As publishers around the world explore ways of charging for their online articles to offset plunging advertising revenues, one of the only groups with experience of charging for digital content on a large scale is reviewing its stance.
Two months ago, Yahoo dropped charges on its US Fantasy Football site, which had charged for premium services such as real-time football scores. It is now re-examining its strategy of charging for real-time stock quotes on Yahoo Finance, executives say.
The decision echoes the experience of the New York Times with Times Select, an online subscription service that it dropped after two years in 2007 even though it attracted 227,000 subscribers and generated about $10m a year.
At that time, the thinking was that subscriptions would hold publishers back from taking advantage of booming online advertising markets. This year, however, growth in online spending has come to a halt, driving publishers to look with more urgency at alternative revenues.
Yahoo’s decision went deeper than that, according to Jimmy Pitaro, head of its media businesses.
“We decided the small amount of revenue we were generating from real-time statistics was not significant enough to justify presenting a less attractive user experience,” he says.
Since dropping charges, user numbers have risen sharply, but that alone will not be enough to offset lost subscriptions, he admits. “We’re clearly not going to make it up in year one, but our new CEO [Carol Bartz] is very clear we need to be focused on the long-term.”
Yahoo is “starting to see a rebound” in online advertising, Mr Pitaro says, but rather than bet on the market continuing to rise, it has coupled the move with an attempt to improve the appeal of the football service to advertisers.
A new, free fantasy football mobile application launched when at the same time the charges were dropped shot to the top of the application charts for Apple’s iPhone handsets.
“We were able to go to advertisers and say, ‘look, we went free; it’s a better product; it’s going to be perceived in a different light from the user perspective; and you’ll have the ability to get your brand across multiple platforms’,” Mr Pitaro says.
He questions the hopes some media owners have that by marrying content with attractive devices they may be able to charge, but says he is confident that some paid content models will succeed.
Those with differentiated content and services, a powerful brand and dominance of a niche subject area will be able to charge, argues Mark Walker, Yahoo’s head of news. “You can put up the pay wall but what’s really critical is what’s behind it,” he says.
Some Yahoo services will fit that description, he says. “It’s within our DNA to offer our services for free. But that doesn’t mean everything has to be free.”
He cites the example of Rivals.com, a Yahoo college sports site, which charges for many team-themed sub-sites. “We think it is the better user experience. Many of our users would actually prefer to pay.”
For knowledgeable alumni, the ability to exchange views only with equally fanatical followers is valuable, he argues, and pay walls “keep out the riff-raff”.
Mr Walker says there is “plenty of room” in the Yahoo News model to accommodate publishers who want to charge for their articles.
Mr Pitaro adds that Yahoo also sees an opportunity in handling payments for publishers that have never had to manage the complex business of taking subscriptions or payments of a few pennies an article.
Amazon.com, Ebay’s PayPal division and Google, which runs the Checkout electronic payment handling system, are all talking to publishers about the same idea.
With strong positions in news, sports, finance and celebrity gossip online, Yahoo is working to build more of its own content, Mr Pitaro says. It is also experimenting with “building our own point of view in news”, he says. This, Mr Walker explains, would mean featuring more commentary than Yahoo News has provided in the past.
That could create more free content in direct competition with newspapers trying to charge.
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