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Business Models for Online Content


Do you pay for what you read online? Probably not. But the market is evolving, and we’re in for an interesting future.

People have been trying to monetize online content for as long as the Internet has been commercial. In the early years of the World Wide Web (and several years before), Internet service providers offered unique content–news, games, and other information–that couldn’t be found on their competitors’ services. That was how services like Prodigy, America On-Line, and others differentiated themselves. The costs of producing this content were included in your monthly fees. When the World Wide Web came along, however, the explosion of information that followed made such walled gardens less and less relevant. They first decayed into so-called portals, and were eventually nixed entirely. The first paid online content, then, was what you got with your ISP subscription.

As millions of websites cropped up, there were people who wanted to make money from the content they offered. In the late ‘90s and early 2000s, a few different models were tried, but the one that found the most penetration was based on ad revenue. Some sites attempted to make money by charging monthly subscription fees in order to access anything at all. Outside of adult content, such a model did not work well at all. So, it was all about ads. Then, as now, there were essentially three types of ad systems, from least to most lucrative:

  * Paid per impression (view) -- Every time someone sees the ad, you get paid.
  * Paid per click -- Every time someone clicks the ad, you get paid.
  * Paid per sale/lead -- Every time someone clicks the ad _and_ completes some part of a sale transaction (from inquiring for more information to actually making a purchase), you get paid. Affiliate programs, though not always considered advertising, operate on this model.

If you were on the Web in its early days, you probably remember what it was like. If you don’t, it might surprise you to learn that Google’s text-based ads were deliberate counterprogramming to the prevailing paradigm of online advertising at the time. Fifteen years ago, online ads were often large, flashy, noisy, in-your-face affairs. Many of them invoked plugins like Flash or Java, which were not particularly stable at the time, and put significant strains on that period’s less powerful computers. Browsers were crashed and frozen on a regular basis. The first browser hijacks and spyware (now mostly called “malware”) appeared. These nefarious applications subverted the intentions of users in order to gather marketable information about them, generate ad revenue, or both.

As ad styles competed with one another to attract the attention of users–becoming ever more obnoxious and destabilizing to PCs–the market reached a saturation point. When the dotcom bubble burst, the online ad market went with it. One of the few influential survivors was Google’s AdWords program, which focused on targeting ads to user preferences rather than trying to attract them with flashy effects. This turned out to be much more effective. Google’s ad program generated more (and better quality) traffic, and it paid ad publishers more money, too. Much of this was possible only because Google aggressively policed both how ads were created, and how clicks were generated. Deceptive ads were not allowed, nor could sites running ads deceive (or even directly ask) users into clicking them. For the most part, that is still how AdWords and AdSense (the publisher-side application) work today.

But even Google ads don’t pay as well as they used to–the ad market has, overall, continued to decline. This is not due just to people getting tired of ads and learning how to tune them out, but also the rise of effective ad-blocking programs like AdBlock and Ghostery. You can’t click ads you don’t see, after all. Such blocking programs originated in response to the real dangers that characterized Web-based ads 15 or so years ago. The only way to be safe was to block them entirely. On many sites, that is still the case. Many ads are also bandwidth-intensive, which remains a serious concern for people on metered or slow connections.

Given that ads are how many sites try to pay for their hosting (which is not free, and not cheap if you are popular) and their content (which takes both time and effort to create), blocking ads exacerbates the underlying problem. This is not to say it’s always wrong to block ads–the safety of one’s devices must come first, and many sites run ads that are simply untrustworthy if not downright dangerous. But there has long been a shortage of options in getting that content (and its hosting) paid for, other than coming out of pocket–which is not an option for everyone.

Way back in 2001, cartoonist Scott McCloud suggested micropayments as a solution. Instead of a subscription, a user might purchase view credits on a site, and each page would use up some amount of those credits. $5 might get you enough credits for 100 page views. It was a novel concept at the time. Tech blog Slashdot implemented such a system, though it really just traded money for ads. $5 gets you 1000 ad-free page views, which is probably a better deal than they get from the advertisers themselves. Other sites tried similar systems, but none of them really caught on. The now-defunct TipJoy service operated essentially in reverse: if you liked something you read or viewed, you were encouraged to leave a tip, even if it was just a few cents. But, as noted, TipJoy and similar services didn’t survive, either. People just weren’t interested in micropayments.

It turns out there’s one domain in which micropayments work very, very well: mobile games. For whatever reason, paying $2 for 1,000 gems in a smartphone-based wargame is appealing to enough people that it supports the business models of countless games. But for Web content? Forget it.

Interestingly, a number of models have emerged in recent years that offer new and different ways for content creators to get paid for what they do. Merchandising has always been an option for people with enough popularity, but until the advent of Kickstarter, it was difficult to gauge interest before investing in a production run. Now, you can be sure you’ll get paid before you’ve even produced your items. (The good news is that kickstarted projects usually deliver, too. Few people end up taking the money and running.) For those who want to get paid more directly for Web-based content, Patreon is a great option. If you have an account on Patreon, people can sign up to pay you some amount per month. A few hundred people throwing a handful of dollars at you each month really adds up–and most creators do this on the promise of producing new content, or otherwise continuing whatever work they’re doing. It could be thought of as an ongoing Kickstarter-like model for online content and services rather than physical or digital products.

News-based websites have taken a different tack. The New York Times, the Washington Post, and others have gone to a “freemium” model not too dissimilar from what many free-to-play video games have done. You get a set number of free articles per month, and beyond that you have to pay a subscription fee. The Times is perhaps the most successful site to employ this model, with over a million digital subscribers. But even with this good news, there’s a downside as overall subscriptions and ad revenue are down. It’s hard to say where the bottom is in these trends. Ad revenues continue to fall, and people are less and less willing to pay for quality journalism, especially from major media outlets. Where there seems to be growth is at the other end: small-time creators making a living or at least supplementing their main income via Patreon, merchandising, and similar means. Fifteen years ago, such options didn’t exist. We’ve come a long way.

As for me, I don’t make any money from this blog, at least not at this point. I don’t run ads, and while I will put submitted links in my weekly roundups, I refuse links that are nothing but blatant advertising (rather than useful information). I might follow the merchandising route at some point and put out a book. We’ll see. By the time I’m ready to do that, there might be a whole new slew of options available. The Internet is funny that way–nothing stays the same for long.