Fee vs. free: Web advertisers, publishers assess new model

For companies like E*Trade Canada, whose modest online banner ads are currently posted on sites like GlobeInvestorGold.com and MoneySense.com, Internet advertising is about leveraging a particular site's traffic - whether free or fee-based. According to pundits, the new breed of 'pay-per-view' Web sites may offer advertisers access to more qualified - albeit smaller - audiences; but only if fee-based Web publishers prove their worth.

For companies like E*Trade Canada, whose modest online banner ads are currently posted on sites like GlobeInvestorGold.com and MoneySense.com, Internet advertising is about leveraging a particular site’s traffic – whether free or fee-based. According to pundits, the new breed of ‘pay-per-view’ Web sites may offer advertisers access to more qualified – albeit smaller – audiences; but only if fee-based Web publishers prove their worth.

With online ad revenues continuing to be hard to come by, many Web publishers are increasingly looking to the user to pony up revenues.

Over the past 18 months, major Web content and service providers, particularly news and info sites like the Wall Street Journal Online, Quebecor Netgraphe’s Canoe.ca and several Bell Globemedia properties, have championed the ‘pay-for-content’ model, supplementing online advertising revenues (which remain the revenue mainstay) by charging visitors subscription and/or one-time user fees.

The transition from free to fee means publishers have to get users and advertisers alike to buy into the concept with unique value-added services and information, and some marketing muscle, says David Keith, SVP, financial products at Bell Globemedia Interactive.

Keith’s company includes GlobeinvestorGold.com, Bell Globemedia’s second pay-per-use site, which launched in December. It followed the October rollout of TSNMax.com, which was canned because it didn’t draw enough subscribers.

‘You’ve got to get the word out,’ says Keith. ‘The fact that we have broad marketing and advertising going on does work to attract not just consumers, but advertisers too.’

He adds that GlobeinvestorGold.com spent over $1 million on an offline and online campaign to support its launch. Twenty per cent of the budget went to online advertising (both banners and viral).

Its marketing efforts have also attracted other clients, he says, including TD Waterhouse Canada, for which Bell Globemedia created a customized version of the GlobeinvestorGold.com site. ‘We’re slowing down the advertising right now during the summer months, but we’ll be right back in there come September.’

GlobeinvestorGold.com, which attracts active investors (80% males with high household incomes) with real-time investing, stock alerts and exclusive content and databases at various monthly fees, has made a go of it despite a slumping economy. Says Keith: ‘The economy has cut into what we would normally see in terms of subscriptions.’

The site’s subscription and ad revenue numbers are not being released – numbers are a little lower than where they wanted them to be, he says, but user growth has continued at a very steady pace with ‘hundreds’ of users per day. ‘People will pay for premium services and we’re proof of that.’

‘There’s a lot of competition from the free sites out there,’ says Keith. ‘We have one with Globeinvestor.com. For publishers, the tricky part is offering enough value-add to cause a person to say ‘I need to have that to do my investing.’

‘We’re also banking on the fact that more and more companies [in our sector, especially] will be moving toward a subscription basis, so as that picks up, we’ll be in better shape because we’re the first with a fully customizable database application.’

Bell Globemedia’s now defunct TSNMax.ca featured exclusive reports from TSN and the Globe and Mail with video, fantasy pools, wireless alerts of news and scores, at a cost of $4.95 per month. Despite a $2 million ad campaign to promote it, the sports Web site simply couldn’t attract a substantial pay-for-use audience. But, some of its popular subscription-based features (namely its fantasy pools), will remain paid services within TSN.ca, says Steve Hulford, VP, sports products at Bell Globemedia interactive, who handled the TSNmax.ca migration.

‘We threw [TSNMax.ca] out there hoping to learn from it. Our users told us they didn’t value, and weren’t willing to pay for premium sports content – it’s already so readily available on the Internet. But they said they did value the games,’ he says. The fantasy pools and games, which are now part of TSN.ca, will either be pay-per-use or advertiser-sponsored (free to users) after the site is re-designed and re-launched this summer.

‘You’re going to get a smaller audience in a pay environment,’ adds Hulford. ‘That’s why we’re using TSN.ca, where we’re getting inundated with traffic and we can monetize that audience. Sponsors are attracted to that. And that opportunity could exist in every sector or genre.’

Sites must choose wisely what they charge for and what they don’t, he says. ‘The tendency is to make a whole site for-fee, and sometimes, as we’ve learned, you need to pick certain features – think about innovative interactive applications that users will pay for – and from day one charge them for it, so users are pre-conditioned to pay for them. The rest of the content is there to tease and upsell the user to the pay services. That allows you to maintain advertising revenue, because you’re still getting the audience numbers.’

For its part, Sympatico.ca is constantly datamining to determine what its audience would like to see, and more importantly, pay for. But John McLarty, GM of Sympatico.ca (English portal), which offers small games and puzzles as pay-as-you-play services (as well as its domain name registration service), adds the general interest portal won’t likely charge for everything.

‘We need to draw visitors with free content, but [if] we could create some niche elements within that big bucket [the site], then perhaps we have a business model,’ he says.

The key to the new model’s success lies in the publishers’ ability to attract specific audiences with premium content and tie revenue to custom-built applications or services, agrees Marcie Sayiner, senior manager of research for Ipsos-Reid in Vancouver.

Ipsos-Reid published a report in September that found that consumers aren’t overly willing, or likely, to pay for just any online content. According to the report, only 5% of Canadian Internet users are willing to fork over a monthly or annual fee to access a news and information site, and only 8% of Canadian Internet users have paid for online content in the past. But once publishers start to perfect their offers, she says, they will see an uptick in users, and advertisers.

For advertisers, she adds, the ‘pay-per-view’ model offers the opportunity to generate much better online advertising results by matching offers to the targeted, and probably more loyal, audience of a pay-for-content site.

‘When we’re considering a site we’re looking for eyeballs mostly. And certainly on a fee site, you’ll get the same eyeballs each day,’ says Rick White, VP, brand and marketing management at Scotiabank. ‘So you’re getting a better buy, a better quality audience.’

However, he adds, the number of fee-based sites where you can advertise is still quite limited, so for now, they haven’t made up a large percentage of the online buy.

‘Because we’re focused on a more sophisticated or active investor, fee sites do make sense to us,’ says Colleen Moorehead, president of E*Trade Canada, which advertises on both content-free, and content-fee sites for different purposes. The person subscribing to GlobeinvestorGold.com, for example, is serious about it and may be in a more tightly defined segment – a segment that’s more likely to parallel E*Trade’s target groups, she says.

‘However,’ she adds, ‘being that you want to ensure that you’ve touched people everywhere, we also use sites that may not be fee-based but are focused on our customer segments, like MoneySense.’

Because E*Trade Canada has unique strategies relative to every site it supports (broad reach vs. depth of building more consistent messaging to the key target segment), Moorehead says she is unable to appraise ROI on fee vs. free sites. But she adds that as a Web advertiser for the past six years, E*Trade is continuously building a collective base of learning to provide benchmarks on such issues.

The company, which counts 85,000 customers, also acts as a Web publisher, marketing its Power E*Trade subscriber service to various customer segments: ‘best’ customers get access to the service for free based on the number of trades they do per quarter, while others, who are perhaps not as active, may pay for it, says Moorehead.

‘Being able to offer transaction capabilities is a very important part of delivering high value content,’ she says. ‘One of our key strategies is to produce original content and support it with a transaction model – that is the killer application.’

Sympatico’s McLarty says there’s also the potential for publishers to offer advertisers valuable data about their users, despite whether it’s fee or free. ‘You can get pretty granular with who is watching and experiencing your content on the Internet. And that won’t go away just because people are paying for it,’ he says. Fee sites, in fact, have the opportunity to collect and share even more detailed audience data since visitors are required to register and provide payment information.

But Ken Schafer, president and CEO of the Association of Internet Marketing and Sales Canada, says at least initially the for-fee areas or sites will have much less advertising. ‘It’s going to be hard to justify plastering a page with advertising and pop-ups where a person is paying for it. There could be the potential for long-term sponsorship-type roles.

He adds: ‘For the free areas, my guess is that you’re going to see a lot more bombardment [of] marketing messages.’ That’s a trade-off that many publishers will probably put toward their readers.’

But that lack of advertising – or rather ‘intrusive’ advertising – on for-fee sites will be a boon to consumers and advertisers alike, says GlobeinvestorGold’s Keith. Ads currently on GlobeinvestorGold.com are straightforward one-click banners, buttons or sponsorships from the likes of E*Trade and HSBC. ‘We haven’t made a big deal about it but we will,’ he says. ‘Our ads are non-intrusive compared to a lot of the free sites, which can drive you crazy. And that’s an important selling feature.’