More Internet users are showing a willingness to pay for content
online -- subscribing to news sites, for example, or paying fees to send e-
greeting cards -- suggesting a shift in consumers' expectations that online
services should be free, according to a survey released Wednesday.
But the survey of cyberspending patterns, put out by the Online Publishers
Association, an industry trade group, also shows that a relative handful of
businesses benefit from these purchases and that advertising remains the
overwhelming source of income for supporting digital content.
Extrapolating the online transactions of 1.1 million consumers, the survey
found that consumers spent $675 million for digital goods and services in 2001,
nearly double the $350 million they spent the year earlier. The survey found
that 12.4 million Americans paid for some type of content in the first quarter
of this year, compared with 7 million in the first quarter of 2001. The survey
did not include payments made to pornography sites.
A big chunk of the spending accrued to business and financial news sites,
which in 2001 racked up $214.3 million in revenue from selling content, mainly
through monthly and annual subscriptions.
"It's where people need information the fastest that influences their
livelihood," said Michael Zimbalist, executive director of the Online
Publishers Association, which is based in New York. The association includes
about 20 major online publishers, including New York Times Digital, the Wall
Street Journal Online, MSNBC.com, ESPN.com and CBS Marketwatch.
The strength of business and financial news sites comes as little surprise
given that financial sites began selling content relatively early in the
history of the Web; the category has been anchored by the success of the Wall
Street Journal Online, which, with roughly 650,000 subscribers, accrued the
second-most revenue, after Real Networks, a distributor of audio and video
material.
Several other prominent media companies have recently introduced for-pay
packages on their Web sites. ABC.com said on Wednesday that it will begin
charging $4.95 per month for "ABC News On Demand," which includes news clips
and day-after replays of "World News Tonight" and "Nightline," as well as 30
days of the programs' archives. CNN.com began charging for access to video on
its site earlier this year.
Zimbalist said the industry had also been heartened by a very recent surge
of content sales in several emerging categories, notably personals and dating
sites, one of the fastest-growing categories, with $72 million in sales in
2001. In just the first quarter of 2002, it had sales of $53.1 million.
In addition, there has been a sudden growth of revenue among sports sites,
which are selling subscriptions to fantasy sports leagues and access to sports
news and statistics, and among online greeting card companies.
AmericanGreetings.com has accrued 1.5 million subscribers, who pay $11.95 per
year, since it started selling subscriptions in December, according to the
company's chief executive, Josef Mandelbaum.
Zimbalist said the growth in these categories suggested that businesses are
beginning to figure out how to package their services in ways that appeal to
consumers, and that consumers are overcoming the idea that content on the
Internet should be free.
Mandelbaum, whose company also owns Blue Mountain Arts, EGreetings and
Beatgreets, said: "In the past five years, we trained consumers that content
was free -- that was our fault." He added that there had been a "general
reluctance, but slowly but surely, people are paying for content."
The story behind the growth in sales of e-greeting cards, however,
underscores that in some regards the spending patterns are quite narrow.
Mandelbaum said AmericanGreetings and its subsidiaries controlled about 75
percent of the free e-greeting market; it and Hallmark.com, a competitor, now
command much of the subscriber-based market, meaning that the growth in the
category is accruing to just a few businesses.
Similarly, just as the Wall Street Journal dominates subscription revenue
in the online financial category, Real Networks draws more than half of the
revenue in the entertainment/lifestyle category.
Generally, the survey found that of the 1,700 sites charging for content,
the 100 with the most revenue drew 97 percent of all revenue and the top 50
sites drew 85 percent of the revenue.
