site in the past and can no longer find it available on the Web, try searching the Wayback Machine on Internet Archive [http://www.archive.org] to view its contents. (Links found on that archived page may no longer be valid.)

"As the free alternatives collapse, consumers will have nowhere else to go and will have to concede that the free lunch is over." This is according to Steve Smith in "The Free Lunch Is Over: Online Content Subscriptions on the Rise" (EContent Magazine [February 2002], available at http://www.econtent.com).

One of the great mysteries of the Internet Age has been how all those Web sites out there sustain themselves. Well, as we know now, they can't always do so, and the demise of a Web site may have nothing to do with how valuable users found it. If its economic model is flawed and/or its marketing campaign ill-conceived, all may be lost. According to Creative Networks Inc. [http://www.cnilive.com], the average cost for establishing a Web site, including maintenance for one year, is $109,000. After all, even free sites must pay their Webmasters.
 

Web Site Economics
In point of fact, few Web sites actually pay for themselves, and their creators feel no need to do so. They believe a Web site constitutes a necessary and integral part of doing business in the 21st century. If viewed as a distinct product of the organization with profit-and-loss distributed throughout the entire line, some products may generate profit and others not. The pressure for the Web site itself to yield significant profits would be reduced, though obligations to minimize costs through effective use of resources (personnel and technology) remain.

A great deal depends upon the purpose of the Web site, why it was created in the first place:

  • As a mass marketing tool for products and services?
  • As a way of making a particular audience aware of information sources concerning a particular subject area?
  • As a productivity booster by easing the staff's day-to-day involvement with information product delivery by streamlining and automating processes and management?
  • As an educational opportunity for staff to learn new techniques, software, and tools for Web site development?
  • As a sales tool, for delivery of content itself?
To some extent, the economics of Web site development and management depend upon the size and type of organization behind it. A not-for-profit organization that publishes a scholarly journal will have very different requirements for its Web site in terms of design than a daily newspaper publisher. A large public or academic library (or even a small one within a larger system) can draw upon the skills of an IT department, as can a special library serving a large institution.

In large part, the type and design of the Web site will depend upon the audience it plans to target and the competition it faces. Much of this is expectation-oriented: Visitors to the Web site of a for-profit entity will expect a higher degree of polish in the design than they would from a small, not-for-profit. They will also compare one site with others that serve a similar purpose to judge how it measures up. When the public pays for access to a Web site's content, the bar for satisfaction in terms of quality, reliability, convenience, attractive appearance, and incorporation of superior technology rises considerably.

Some content providers receive royalty payments for the syndication of their content, made available on other sites that have yet to create their own content, Web-based aggregators, or even traditional online database vendor systems. Providers who believe they have material useful to other Web sites covering their subject area should investigate this potential additional revenue stream ... money they might then use to subsidize their own Web sites.

Sponsorship of a Web site, such as a library's, can come from groups outside a parent organization. Development of certain portions of a site may be underwritten through grants, "friends of the library" groups, or even library membership. Success depends upon the development of partnerships, both on the supply side (e.g., information providers) and the demand side (i.e., the customer base).

Ties to customers will likely be strong the loyalty factor where customers have a longstanding relationship with an organization and a stake in its success. As a known quantity, if what is delivered online helps customers, they might see it as worth an investment. One reason that e-mail newsletters are extremely effective is that readers exploring the site promoting the newsletter have already declared their interest in the content provided. These potential subscribers are a self-selected group interested in an organization's work or the specific topic covered by the Web site.
 

Web Advertising Realities
If a site requires additional financial support, advertising is an option. As stated in the March 2002 issue of Searcher ("Getting From Print to Online: A Searcher's Advice to Publishers and I-Commerce Concerns"), Webmasters should "consider the quality of the products and services being marketed and their relationship to the information content being delivered," avoiding "those dynamic HTML ads that float over the page."

In addition to any banner advertising, Webmasters may embed buttons and/or text with links into the left/right navigation bars. For example, look at the left navigation bar for the New York Times on the Web [http://www.nytimes.com], where one day's advertising buttons included Orbitz, British Airways, Half.com, and Juno. This is an extremely effective way to establish "click-throughs," particularly if the sites promoted relate to the originating site's content.

The New York Times' Web designers understand that utilizing ad space on their own site to promote their products can yield results. The final advertisements on the Times' left navigation bar this morning were for 50 percent off home delivery of the Times and, as an example of affiliate marketing, "Pick up your New York Times at Starbucks." One word of caution: While some marketing gurus say, "Ads that don't look like ads work extremely well" (Matt Mickiewicz. "Case Study: What's the Most Effective Advertising Vehicle?" EcommerceBase, http://www.ecommercebase.com/article.php?aid=598), no one likes to get fooled too often. What is delivered still has to live up to user expectations.

Those who think that carrying advertising on their site will answer all their financial woes may need to reconsider. According to Tig Tillinghast's ClickZ article ("Why Online Media Should Sell for Less than a Buck. And Why It Doesn't," http://www.clickz.com/media/buy_101/article.php/919961), "The advertising industry appears to receive an average of $0.387 cents for 1,000 impressions after subtracting serving costs and the amount due the site.... The cost of serving 1,000 ads ranges from about $0.30 to $1.00. This saps the brunt of the revenue from sites."

Adding advertisements to on a Web site will also require some additional expenditures in terms of server hardware to handle increased site traffic in-house or outsourcing the project to third-party servers and software. (For a comprehensive list of ad management software, see AdResource at http://adresource.internet.com/software/management/0,1401,,00.html.)

A visitor to a Web site may not even notice the ads displayed. It's the number of unique visitors advertisers most want to capture, not the total number of clicks, taking into account that people tend to be curious about what is offered. Repeat visitors to the site skew the results. Those developing the ads might be interested in the number of visitors who don't click-through. Was the ad poorly designed, or perhaps the message is just not compelling?

An equally inaccurate measure is the number of "hits registered every time a text or graphic file is delivered, whether advertising is displayed or not... An intelligent agent, or 'bot,' could automatically visit a site every hour and inflate a visitor count. Variations on intelligent agents include 'spiders' and 'crawlers,' which are software programs that visit virtually every page on the Web to create indexes for search engines, but cause overcounting of traffic in the process.... If a banner ad is large, it takes longer to load, giving the visitor a chance to move on to another page or site before it is displayed yet the impression is still counted" ("An Advertising Primer: Terminology, Traffic, Statistics and Usage." AdResource, http://adresource.internet.com/primer/article/0,,301_200681,00.html).

Tools such as WebTrends [http://www.webtrends.com], DeepMetrix' (formerly MediaHouse Software) LiveStat [http://www.mediahouse.com/livestats/index.html], and NetGenesis' NetAnalysis [http://www.netgen.com] can help collect and generate reports that, properly analyzed, can reveal behavioral profiles of a Web audience, pointing out areas needing improvement:
 

  • Number of unique visitors to a site
  • Total number of visitor sessions
  • Average length of session
  • Browser-to-buyer conversion rates: Does IE x.0 deliver more completed transactions than Netscape?
  • Revenue per customer
  • Who visits a site and where they come from.
  • What visitors used on a site and why they left (e.g., glitches in checkout?)
  • First-time visitors and buyers during subsequent site visits
  • Traffic driven from affiliate programs and sites
Given the seemingly low response rates for online ads, now estimated at less than half a percent with "click-throughs" averaging 1-3 percent of total impressions or page views why should advertisers choose to use the Web as a means of promoting their wares? Consider:
  • the relative cost of ad development and sales via other channels.
  • the benefit to an organization in terms of perception by others (that advertisers are "up with the times").
  • potential for increased efficiency and for upgrading the skill levels of staff, e.g., elimination of in-house manual entry of data, increased accuracy, improved customer service response time for fulfillment.
As they track conversions, Web planners should think in levels, looking at the number of completed actions (registration forms filled-out in their entirety and submitted online; sale of a product; article requested; etc.). They should compare that with the number of unique click-throughs as well as total. This will tell how many people showed interest (by clicking through) but never completed the action (by filling out the form or purchasing an item). Advertisers must also take into account post-impression conversions: "Those who view ads and later head to a marketer's site by typing the URL into a Web browser or finding it through a search engine are 60 percent more likely to repeat their conversions than those who click the ad directly" (Engage Inc. "Summer 2001 Online Advertising Report," 12 July 2001. Summary available at http://www.emarketer.com).

Visitor-to-lead ratios typically range from "0.5-5 percent, with the majority under 1 percent," according to reports on Doctor Ebiz [http://www.doctorebiz.com]. So, of 100 visitors coming to a site, fewer than five will complete a registration form or sign up for e-mail notification of some sort, including newsletters. To help keep track of the number of visitors, Webmasters can install a counter on their home pages. (Find a selection at 1001 Free Webmaster Resources, http://www.worldzone.net/ss/antelope/counter.html.)
 

Will They Buy?
The question remains as to whether these conversion rates hold true for those registered for a free service delivered via the Web. Will people choose to step up to the next level of premium service if it means paying a fee? Even if they will not, "User fees will not replace ad revenues in any substantial way anytime soon. Perhaps, most importantly, fee-based models are most likely to succeed or fail on a case by case, brand by brand, and sector by sector basis. The task at hand is not necessarily 'retraining' consumers across the board so much as retooling content offerings and merchandising strategies" (Steve Smith. "The Free Lunch Is Over: Online Content Subscriptions on the Rise." EContent Magazine, February 2002).

Factors that come into play in making these types of moves include the following:

  • Active contributors to a discussion have a higher conversion rate than non-contributors who, in turn, have a higher conversion rate than first time visitors. Also, active contributors will visit a site more frequently, yielding increased sales.
  • Type of subscription individual or organization (enterprise-wide). Individuals may remain convinced that information should be free (or, at least, must be out there and available elsewhere at no cost). Those who act on behalf of an organization may feel the time spent searching for it elsewhere can be better spent and purchase a subscription.
  • Price points: Payments made via the Internet tend to be at the lower range, with big-ticket items sold offline. (Consumers who buy online now average about $300 per month, according to the Forrester Research Online Retail Index [http://www.forrester.com/ER/Press/Release/0,1769,678,00.html]. Business-to-business transactions are difficult to quantify on a per-transaction basis, but industry consultants peg the amount at around $1,000.)
  • The degree of competition at that price point (or even a bit higher). For instance, if you have to pay $2,000 per year for organization-wide access to economic data delivered via a popular Web site, will you explore free alternatives, even if a bit less user-friendly? Will you investigate the more prestigious economic powerhouses formerly out of your reach, which now provide end-user access via the Web for, say, $3,000 per year? Is the reputation of these organizations worth the extra $1,000? Will registrants rethink their search plans and step up to a slightly more expensive service, but one that offers special features?
  • The Commission Junction [http://www.cj.com] "open marketplace: provides visitor-to-buyer conversion ratios on advertisers and publishers." It reported a 3.2 percent average conversion rate in its network between January and September 2001. The following click-through rates (CTR) include banner, text, e-mail, and other forms of online advertising: Commission Junction Network CTR: 1.9 percent; Industry average CTR: 0.24 percent."
For one case study, look at the free Web translation and dictionary tool launched in 1997 by Babylon [http://www.babylon.com]. In May 2001, the firm started a pilot project to convert free users to paying customers at a modest $17.95 for a 1-year license and $44.95 for a perpetual license. (A 30-day free trial is available.) "Babylon said it hoped that 10 percent of existing users wouldn't jump ship. Twenty percent of Israeli, Australian, and Swiss users decided it was worth paying, 13 percent from the corporate market and 7 percent from retail. Over half of Babylon's user base uses the application at work, and from reactions the company has received, it seems that many users went to their bosses to get a license." So said an article in Wired by Tania Hershman ("How to Translate 'Free' to "Fee," January 22, 2002, http://www.wired.com/news/ebiz/0,1272,49646,00.html).

Yahoo! Premium Document Search [http://premium.search.yahoo.com] makes Northern Light's Special Collection documents available for a per-document fee (prices for most documents range $1-4) and also a subscription basis ($4.95 for access to up to 50 documents per month). (Please note that not all of the publishers participate in the "premium content" package. For a listing, see http://www.help.yahoo.com/help/us/ysearch/premium/premium-05.html.)

This is another example of a "move away from the "everything is free" model supported by Web advertising to a "pay for what you get" model that allows Web companies to prosper without consumers feeling ripped off."
 

Determining What to Charge and Creating Convenient Options for Payment
Deciding what to charge for material on a Web site relates back to the reasons the creator built the site in the first place, what the market will bear (which depends, in large part on the target audience and what competitors charge), and how much the Web site needs to make to break even or generate a profit. Unique content (i.e., content not readily available on other Web sites or, at least, not in the same form) can be sold for a premium. However, there remains the psychological barrier for individuals who either believe information should be free, feel they can find similar information for free elsewhere (on the Web), or have privacy and security concerns in purchasing documents or data online.

The type of content and the target audience will help decide whether to make material available through an annual subscription or individual transaction. Web-based services that maintain a longstanding and intricate relationship with users, such as members of an organization or "friends" of a library, may find an annual subscription a good choice.

Transaction-based schemes tend to be labor-intensive and may require extensive automation for companies short on manpower. Also, the issue of price points comes into play: Individuals tend to feel okay about spending $2.95 on the Net, but may want to handle larger transactions, such as corporate membership fees, offline or through deposit accounts.

The convenience of being able to pay via the Web, combined with "instant gratification" in terms of delivery (order fulfillment), makes online a good choice. However, e-commerce sites must have adequate technology in place to meet the concerns of clientele vis-à-vis security and the ability to verify and process payments. To assure secure transactions in-house, you must have a Secure Sockets Layer (SSL) Server. Proof of security in the form of digital certification can be obtained from Verisign [http://www.verisign.com], Thawte [http://www.thawte.com], or GeoTrust [http://www.geotrust.com].

The notion of Web currency seemed promising just a few years ago and may be popular for shopping sites, but is not in use to any great extent for the purchase of information (at the article or document level). The closest the industry has come to establishing a service that specializes in these types of transactions is Qpass [http://www.qpass.com]. In the past year or two, we've seen a definite shift in the focus of their business to wireless ("account, payment and billing solutions for mobile commerce"). It's difficult to predict how many other publishers will make their articles or individual reports available to the public on a per-use basis using Qpass.

PayPal [http://www.paypal.com] has been used by some publishers selling newsletters to information professionals over the Internet. Using PayPal, anyone with an e-mail account can send money to anyone else with an e-mail account, provided they both are members of PayPal. The sign-up procedure is painless: "You pick the kind of account you want to draw money out of and let money flow into. Any credit card or bank account will do.... Send money and your account is debited; receive money and it is credited," according to Ted C. Fishman's Esquire article ("Services Like PayPal Are Going to Change What We Mean by Cash," March 2001, http://www.esquire.com/themagazine/market/010301_mma_electronic_1.html). The drawback is that buyers who are not PayPal members must leave the site to sign-up, which may leave e-commerce sites losing some purchasers along the way. Also, transfer of money into a PayPal account may prove difficult in some countries, which can limit international sales. On the other hand, PayPal is an attractive option for the merchant, since it has no set-up fees.

Fishman continues, "ClickBank [http://www.clickbank.com] offers the advantages of an affiliate program and allows shoppers to pay easily using a credit card. Third parties, such as Willmaster.com [http://www.willmaster.com/master/ecommerce.shtml] have developed tools to help automate ClickBank orders and automation is the key to cutting the time costs of online sales. ClickBank charges a $49.95 set-up fee, but the flat 7 percent fee on sales is pretty high compared to merchant credit card costs, especially when sales volume increases."
 

Interim Stages
Access to free content on the Web continues, with many sites offering premium services to those registered; for a modest fee, some provide value-added services. ResearchBuzz [http://www.researchbuzz.com] "is a free weekly newsletter covering developments and news in the world of online research." For $20 per year ($15 for students, educators, and librarians), you can get the regular ResearchBuzz newsletter e-mailed to you, minus the advertising (which is really not obtrusive and often acts as a helpful reminder to the reader); an "extra" edition covering news and happenings in the search engine/online information world, as well as more resources excluded from the free edition; plus an article covering different aspects of searching. (For a sample copy, go to http://www.researchbuzz.com/extrasample.html.)

Many readers of Searcher magazine will know about Free Pint [http://www.freepint.com], the "online community of information researchers whose members receive a 'free newsletter every 2 weeks packed with tips on finding quality and reliable business information on the Internet.'" In addition to the biweekly e-mail newsletter, registered subscribers can gain access to the archives going back to 1997. Individuals considered "core subscribers" have also signed up for the Bar Digest, a posting of Web-related questions and discussing issues with other members e-mailed three times each week. At the beginning of 2002, the newsletter had over 45,000 subscribers and the Bar Digest had over 7,000. Currently, over 450 individuals have signed up for weekly alerts to new jobs matching their profile in the Free Pint Jobs Database. (There were 85 jobs listed in the database on 01/30/02.)

Free Pint's Pub Crawl, a weekly round-up of articles covering a wide-range of information and Internet-related topics, is delivered via e-mail to Free Pint "Regulars," as their Premium Service subscribers are dubbed. (Redistribution rights can be obtained for a bit extra, and William Hann, creator of Free Pint, has indicated that the redistribution license "has been taken up by many corporations, government organizations, and business schools, as well as individuals.") Mr. Hann remains somewhat puzzled as to why "few have taken advantage of the 10 percent purchase discount and only a handful of Regulars have added their profile entry to the Directory of Regulars." As with any good product manager, he is rethinking the focus of the Regular subscription service. The cost for this Premium Service is $85.

Services on some sites remain free, but the Webmasters encourage donations, even suggesting dollar amounts for contribution.

Some groups maintain two sites running in parallel: one for free and one "For Subscribers Only." This was the case for two Web sites covering the economy: The Dismal Scientist and FreeLunch. Both were mentioned in the November/December 2001 issue of Searcher, "Economic Statistics & Forecasting Data via the Web: A Master List" (Table 5, Investing Plus!, page 66).
 

Economy.com's The Dismal Scientist and FreeLunch
The Economy.com Network consists of Economy.com [http://www.economy.com], a collection of data and analysis on the world's economy; The Dismal Scientist [http://www.dismal.com], providing economic analysis; and FreeLunch.com [http://www.freelunch.com], containing a collection of free economic, financial, and industry data series that can be browsed, searched, and downloaded. Underlying all of this is a database of economic statistics, known as the Databuffet.

DataBuffet.com provides access to all of Economy.com's historical data. "Using only a Web browser, users can choose among millions of economic and financial time series without having to know mnemonics or databank names. Since the entire system is Web-based, users never have to worry about software upgrades or storage issues. Data can be downloaded into many formats, including Excel, Access, XML and many other text files.... The historical datasets ... cover all aspects of the world economy. The databases include geographic data for the U.S. covering National, State, Regional, Metropolitan Areas, Counties, and ZIP Codes, as well as international coverage for Canada, South America, Europe, Asia, and the Middle East. Sources range from government agencies such as the Bureau of Labor Statistics, Federal Reserve, OECD, and the Bureau of Census, to private firms such as R.L. Polk, Moody's, The Conference Board, National Association of Realtors, and the Motion Picture Association of America. All time series have the original data source stored as an integral component of the series." A publication/database update schedule is posted on the Web site indicating when each was last updated and when the next update/email will be distributed [http://www.economy.com/dbase/schedule.asp].

Some have described DataBuffet as a bit "clunky" to use, but this might well describe other economic warehouses delivering data via Web sites. Paul Getman, president and CEO of Economy.com, views the new Global Insight Inc. [http://www.dri-wefa.com] entity that combines both Data Resources (DRI) and WEFA (formerly known as Wharton Economic Forecasting Associates) as his main competitor. For sophisticated data analysis, DRI & WEFA certainly have superior name recognition, resulting in great credibility in terms of the marketplace. Coverage of international economies must also increase for Economy.com to compete head-on with Global Insight Inc. (GII).

The differences between the two firms appears to be the target subscriber market. GII is used primarily by companies which have ongoing requirements for economic data and query the service on a fairly regular basis. The database underlying the Economy.com Network and the price of its standard reports is really designed for use by a company or individual with an occasional need for specific types of economic statistics and forecasts. The new site is a convenient one-stop shop from which to pull the data.

ForecastBuffet.com is the forecast equivalent of DataBuffet.com, offering forecast time series covering the states, metropolitan areas, counties, and industries. Core Forecast Databases are designed for clients who need access to broad categories of forecast data on a regular basis. "Each month, Economy.com's staff produces a consistent set of forecasts with a quarterly periodicity and a 30-year forecast horizon for the U.S., all states, and 315 metropolitan areas. Forecasts covering over 3,100 counties with annual frequency are updated each quarter. Core Forecast Databases provide users with broad forecast coverage of all major economic sectors: employment, income, demographics, credit quality, residential, and nonresidential construction." Specialized Forecast Databases (Detailed Employment & Output) have been developed for clients who need a high level of detail. Data access is offered at a fixed price that depends on the database and number of users. Industry Services ! Buffet features highly detailed forecasts for employment and output for the U.S., all states, and over 300 metropolitan areas.

Economy.com's mission is "to be the premiere destination on the Internet for anyone seeking high-quality information, data, or products on the world economy." Its clients have access to a staff of 35 economists (out of a total of 70 employees) via phone, fax, conference calls, e-mail, and 2-day conferences held semi-annually. (For those unable to attend, the conference books and presentation files can be downloaded from the Web site.) The purchase of documents involves some drilling down until you arrive at precisely the data or report you need, but it's quick and painless a simple "point-and-click" process, with no chance of getting lost along the way. The order processing is smooth and delivery near instantaneous.

Mr. Getman describes the genesis of The Dismal Scientist in 1997 from being a marketing tool for distributing reports issued by RFA ("a loss leader") that evolved into a highly successful venture. (Certainly, the shift from RFA to Economy.com as a corporate name is a move in the right direction.) With little effort put into marketing, the business press began to highlight The Dismal Scientist as an excellent Web site to consult. As word of the service spread, use of the Web site increased, straining corporate resources. For a time last year, in-house economists couldn't even get onto the system!

Arguably, it was poor planning in terms of the amount of traffic the site would have to support, but this seems the right way to transition "from free to fee." As opposed to some companies that simply saw the Web as a money-making venture, Economy.com appears to have needed to close its site to the public to control "overuse." Subscribers are now assured 24/7 access to the databank.

At the beginning of 2001, the decision was made to take the year to transform The Dismal Scientist into a fee-based service. Forecasts as to the number and type of subscribers were made and prices for access to the data were set. On November 29, 2001, The Dismal Scientist converted to a paid subscription site. Three weeks later, The Dismal Scientist was doing the level of business the company had believed it would take a year to reach. (One hopes that their economic forecasts are better than their predictions of Web site usage!)

If you seek economic news, analysis, and data around the entire world, this was one of the best places to go on the free Web. While the fee-based service promises expanded "international and industry analysis ... additional tools and special features," its competition has now changed, and its target audience may demand that the new site deliver what has been promised.

Competition from other free services may not have been so stiff. After all, anyone can put up a Web site and say it's a good economic site. It took the public quite a while to discover RFA (now Economy.com]. Competition may now come from economic powerhouses that have been in the business of collecting and forecasting economic data for years. The problem with powerhouses was always that you had to buy access at a substantial price; the Web has permitted users to identify and pay for precisely what they want each and every time. Improvements have been made as these companies moved from legacy systems to the Web and now pricing structures are beginning to reflect the new realities.

Perhaps the most direct competition for Economy.com will come from EcoWin [http://ecowin.com], a Web-based provider of economic and financial time series, to develop a database of indicators and forecasts on major and emerging markets. EcoWin has just teamed with The Economist Intelligence Unit (EIU), a world leader in country analysis and macroeconomic forecasts. EIU will integrate its international economic and financial forecast and historical data, EIU DataServices [http://eiu.com/data], with EcoWin's flexible time series data. The Windows-based platform will better serve the needs of busy, networked executives by providing a single source for retrieving, charting, and analyzing the latest market data and forecasts.

Admittedly, individual subscriptions are quite reasonable and, if you found The Dismal Scientist useful in the past, there is no reason why a charge of $16.95 per month would stop you from subscribing. If your need for economic data is constant throughout the year, you can save money on an annual subscription ($159). Groups of 10 users pay $1,095 per year (only $110 per user), and site licenses are available at $2,995 per year for up to 500 users. (That's $6 per user!) On a cost basis, subscribers to any of the Economy.com products and services get a true bargain.

Only 10 percent of paid-service subscribers are individuals; corporate subscribers include major investment, money-center, and central banks. The Dismal Scientist now pulls in half a million dollars a year; another half-million comes through the purchase of reports. Costs are low, with no salesmen required to explain the database or contents of the reports. Credit-card processing makes the sale of data and reports easy and convenient for both buyer and seller. When data is downloaded in error or reports don't meet the expectations of users, refunds are granted with no questions asked.

A seemingly separate service but appearances can be deceiving FreeLunch.com [http://www.freelunch.com] provides free access to over 1,000,000 economic and financial data series, "which can be charted and downloaded in a number of convenient and customized formats." Browsing the directory, you have your choice of 14 categories, each extensively organized with subcategories that make sense to both the economist and the layperson. The site's search engine is good, generally yielding accurate results on the first try. Advanced searching is available, limiting the search phrase to a particular state, date, frequency of data release (daily, weekly, monthly, quarterly, annually, or all), and order of results (MSA, start, > or < a year between 1900 and 2025).

Visitors are encouraged to register for access to the site. Benefits of registering include access to Research@Economy.com, offering "hundreds of analytical reports covering a wide range of industry, macroeconomic, regional, and international topics. In addition, there are thousands of preformatted historical data reports available in Acrobat or Excel format covering all the states and U.S. metropolitan areas, and specialized forecast reports on detailed employment and occupation trends." Some of the reports are available free of charge; the others cost from $20-1,000 apiece, with the majority of the reports selling at the lower end.

FreeLunch.com lists the day's economic releases, including the indicator and time of release. Links for "Analysis" and "View Series" open a new window, as do "Hot Downloads" and "Data in the News," and the new window is actually on The Dismal Scientist Web site. Registered users have access to these data. They may also elect to receive e-mail notification apprising them of the release of major data.

Time alone will tell how The Dismal Scientist fares as a fee-based service. Management remains confident that it can sustain this level of interest in its current product as it explores improvements in terms of joint ventures, reciprocal data arrangements, and the introduction of new economic reports. Joint ventures such as with Consensus Economics, Inc. to deliver economic forecasts is certainly a step in the right direction.
 

Conclusions
The decision to move from free to fee should not be taken lightly. When made as a pure business decision in terms of how the income generated could improve operations and the products and services delivered, it can be viewed as a wise choice.

Activities behind the scenes must be seamless and efficient, providing customers with convenient and easy mechanisms to get at what they need when they want it, with a minimum of effort. There is a psychological component to "shopping" online, whether on a per-transaction or subscription basis, that requires further study. What is clear, however, is that when a free site goes fee-based, customers must understand why the decision has been made and witness promises of improvement being honored. Sites will not succeed by simply instituting charges for that which was once retrieved for free.

In today's competitive environment, limiting use of the Web may not be an option for many Web planners, but they must choose how to play in this neighborhood quite carefully, taking into consideration the nature of the goods and services provided, as well as target customer bases. Selection of quality partners for online ventures content, technology, transaction processing, sponsorship, and advertising is critical for success.
 

Consumers Have Technology, Too

"Technology is now available that blocks some types of ads from appearing on-screen. For example, Adsubtract software [http://www.adsubtract.com] blocks banner ads, thereby speeding up the loading of pages onscreen." To view a recent and appealing innovation, click on to the business section of the Washington Post Web site [http://www.washingtonpost.com/wp-dyn/business/]. The banner ad at the bottom of the screen can be closed by a simple click on the x.

Software that minimizes the number of ads that pop-up on your screen can be found at Pop Up Stopper [http://www.panicware.com], Pop Up Killer [http://software.xfx.net/utilities/popupkiller/index.html], PopNot [http://www.hdsoft.com/popnot], and Webwasher [http://www.webwasher.com]. If you find yourself on a Web site that tries to block browsers equipped with "cockroach ad" killers, just shut down the pop-up filter. For an interesting discussion of why "Google does not allow pop-up ads" on its site, including a link to at least "one program that attempts to detect and uninstall pop-up programs," see http://www.google.com/help/nopopupads.html. For an overview of ad-blocking software, see Junkbusters at http://www.junkbusters.com/guidescope.html.

Some browsers permit you to turn graphics off to speed up delivery of pages, sometimes replacing a graphic banner ad with a text message. "Industry estimates place "graphics off" browser usage at 6 percent," according to AdResource.

So Outsource It

If the level of purchases made through a site rises above what the site's owner feels their technology and manpower can handle, they may outsource both the content distribution and transaction processing. Assistance for e-commerce activities is available through a number of different types of Web sites. Some will act as hosts for your online store; others as your online bank.

  • Bigstep.com [http://www.bigstep.com] began building Web sites in 1993, quickly establishing a catalog management tool for displaying and describing products sold on Web sites. Bigstep acts as a merchant account, accepting credit-card payments for items deposited into shopping carts and managing incoming and outgoing orders.

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  • FreeMerchant Store Builder [http://www.freemerchant.com] will help set up an online storefront. In addition to the basic store, premium services are available to help promote and manager commercial operations.

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  • Cardservice Credit Card Processing [http://www.cardservicenewaccounts.com] provides credit-card processing services for Internet business transactions. Over 120,000 merchants currently use the service as an intermediary between customers and their banks.
For a step-by-step guide to becoming eCommerce-enabled, including a comparison of Online Transaction Providers, visit the eCommerce Guidebook at http://www.online-commerce.com.
Summary of Publications Available from Economy.com.

Delivered via Acrobat PDF format, the three- to four-page products all have the look and feel of an S&P tear sheet or Moody's Industry Review. Sample reports from each of the services outlined are available for download from the publication's Web page [http://www.economy.com/rfa/prodserv/<productname>.asp], where <PRODUCTNAME> equals state, macro, industry, etc.).

  • Precis World outlines current and expected economic conditions of 10 countries, though individual economic statistics and forecasts available in DataBuffet cover many more. Each report covers a single country in detail, including a 5-year forecast of GDP, employment, industrial production, trade balance, population, prices, and exchange and interest rates. Short-term and long-term outlooks appear in the written analyses; each country's strength and weaknesses and forecast risks are also detailed. Reports are available for single purchase ($200) or subscription ($500 for the current report + two updates). The product may change slightly when Economy.com introduces its new World Business Monitor.

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  • Precis Canada provides a thorough coverage of the Canadian economy as a whole, four provinces, and five of the top metropolitan areas, including 5-year forecasts, risks, economic, and demographic indicators. Published three times each year, this product is only available via the Web.

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  • Precis Macro provides an overview of the U.S. and regional economies, financial and international markets, labor markets, agriculture, business investment, consumers, energy, housing, government, and forecast risks. Each chapter includes extensive analysis plus four charts (with commentary). Recent performance is illustrated through 250 economic and financial data points, and a 5-year quarterly forecast for over 200 key variables appears in each workbook. Published monthly, reports are available at $750 per report or $5,995 for a year's subscription.

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  • Precis Industry offers concise yet comprehensive research on the current and expected economic conditions of 63 U.S. industries." Forecast detail for 40-50 financial variables is included in each four-page report, updated three times per year. Cost is $200 per industry report for single purchase; $500 per industry subscription.

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  • Precis Consumer offers extensive coverage of all major facets of the consumer economy. Nineteen separate reports, each updated three times per year, include extensive analysis of current and anticipated trends, charts with commentary, and 5-year forecast detail. The tables include approximately 150 economic and financial data points. Cost is $200 for a single purchase; $500 per annual subscription.

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  • Precis State covers the 50 U.S. states, plus the District of Columbia, Guam, Puerto Rico, and the Virgin Islands, offering detailed reviews of the prevailing economic conditions and 5-year forecasts for major indicators. Statistical tables are presented in standardized format to permit easy comparisons among states. State ranking tables for all states are included in each report. Costs are $200 per state report or $500 per state subscription, which includes the initial state report plus the two updates. Discount packages are available for those purchasing 10, 25, or all 50 states.

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  • Precis Metro covers U.S. metropolitan areas. Reports cover a single metro area in detail, providing 5 year's data of gross metro product, employment, income, population, housing activity, migration flows, and personal bankruptcies. "Written analysis details the metro area's recent economic performance and short and long-term outlooks. Each area's strength and weaknesses and forecast risks are also detailed.... Each report includes regional and national overviews, forecast assumptions, metro area ranking tables for all MSAs, forecast tracking, and user's guide at no extra charge." Each report is three pages in length. Cost is $200 per metro area report for single purchase; $500 per metro area report subscription. Special rates are available for packages of 10, 100, and all 321 areas.

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  • Make-a-Precis permits the user to access the underlying data for any of these reports, selecting their own regions (e.g., state, metro, etc.) or industry and criteria. Reports are $200 and up, depending upon the number of data elements generated.

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  • Regional Financial Review "covers the U.S. economy in all its dimensions: Macro; International, Regional; and Industry.... The Review offers in-depth analysis of topical issues highly relevant to business planning," such as e-commerce, the mortgage credit outlook, and an examination of risk-adjusted returns by industry, to name but a few. The discussion of major developments and changes to short-term forecasts for states and metropolitan areas is supplemented by over 60 tables offering historical statistics. Available at $1,295 per report or $8,995 for a 1-year subscription (12 issues).

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  • Creditforecast.com, a joint venture product with Equifax [http://www.equifax.com] "combines more than five years of credit data with key economic indicators. The result is a unique online forecasting database of economic, demographic, and credit variables. This allows you to examine, segment, and stratify credit risk and economic data for over 232 geographic areas in the United States."
Barbie E. Keiser is an information resources management consultant located in New York City [barbieelene@att.net].
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