The Internet crunch has put to test the accepted practice of offering everything for free on the Web. Sites offering free information, free web sites, free shipping, and other Web freebies are shrinking in numbers, if not disappearing totally.
Both big and small online businesses have realized, some more painfully than others, that running a business by giving away free products is not workable. There are overhead expenses to pay -- salaries, rents, marketing costs, and others. Small online entrepreneurs, even the part-time hobbyists, are not spared from expenses: they need to pay for server or hosting fees to continue their operations.
As costs increase, advertising revenues have steeply declined making it difficult for a business to survive by displaying banner ads alone. To cope with the increasingly difficult market, dot-coms are cutting their budgets by laying off or reducing salaries of their staffs. Many have already closed their businesses altogether.
As a result, online businesses are experiencing a mad scramble to find other means to increase revenues. NetZero, a free Internet provider, has reduced its free offering to 40 hours and introduced paid subscriptions. Bizland now charges for Web hosting it used to provide for free to small businesses. Salon.com, the online magazine, will now carry fee-based premium content.
What used to be free is now slowly changing to fee-based. The low ad rates and poor affiliate returns have forced many small entrepreneurs to face two options: to charge or go under. The state of running a free site only to earn $1 for every 1,000-banner impression per month can only last so long. With the current slump in ad market rates, a site generating 100,000 page views a month can only expect to earn $100 - an amount that is not even enough to cover dedicated server fees.
People prefer to pay for unique content
Many sites are seriously considering charging for access to their content, either through a monthly subscription fee or a one-time access fee. The success of WSJ.com in creating a subscription-based model has inspired both small and big publishers to explore the same approach.
Some publishers are looking to combine free content with fee-based content. A significant level of content will remain free, while paying members can have access to the best content with no banner ads and other "special" features. Using this strategy, the site can still generate the same amount of traffic overall, while subscribers enjoy special treatment and publishers earn revenue to pay for the bills and time spent developing the site.
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