Commentary

Ease of Purchase: The Key To The Paid Web

Two years ago, few could have predicted that the subscription model would be receiving so much airtime right now. Advertising was growing at a steady clip, particularly online, and CPMs were healthy. But then, few could have predicted the severity of the recession that was to begin in December 2007, which caused the acceleration of permanent change in some industries (banking and automotive) and has a few others on the ropes (newspaper and real estate). On another note, did you know that the average U.S. recession has lasted 17 months since 1854? Statistically, we could be out of the woods as I write this in June 2009. But I digress.

Barry Diller -- whose IAC brand oversees businesses that have both subscriber and advertising-based models -- delivered a highly controversial keynote at the Advertising 2.0 Conference last week, where he called the advertising-only model unsustainable for the Web. You can read coverage in CNET. What was particularly interesting was his comment that the iPhone and its App Store is the reason why he has so much faith in the paid model. Why? A few flicks of a finger and your content or software is delivered instantly, and your account is debited or billed. Diller believes that the success of the paid Web will be largely ushered along by the ease of purchase phenomenon.

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This has profound implications. Right now, it is either ridiculously easy to buy content (think Amazon, iTunes, or the App Store), or somewhat difficult. As an experiment, I intentionally searched for an obscure topic in a past Wall Street Journal article. I was taken to a page where I needed to create an account with a partner who manages archived content. Surely it is a process I would have completed if I was on a real mission for a particular piece of content, but more to the point, it illustrates just how easy the App Store is by comparison.

Last week, Steve Robinson penned a Video Insider article on the possibility of Hulu moving to a subscription model. While I don't know if that is in the cards for Hulu -- my take is that the mainstream appeal of the site (not to mention its backing by the networks) will keep it ad-supported -- he makes very good points. Quality content combined with ease of purchase is already a real business online not only for Apple, but for the MLB and Netflix. With iTunes, the App Store and AppleTV, is Apple showing us what the future will look like for the paid Web?

7 comments about "Ease of Purchase: The Key To The Paid Web".
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  1. David Lewenz from Axxiem Web Solutions, June 15, 2009 at 4:01 p.m.

    Subscription is mandatory when it comes to video online, Band with cost will eat you out of house and home in a short period of time as user content is viewed. WeC2.com is set to launch July first it will be the first true network news channel that allows content providers to sell content in real time. Subscription for content upload starts at $5 dollar per year and grows as content is uploaded for sale. The company is focused on three revenue streams membership, commission on each transaction with a unique viewer driven advertising model.

  2. Dean Collins from Cognation Inc, June 15, 2009 at 4:07 p.m.

    One of the aspects i think most people are missing about Google Wave.... is Google Robots.

    Yes the 'monetisation' hooks aren't even built yet for a Wave App Store but when you think that a Google Robot could site between you and all of your interactions with anything web related and do "stuff" in real time.

    (the real time english/japanese translation example of the launch video was good but not 'un-thought' of, there are plenty of others less obvious but even more usefull day to day)

    eg "in 15 minutes of brainstorming one of the ones we came up with was at barcampnyc4 was a 'CNBC' wave robot that would insert into any document real time financial information about a company where a financial ticker symbol was implemented into a Wave enabled document"
    (more here - http://deancollinsblog.blogspot.com/2009/06/wave-app-store-mechanisms.html).

    So to answer your and Barry Dillers question, yes the future of the web is monetisation BUT it's not going to be for content BUT for tools to handle the organisation and integration of the information on the web to turn it into something purposeful and worthwhile.

    Cheers,
    Dean Collins
    www.Cognation.net
    P.S. Dont bother, the domain www.WaveAppStore.com has already been taken.

  3. Paula Lynn from Who Else Unlimited, June 15, 2009 at 4:17 p.m.

    1. Nickeling and diming an audience is one sure way to lose them. Some smart techs will figure out a one time paid subscription model to include verticle/horizontals tubes across platforms and websites and whatever else. That still may not be the answer until a full advertising support system is designed and implemented to clean up the fuzz.

    2. How many can remember what it was like to try to retrieve/find older information/content? Filling out a form seems like a day at the beach.

  4. Richard Monihan, June 15, 2009 at 4:18 p.m.

    I'm not sure either model can "survive" on its own, in the traditional sense. There is a growing belief that the advertising model cannot work on the web. I disagree. Certainly for smaller sites, it's unlikely to help them survive. And this would mean sites under 1.0mm uniques per month.

    Due to the lack of reach, it's nearly impossible to get high profile brands to purchase ads to pay attention to the site if it's too small. Sadly, this is a terrible mistake on the part of advertisers, as smaller sites are better brand marketing vehicles - they tend to have loyal audiences, and their niche exposure tends to be a better fit for specific advertisers.
    All in all, however, smaller sites have to rely on third party "remnant" advertising revenue.

    Larger sites benefit from their "reach" - even though reach should not be a purchase requisite online. If I buy 10,000,000 impressions on a site that gets 5,000,000 uniques per month, there is a low likelyhood that I will hit even 2.5mm of these uniques if ads run more than 2 per page.....which in all likelyhood they do. More importantly, reach is better achieved via a large aggregation of purchase over a short period of time - such as via TV.

    Online ad purchasing should focus more on environment, demographic fit, and ease of purchase/usage. Spending huge sums to buy that special "content package" seems really cool, but in many cases gives little extra value to the media spend on banners that it is supporting.

    However, larger sites are adept at selling through the cool special "packages", leaving smaller sites to scrounge for the crumbs. This is what makes the advertising model unsustainable for the web. Larger sites sell advertisers snake oil, and it will be a long time before the advertisers sort through the wheat and chaff to determine what is valuable and what is not.

    In the meantime, these small sites will likely go out of business...or barely cling to life.

    The larger sites will thrive on advertising, then as an adjunct, offer "premium paid content".

    That is the real value. Once a site is clearly viable, being able to further qualify your audience with paid content makes it a more valuable advertising purchase...and it represents another revenue stream.

    As usual, the value of increasing returns to scale steps forward as the driver for websites, just as it has for every industry that has preceded it.

  5. Richard Monihan, June 15, 2009 at 4:20 p.m.

    I forgot to mention, one way smaller sites may survive is the creation of an "ease of use" purchase engine utilizing auctions.

    The ability to have advertisers comb through sites in an auction engine and purchase the best sites that meet their needs from a demographic or environmental standpoint, but purchase them with one click and at a reasonable price will help smaller sites survive.

    I know Google/Doubleclick has attempted something along these lines, but I believe this effort needs to be expanded rapidly beyond its current small base.

  6. John Capano from Wunderman, June 15, 2009 at 5:22 p.m.

    I suspect that a lot of the 'ease of purchase' sites you are referring to are sites where you already have an account, have had it for a while and are used to the User Experience. I don't recall Amazon or the iTunes store being any easier of an experience the first time I used them than the WSJ is now. As consumers, we tend to forget how difficult something is in direct relationship to how badly we want it and how long ago we experienced it. Today, I’m loving the iTunes store. The day I signed up, not so much.

    What we are seeing here is the same thing we've seen in retail (how easy does a store make it to walk in and buy something) and customer service (how easy does a company make it to resolve an issue). These issues have always been at the heart of the retail to consumer experience. Transferring them onto the web hasn't changed the challenge (making it easy for the customer to do business with you), it's just widened the conversation to include another touch-point. Which we will do again as Mobile retailing takes hold.

    In all of these situations the customer experience is key, whether it's setting up an account, being a one time buyer, being a return customer or trying to resolve an issue. Companies that get this, and spend the right amount of time and effort to figure it out, will have a serious competitive advantage over their competitors that don’t. I can’t think of a time, industry or channel where this hasn’t always been the case.

  7. Pierre Wolff from Livefyre Inc., June 15, 2009 at 6:02 p.m.

    sticking w/the ease of payment system issue for a moment, neither iTunes, the App Store, nor Amazon's One-Click options are actually any easier than most other ways of purchasing. The only diff is that because one has to sign up to get started w/these services, they're sacrificing the initial easy sign-up capability that most sites enable, in order to make later payments easier. If more sites were prepared to use Paypal today, they too could have an easy payment system. Sure, it requires signing up for the payment system, but going forward it's easy. I use Paypal every time I buy flowers on 1-800Flowers and it's a painless activity.

    As it turns out, many merchants don't want to use a standardized payment system because of the fees, and those who choose to go at this on their own need to have a high enough volume of transactions to undertake this process. Hence, both Apple and Amazon had this going into their respective game. But consider the fact that they everyone has to sign up w/both of these companies to buy fm them. Not likely that consumers will want to do this w/10 more companies.

    Until some provider is able to become the standard payment service (Google tried and failed w/their shopping cart offering), I don't see Mr. Diller's remark making too much sense. Makes you wonder why none of his companies are accepting Paypal.

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