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Follow UsAndrea Orr
PALO ALTO: Internet users were stunned last week when Napster, a company
whose name has become synonymous with free music online, adopted a plan to
charge money for its popular service.
They are likely to have to start paying, or paying more, for a lot of other
Internet services as well.
Goodbye to the free Internet! Check out this scenario: A softening
advertising market that appears incapable of supporting the entire Web plus the
launch of several sophisticated services like free long-distance calling that
save consumers serious money. Enough to force several of the most popular online
sites to consider a shift from a free to a fee-based model.
"People will have to realize that free doesn't last forever," says
Dan Campi, chief executive of Punch Networks, which makes a software that lets
consumers share files over the Internet and has discovered they are willing to
pay.
"There's no free lunch on the Internet."
Unlike Napster, which agreed to add a fee to its service mainly to settle
litigation with music companies over lost royalties, many other companies from
Yahoo Inc. to America Online may decide to add new fees simply because they can.
"The days of solely relying on advertising are numbered," says Bob
Visse, lead product manager with Microsoft Corp.'s MSN.com Internet portal.
"It's clearly not going to be our only revenue model."
"We've done a great job of building a large customer base. Now, the
question is how do we convert our 210 million users into a subset of customers
who will actually pay. It is crucially important to us."
Like MSN, which says it sees potential to charge money for a host of services
from online music to gaming, and long-distance calling, other companies say they
suspect they can get away charging at least a nominal amount for their most
valuable services.
For example:
- Yahoo, which last month unveiled several free voice features from Internet
content over the telephone to voice mail and long-distance calling, said it saw
"plenty of potential" to charge for some services, such as
international calling.
- AOL is offering similar phone services for free but has advised its
customers they will have to start paying $4.95 per month in January.
- The auction site eBay Inc. has added a premium fee of $19.95 on top of its
modest listing fees to sellers who want to reach a larger audience, by listing
items for sale in two different merchandise categories on the site.
- The online payment service PayPal, which lets people transfer money from
one bank account to another, has started imposing a fee on some of its high
volume customers. The company took the move after discovering that a lot of
people were using its service to help run small businesses and other
money-making ventures like auctions.
- Internet grocer Webvan has just informed customers it will add a delivery
fee of $4.95 on all orders under $75, which it had been filling for free.
In fact, one of the main reasons these companies see fit to charge money is
because they believe they are helping their customers make money, or at least
save it elsewhere, especially on some of the new voice services that offer
long-distance calling.
"If you look at the minutes of usage a company like Yahoo gets for its
phone services, and multiply that by 5 cents a minute, that's a big number of
long-distance bills that are being avoided," says Lanny Baker, an analyst
who follows Internet media companies for Salomon Smith Barney.
"Would consumers be willing to pay for a service that offered unlimited
email storage, instant messaging on cell phones, long-distance calling and a
voice-activated address book? They probably would."
If it does not seem especially notable that companies might start charging
for such valuable services, it marks a dramatic departure from the Internet of a
year or two ago, when everyone was offering everything for free.
Starting with free Internet browsers, the bulk of content on the Internet
became free after companies such as TheStreet.com that tried to charge money had
trouble signing up customers. Some consumers got free PCs to display all the
other freebies and some Internet retailers even toyed with the idea of selling
merchandise at or below cost and making all their money from advertising and
promotions.
Meanwhile, free Internet service has swept the country. A host of companies
from NetZero Inc. to K Mart Corp. are signing up millions of customers with
services that so far have been supported by advertising.
NetZero chief executive Mark Goldston insists that the outlook for the free
model remains "very bright," but even this head of a company, whose
name essentially means free, says he may some day charge money for premium
features.
"If we found something that was very compelling as a service - say
something that connected a wireless phone with a personal digital assistant and
a laptop - then we would research our user base and we might consider giving it
to them for a price. If enough people said they'd pay for it, then that is
something we'd have to consider."
(C) Reuters Limited 2000.