Paid Content vs. Advertising Supported

posted by   Ian Wyatt   |    March 16, 2009

Posted in   New Media   |   Comments

I've been thinking more about Plenty of Fish, entrepreneur Markus Frind and Internet business models as a follow up to my blog post from the weekend, Plenty of Fish: $10 million revenues & 50% profit margins.

In March, 2006, Plenty of Fish founder Markus Frind wrote a blog post titled "How I made a million in 3 months" on WebmasterWorld. The post begins with "Lots of hard work, and a billion+ pageviews." The second point of his post is more insightful: "You have to create sites that will bring in repeat traffic. If you think you will get rich off SEO think again. If you create a Free jobs site you could net 30 million + a year if you got big. Club listings site, free religious personals etc would all be big money makers. Look for established markets and offer a service for free and support it with adsense."

Other sites have done exactly this. Think about Craig's List, which for years has taken market share from newspapers by offering free classifieds to a growing online audience. Do newspapers still have print classifieds? Who pays hundreds of dollars to list a job in the local paper? While Craig's List today charges a nominal fee of $25 for job listings in major markets, much of the site is completely free - and was for years, which allowed Craig's List to steal market share.

Want to be the next Markus Frind? Start by asking, "what do people pay for online?" Music. Games. Porn. Dating. Job ads. Investment advice. All opportunities for free sites to topple the paid sites. Start a simple free site, add Google AdWords, and let the traffic and profits begin.

Will paid content fall by the wayside, with more entreprenuers like Markus launching free sites to undercut the paid content providers? Perhaps in some areas but not in others, such as music and games, where copyrights will keep that from happening. There is definately a trend toward more free content, as users launch free sites and Internet businesses extending the free line, giving away more for less (or free). Nobody pays for online news, gossip, restaurant reviews, recipes, or searching job listings.

The advertising model can work very well online, and my company's growth in recent years has been a direct result of growth in online advertising, and our ability to build a large and captive audience. But ultimately, businesses have to be selling a product or service, and users must be buying. If users never buy, busineses won't advertise.

I continue to believe that paid content is here to stay. Paying for content means that the user views it as being valuable. If it is free, users sense that it is worth little. The paid content barrier establishes a sense of exclusivity that everyone seeks. In a challenging economic environment where advertising rates are declining and media spending is slowing (even in the online channel), I believe Internet companies will continue to add products or services that they can sell to their users to offset declining ad revenues.

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