NO, IT WON’T [Author: Lum the Mad]

Here’s some of the conclusions we’ve come to, as we try to navigate the flotsam and jetsam of the post-modern Internet.

Web sites are faced with three choices currently:

  • Try to eke out an existence in a collapsing ad banner market. To compete for dwindling resources, some content sites become little more than advertising with a dash of content. Advertising becomes ridiculously intrusive, with huge popup ad pages and animated Flash marquees taking up 3/4 of the page.

    Unfortunately, there is so little money in the ad banner market currently, that even with advertising so intrusive it literally chases away readers, this model is really only workable if a website is backed by a company with lots of venture capital and an unblinking willingness to pay the bills. Good examples of this include the Gamespy network (which run house ads almost exclusively, apparently existing solely on venture capital and whatever revenue registered copies of Gamespy-the-application bring in) and Daily Radar (which is a good example of more ads than news).

  • Run as a volunteer service, with unpaid writers, and publishers willing to foot the bill for hosting.

    This is the model our own site is (somewhat involuntarily) using. Every MMOG fan and news site, such as XRGaming, Stratics and Vault Network uses volunteer writers almost exclusively as well – the MMOG community has a surplus of talented and opinionated writers, and a shortage of actual income.

    The problem here comes when bills need to be paid. For a site such as ours, with a fairly small niche readership of 1 to 2 million page views monthly, finding cut-rate hosting that’s affordable by the hobbyist is in the upper end of feasability. For larger sites such as Casters Realm and Crossroads of Dereth, with 10 to 20 million page views and up, this no longer is an option. With hosting bills upwards of $4,000 monthly, the site either requires revenue or it bankrupts its owners.

  • Charge for content. This is seen by most analysts as the Internet’s future, based on the two entirely reasonable assumptions that (a) the current models aren’t working and (b) the money to keep things going has to come from somewhere. The only problem is that it won’t work.

Why not?

Here’s one thing to consider. How will your business – and it just became one, the second you turned on the “pay here please” sign – grow? Most websites grow through word of mouth. Links. But links to subscription-only sites are kind of pointless, since you have to actually pay money before seeing what’s on the other side. Your business doesn’t grow. Then it dies. On the plus side, this cuts your bandwidth costs significantly.

Still another factor for community based sites (like, say, this one) is the expectation raised by the transition from hobbyist site to paid concern. Simply put, people expect more from what they actually pay for. Picture someone trolling the message boards here, who is then banned, who then not unreasonably demands a refund. Every moderation decision (and most agree that successful web-based messaging systems require moderation of some sort) becomes a business decision – is banning this person from the system worth the hassle and cost of paying him back his money? One could argue, as, not coincidentally, most online games do, that forcing users to click through a restrictive End User License Agreement gives the content provider the right to prune his/her userbase without giving friendly refunds later. Whether or not this is legal (and so far no EULA has actually held up in court) is irrelevant – the key here is, is the content provider willing to suddenly provide professional moderation, enforced in such a way that the majority of users (who, remember, in a free market hold the real voting power over any business) don’t get fed up and vote with their dollars?

Even further, what if that website doesn’t post any updates for a week? Are they in breach of contract? Users who pay for access certainly expect something for their money. And it’s highly likely that a site that charges every user would no longer be able to run off of volunteer labor as well. After all, it’s pretty obvious that money is coming into the system, and those people are paying for the fruits of volunteer labor. Not a terribly workable proposition.

But all these are almost laughably insignificant in the face of the real reason why subscription-only sites will fail: the Internet is a free market, in more than one sense. It is ridiculously easy to find competing sources for nearly anything available online. If you don’t like the news and views here, you can go here or here or here or here. If you don’t like the EQ news at EQ Vault, there’s EQ Stratics, Everlore, Casters Realm, or any number of smaller news sources. If one or more of these sites suddenly began charging for access – even a laughably nominal fee such as $1 a year – loyal community members would undoubtably pay up, but the vast majority of users would simply click elsewhere.

Even financial burden aside, it’s simply easier to bookmark another page then to go to the hassle of going through a shopping cart application, entering in your credit card number assuming you even have one (many teens who are avid gamers don’t) and assuming you trust the site operator not to go on a shopping spree with your line of credit, then every time you visit the site, entering in a username and password. And you thought pop up banners were annoying.

So what will happen?

Well, expect a shakeout. Expect some of the larger sites to close, simply because they can’t afford to pay the bills any more. This will rapidly cause a cascade, as users of the sites that close flock to other sites, which then have suddenly increased bandwidth to pay for. Sites that aren’t self-sustaining – that lose money on page views – will collapse quickly in this environment. (Kuro5hin posted a good analysis from Shepherd on this correlation recently.) It will be a very dramatic month. And it may be next month.

The sites who survive this shakeout will try to juggle numerous revenue streams. Salon today announced such a juggling act – huge ads for free visitors, subscription options for loyal visitors. actually is offering you the opportunity to read Pud’s mail.

Niche sites will become further niche, as specialization wins out over all-encompassing portal. Instead of Shugashack and Blue’s (both of which I don’t expect to survive the coming shakeout) for FPS news, perhaps clan sites will pick up the tab for community and discussion – much smaller, more easily managed community – while the larger portals such as ZDNet/Gamespot and Daily Radar, which will probably survive the shakeout, do the yeoman work of posting press releases and game demos.

And eventually – in a year or so – all of these, including ZDNet and Daily Radar – and Salon, and, and Yahoo, and every other content-driven site on the web – will collapse. Simply because offering your product for free is not a sustainable business model. And only then, when the Net is literally a smoking wasteland of dead sites and the “free market” is finally no longer a convinenent option for users – only then will subscription-based web sites catch on.

Call it the Nightmare Scenario. I’d tell you to sell Yahoo short – but hey! You already did!