Page 168 - Electronic Commerce

Selling on the Web

changing Web users. Some companies created electronic commerce Web sites that needed
many years to grow large enough to become profitable. This is not unusual; both CNN and
ESPN took more than 10 years to become profitable and they had both created new
businesses in television, which was an existing and well-established medium. Many Web
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companies found that their unprofitable growth phases were lasting longer than they had
anticipated and were forced either to change their revenue models or go out of business.
This section describes the revenue model transitions undertaken by five different
companies as they gained experience in the online world and faced the changes that
occurred in that world. In the second wave of electronic commerce, these and other
companies might well face the need to make further adjustments to their revenue models.

Subscription to Advertising-Supported Model
Microsoft founded its Slate magazine Web site as an upscale news and current events
publication. Because Slate included experienced writers and editors on its staff, many
people expected the online magazine to be a success. Microsoft believed that the magazine
had a high value, too. At a time when most online magazines were using an advertising-
supported revenue model, Slate began charging an annual subscription fee after a limited
free introductory period.
Although Slate drew a wide readership and received acclaim for its incisive reporting and
excellent writing, it was unable to draw a sufficient number of paid subscribers. At its peak,
Slate had about 27,000 subscribers generating annual revenue of $500,000, which was far
less than the cost of creating the content and maintaining the Web site. Slate is now operated
as an advertising-supported site. Because it is a part of Microsoft, Slate does not report its
own profit numbers. Microsoft maintains the Slate site as part of its Bing portal, so it is likely
that the value of the publication to Microsoft is to increase the portal’s stickiness.

Advertising-Supported to Advertising-Subscription Mixed Model
Another online magazine, Salon.com, which has also received acclaim for its innovative
content, has moved its revenue model in the direction opposite of Slate’s transition. After
operating for several years as an advertising-supported site, Salon.com began offering
an optional subscription version of its site called Salon Premium, which was free of
advertising and could be downloaded for later offline reading on the subscriber’s
computer.
The subscription version offering was motivated by the company’s inability to raise
the additional money from investors that it needed to continue operations. The
subscription version has gone through a number of changes over the years and now
includes access to additional content such as downloadable music, e-books, and audio
books.
The premium version of the site, now called Salon Core, also includes subscriptions
to various print magazines, access to sports content, music, and a preferential access to
the site’s writers and editors.

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