net.wars: You can't make money on the Internet

by Wendy M Grossman | posted on 08 March 2002

Well, it's official. You can't make money from content on the Internet.

Wendy M Grossman

So, at least, Peter Chernin, the chief operating officer and president of News Corporation (aka "Rupert Murdoch") told the FT New Media and Broadcasting conference this week. "No viable business model," he said. Well, let's face it. If you run a huge publishing empire whose major products are widely available through existing media at low apparent cost to the end user (that is, they are subsidised by advertising), it's easy to see why people might decline to pay for your product online. The other problem, of course, is that News International in particular has never "gotten" the Internet. Almost every attempt has met with failure, from Murdoch's 1994 purchase of Delphi  and failed joint venture with MCI to his Line One  and Currant Bun ventures (Line One still exists, but it belongs to Tiscali now).

In fact, even News Corp manages to make some money from the Internet, and therein lies a clue to how it can be done successfully. Crosswords. People are fanatical about crosswords, in particular the Times crosswords, and as the company has a subscription service  for £10 a year that lets people have more of them: the Australian crosswords, for example, and special interactive puzzles. Of course, it has to be said that the other resource News has figured out how to exploit online a bit is Page Three . That site, which according to a source inside the company is getting some 35 million impressions a month, makes money from merchandising and sponsorship. You know, customised greeting cards, answering machine messages, ring tones, and pay-per-view videos of photo sessions with the, er, girls. I can't help envisioning the subscriber-only area as being frequented by the sort of men in raincoats you used to see sneaking into seedy Times Square theatres in New York, but I am assured that no, it's all 14-year-old boys. Whatever.

Of course, it's not just Murdoch's lot that have failed at making money. Time-Warner had several multi-million dollar failures including the Netly News and its Pathfinder portal, and even such born-of-the-Net organisations as Wired News  wound up being sold when they could no longer afford their burn rates. Based on that, it is probably true that large companies – which feel they have to have large Web presences with all the extra staffing and resources that entail – are stuck using their Web sites, as Chernin said, to promote the existing offline products that people will actually pay for.

But it is not impossible to get people to pay for content on the Net.

Even I, a diehard old Nethead, pay for some bits, such as an electronically delivered daily tennis news service. Even though I read rec.sport.tennis daily as well as a bunch of other news sites, the newsletter is convenient, it contains information that isn't available elsewhere, and it arrives with clockwork regularity. It seems to me that that's the key: to find a niche that is not currently occupied by competing free sites.

The problem the big media companies have is that if they try to charge for their coverage of, say, George Bush's latest bit of idiocy (here – it's down at the bottom), they'll be up against a thousand obsessives who are documenting the same thing, many of them in far more detail.

I'd probably even pay for NTK (here) if they asked me because I love the sarcastic jokes so much.

A lot of people over the years have blamed the whole mess on the lack of micropayments. To some extent I think this is right. There is no way yet of making it as easy to pick up a single online issue of, say, the Wall Street Journal as to pick up a single paper copy.

All sorts of schemes have failed at this particular hurdle, from Digicash and Cybercash, which required you to take real money and turn it into their unfamiliar currencies, to Beenz, which had a sort of frequent flyer miles concept that allowed you to pick up points with purchases on member sites that could be used for futher purchases at other member sites. I've long been a skeptic about micropayments, because I think consumers hate being nickel-and-dimed. We're already paying to be on the Net, and all that stuff adds up.

Of course, one reason that people aren't paying for content today is that in most cases there's nothing micro about the sums demanded. At $15 a year, Salon's premium content is a pretty good deal, though with millions of sites to choose from (instead of hundreds or thousands in the print world), how many $15 subscriptions can a person afford? But $2.95 each for archived Business Week articles when you have no idea if they'll contain the information you want? What's more interesting is the The Times new breaking news update service, delivered via SMS: up to three updates a day, reverse billed at 25p per SMS, of which News International gets a cut.

But these are early days. I'm sure all those monks thought there was no way to make money out of printing books, too.

You can discuss this article on our discussion board.

Wendy M. Grossman’s Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, follow on Twitter or send email to netwars(at) skeptic.demon.co.uk (but please turn off HTML).