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Fee At Last

With three notable exceptions--specifically, a few focused-information services (such as Consumer Reports Online), various gaming sites, and countless, um, clothing-optional domains--subscription-based Web services have not fared well on the Net.

But neither have sites offering free services. Companies scrambling to find new sources of revenue are being forced to alter their strategies. What used to be free now often comes for a fee. No two sites seem to take the same approach to charging customers for previously gratis goods. For several years, many sites have offered a limited area of free services and content, with a charge for "premium" versions that include extra features. After attracting users to the free product, these sites hoped to convince them to migrate to the fee-based version. Whit Andrews, research director with market analysis firm Gartner, expects that we'll see the free versions of many sites get skimpier.

"When it started, the idea was only to charge for really [advanced] services," Andrews says. "Premium service now means less than it did."

Two years ago, for example, the online storage site FreeDrive provided 20MB of storage space at no charge; premium deals let you buy more space for a fee. But today, FreeDrive offers only a tiered system of subscription plans that are priced at up to $10 per month, and users must agree to accept outside ads sent by e-mail. FreeDrive's competitors--Driveway, I-drive, and My Docs Online--have all suspended their free services, too.

The venerable Encyclopedia Britannica made a splash a couple of years ago by offering the unabridged content of its volumes at no charge on its Web site. But last July, amid a round of layoffs at the company, the site changed its policy. It now charges $8 per month or $50 per year for access to the encyclopedia. The site's spokesperson, Tom Panelas, says the change has been a success, with many users of the formerly free service signing on.

"We believe that there is a value to what we offer that customers are willing to pay for," Panelas says. "People are realizing that not all information on the Web is quality information. And people have always been willing to pay for quality."

Online magazine Salon.com is another content site that introduced a subscription plan. Though some of the site's articles remain free, for $30 a year readers gain full access to all of the site's news, political stories, and columnists. Patrick Hurley, Salon's senior vice president of business operations, says the change has been well received by readers. The magazine signed up 20,000 subscribers in the first six months of the plan's launch. More important, according to Hurley, the amount of traffic to the site has not decreased since the changeover.

Another strategy some sites pursue is to charge for services that are available for free elsewhere. For example, the site www.555-1212.com now charges variable amounts for its residential and business phone directory services. One option lets you buy a block of 100 lookups for $10. At 10 cents a call, it's cheaper than dialing directory assistance over the phone. But of course, you can get the same information for free at every major Web portal.

So what's a savvy Web user to do? As always, exercise caution. Be wary of long-term commitments, especially since so many dot coms are disappearing without warning (see " Dealing With a Dead Service." ) And carefully read the terms of any fee-based premium service before putting your money on the line.

Payment Plans

The trend toward subscription-based services translates into more hassles for users. Even if you're willing to pay a nominal fee for Web content, the work of establishing and tracking dozens of different subscription plans can be a pain.

Enter micropayments, an idea whose time has come but may not stay. Micropayments enable you to pay for content as you go--50 cents here for a Wall Street Journal Online article, or a dollar there for a PDF file containing some market analysis.

Micropayments (which never exceed $10 and can be as low as a few pennies) are drawn from a credit or debit account maintained either by the Web retailer that sells you the product or service or by a third party that partners with online retailers to manage individual customers' micropayments. For instance, a number of media companies--such as Consumer Reports Online, The New York Times, and The Wall Street Journal Online--use a payment system called Qpass. If you're looking for an archived article that's more than a week or two old, you can pay a small amount via your Qpass account to gain access to that article. Qpass simply monitors all of your micropayment purchases across various publications and then bills your credit card monthly.

But micropayments haven't caught on among sellers in a big way. Many Web content providers already have their own methods of delivery and billing, and they are reluctant to switch to a payment approach that involves a third party.

"The technology has emerged to support micropayments at almost any level," says Gartner's Andrews. "You just don't have any real passionate desire from content publishers to adopt it." And that brings us back to square one--dozens of accounts with different providers.

Andrews suggests there may be an incentive for sites to switch to a micropayment model in the future.

"Where micropayments might [be] relevant is [as] a third-party system that's more of a metering...model, cell-phone style. 'This person has listened to x percent of their allotment of downloadable music,' for instance, or '[has read] x percent of articles from participating publishers.'"

Time will tell whether this type of purchasing model gains wide adoption.

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