For-Pay Netsurfer Subscriptions: Why We Did It

This web page contains some background on how Netsurfer came to start charging money for subscriptions. We wanted to give our interested readers some context for how we arrived at our decision to switch from the free, ad supported business model to the cash subscription model. Ultimately, it was an inevitable decision, and should come as no surprise to anyone who's been following the evolution of Internet businesses over the course of last year.

This account is based on some of the feedback we received from you, our readers, when we discreetly mentioned a few months back that we were thinking of charging real money for subscription. It should address most of the issues and questions on your collective minds.

Online Advertising, R.I.P.

Of all the feedback we got on deciding to charge for subscriptions, the easiest to address has to do with advertising. Some of our readers, perhaps mercifully unexposed to the harsh and brutal realities of economic apocalypse, asked us why we could not continue operating as a free, ad-supported set of publications.

Three things happened to online advertising last year that killed it as a business model for us. Actually, that's rather mild. Say maybe utterly destroyed, totally demolished, smashed to bits, pushing-up-the-daisies-it-wouldn't-squawk-if-you-put-ten-thousand-volts-through-it annihilated it as a business model for us.

Now, keep in mind, we're not sissies about this. Unlike a lot of online businesses which relied on selling advertising to survive during the late lamented dotcom euphoria, we actually made a living on advertising revenue from about 1995 until 2001. That's more than can be said for many of the late lamented online publishing ventures. We played the game and we're still here. But it's time for a change.

OK, so three things destroyed online advertising in 2001 and made it impossible for us to rely on it as the means of our existence.

The Dropping Bottom

First, the bottom dropped out of the ad pricing market. By the summer of 2001, the average one million ad exposures we delivered every month got us about $200 in revenue. That's just laughable. You can barely run a modest aquarium on that budget (though probably without the piranha), never mind an honest publishing venture which takes pride in actually paying its writers.

At the same time, while the price of ads was plummeting, the advertising market for medium-sized sites like ours effectively evaporated. The small ad buyers went out of business. The big online advertisers consolidated their ad-buying operations and decided that it was not worth throwing money at lesser sites like ours. Unless you were serving hundreds of millions of ads per month, they did not even want to bother talking to you. It made perfect economic sense from their point of view since the larger content sites gave them better economies of scale in a market where online ad responses were taking a dive.

All this led to the situation at the end of last year, where the sites ranking among the top 50 in number of Web visitors commanded 95% of the online advertising revenue. Think about that. If you were not one of the top 50, you were basically locked out of the online ad marketplace. Game over. Even if the total slice of ad revenue spent online expands, none of it will trickle down to smaller sites like ours. It probably never will again. It's bad for us but, hey, it was really interesting watching the process from the inside. Fascinating even. I mean, who wouldn't want to watch the sinking of the Titanic? From the deck? We actually did.

Gag Factor

The third thing that happened to advertising, which truly made us gag, was technology. Online ad technology had become so annoying that we no longer wished to be associated with this industry. It was not only the dramatic rise in the use of the universally hated pop-up ad. That was just the tip of the iceberg, an ugly pop/up/under/over/everywhere monster of a berg. You could even hear the bandwidth sucking. There was invasion of privacy. There was spyware. If you wanted to play as a content provider, you had to support some of those horrible technologies. The ad buyers demanded it.

Clearly, these nasty new ad technologies were a response to the inevitable decline in the power of the banner ad to attract any attention. There was a time when decent banner ads could bring an advertiser a respectable 5% click-through rate. By the middle of last year, that number had dropped to the 0.01% range. Pitiful. So naturally everybody was striving to develop the next most annoying thing which would get Web visitors to click on it.

We do not like to annoy our readers. Actually, there's a selfish motive here - we are our own readers and we really, really don't like to be annoyed.

Having seen the direction in which all these new ad-delivery technologies are heading, it is painfully obvious that the ultimate destination is that special circle of Hell which has heretofore been reserved exclusively for dinnertime telemarketers.

We want no part of that.

Timing Is Everything

OK, so there we were, with a failing ad market and the need for a new business model. We're not stupid, and we saw where this was heading fairly early last year. Maybe even earlier. The obvious solution was to go to cash subscriptions. The problem was timing. We had to wait for the collective delusion which was the Net economy to fade into harsh economic reality. Consumers would not pay us for content until they realized that content had a cost. Not until all those free-content-producing dotcoms bit the dust would the lesson be driven home and the public experience a modest economic satori. Content had a cost and good content was worth paying for.

Will Anyone Pay?

Ah, but would anybody actually pay for anything online? It may be hard to believe, but until the late summer of 2001, the only publications which provably made real money from online subscriptions were the Wall Street Journal and Consumer Reports. We're pretty good, but obviously not in that league. The few other organizations which tried running for-pay sites never got anywhere. (Well, except for porn, but we really didn't want to go there, at least not in broad daylight.) Consumers were simply not willing to pay in a market that provided not only tons of free content but the perception that generating content had no cost. By the fall of 2001, several online outfits under the duress of no ad revenue started making the transition to subscriptions, and although they lost a lot of viewers, they were generally not driven out of business. Their experience actually provided some hard numbers for our own business analysis of exactly what the impact would be for us to go with for-pay subscriptions.

So here we are. You, our readers, are not stupid and you probably understand that without revenue we can't run this Netsurfer business. Advertising is no longer a significant or viable contributor to revenue for sites like ours. Hence you have to pay a reasonable amount to play.

A Reasonable Amount

So what's a reasonable amount? We actually got a lot of suggestions about that when we floated the subscription idea a few months ago. Here's how it broke down.

A small number of people said they would not pay for Netsurfer publications under any circumstances. Some said it wasn't worth it, some said they were morally opposed to ever paying for any sort of content. Not much we can do about those people except thank them for letting us have a sliver of their attention until now. We'll lose them, and we'll be sad about it. Life goes on.

Most people expressed a willingness to pay something for Netsurfer content. The suggested subscription prices were actually pretty reasonable and in line with our own thinking. Suggestions ranged from a low of $5 to a high of $25 per year. That made us pretty happy, and off we went to look at what we needed to do to support Netsurfer and make it thrive based on some reasonable projected subscription numbers. Here's our thinking on the subject of price.

At anything less then $10 per year, the business is not worth running. Operating costs, salaries, and taxes would eat up any revenue we generate and it would be an exercise in prolonged futility. Not interested.

At about $15 per year, we would make a go of it and could probably run Netsurfer as is until we became terminally bored. There is some risk that we would not be able to keep up with subscriber attrition. It might take us more than $15 to replace each unsubscriber with a new reader, and we would eventually enter a slow economic death spiral (the calculation is a bit more complicated but this is not a spreadsheet, so we won't go into it). This way lies stasis and not a lot of fun.

The sweet spot is at $20 per year. Most people would probably not be willing to pay anything more than that for Netsurfer content anyway. At $20 per year, we can not only continue but we can thrive. We can expand, something we are quite interested in doing. We want to do more e-zines. We just launched Netsurfer Robotics, and we want to launch more e-zines with similar narrow niches. It's fun and it makes for a viable, growing business. At $20 per year, we can do that and look forward to some sort of decent future. Maybe even a restful retirement somewhere without keyboards and a decided lack of virgins.

So that's how we came up with the price - $20 per year for full and unfettered access to all Netsurfer content. For the moment Netsurfer Books/Library and Netsurfer Robotics will be totally free - you can still get them without paying any money. (Books brings in affiliate revenue, and the new Robotics needs nurturing, so it does not make sense to charge for them at the moment.)

We know - very painfully, we know - that we're going to lose the vast majority of our 120,000+ subscribers by deciding to charge money for our e-zines. That's regrettable, to say the least. We like the fact that we can open that many people's eyes to some of the great material on the Net, and that we can give you a heads up on some of the momentous but little known events of the week. That number will become dramatically smaller. But, ultimately, that's the price of our continued existence.

The Sales Pitch

Actually, let's start with the anti-sales pitch.

We know some of you will ask yourself seriously whether we're worth the measly $20 per year. (We are strangely compelled by Occult Forces of Publishing Tradition to note that this is only about five cents per day, or about the cost of the proverbial one cup of coffee per week. (Coffee is bad for you. Very bad. You really should cut down, don't you think? Start small, like cutting out a cup a week.)

If you can't afford our subscription, for heaven's sake, don't spend it on us! If you're really so hard up that $20 per year makes a difference in your life, you have no business wasting time reading about Hamsterdance in Netsurfer Digest. Get a grip and go looking for a job, start a company, volunteer for medical experiments, or reconsider that promising career in fetish porn. Just do something to get a decent income. Then you can come back and subscribe.

But, if you can afford it and like what we do, like to keep informed about this vast tentacled monster that is the Net, then give us a go. It's only a measly $20 bucks, and if we warn you of just one security or privacy threat or if we bring you that one link to that perfect, Nirvana-inducing Web site, then it will be worth the cost. And you know, eventually we will.

That's it. Our future is in your hands. Now go wash up.

You can subscribe to Netsurfer here:

SUBSCRIBE: http://www.netsurf.com/signup.html