The Internet is changing and in some ways it's for the better and some ways it's for the worse. If you're like me, you have this nightmare scenario where the net becomes a massive nickle and diming excercise where every site is demanding money from you when they used to be free. I pay $40+ per month for my net connection, now I'm expected to pay a bunch of money for the websites I visit that used to be free?

What I predict we'll eventually see are metaservices in which users subscribe to "web content" for $9.95 per month. They get to pick 20 sites that the metaservice has agreements with to be subscribers to. So on the good news side, I don't think we're going to see a scenario where users are going to be paying $50 per month to access sites. The bad news is that I think the days of the free net are going away unless some other mechanism can be found to pay for the cost of websites. Advertising doesn't work very well (regular TV model). The alternative that's proven successful is subscriptions.

One of the things I've seen from many sites is that they start taking away features and then asking for considerable amounts of money in exchange for what they used to get for free. This is problematic because it really poisons the user base. I mean really, how can you go from being a free site to asking for $10 per month? Or how about this, how can you go from being a free site to suddenly taking away half the features of the site to those who don't pay? I know that really irks me and makes me less inclined to subscribe to a site. I want to subscribe to sites to help them. I might be inclined to subscribe to sites if they offer additional goodies for me. But I don't want to feel like I'm forced to subscribe.

I do think that subscriptiosn are the wave of the future. I just think that sites need to be careful about how they go about them. The amount they charge should be based on how much money the site needs per month / how many people they hope to subscribe.

Let's use WinCustomize as an example:

Most sites don't give away financial data but we're pretty open about things around here. WinCustomize costs about $150,000 per year. It would cost dramatically more if it weren't for the volunteers who moderate the site. Add another $10,000 per year in misc costs and $10,000 as a "savings account" for future expansion and you're at $180,000 at what the site needs to generate each year to be an independent viable entity. That's actually amazingly cheap. Consider all those dot-coms out there that burned through millions per month and had websites not nearly as popular as this one. When Pets.com went down, they had fewer registered users than WinCustomize has today and vastly last traffic. Yet they went through hundreds of millions of dollars (while for us, $1 million in venture capital would last FIVE years). Anyway, bottom line, $15,000 per month in costs.

Next, how many people should a site hope to subscribe? What percentage? This is a real tough one because it is tough to measure the likelyhood of people subscribing. This website gets over 35,000 unique visitors per day. That's why it takes the equivalent of 14 T1's to handle the traffic. There is little information on these people.
Let's use April's data though. In April, this site got about 1.2 million visitors. Of those visitors, around 14,000 of them visited the site over 100 times (over 3 times per day). So in my view, those people would be the ones most likely to subscribe. Most people only visit a site one time per month, it's "the regulars" that have to be the focus. So what percentage of that 14,000 who use the site on a constant basis should the site hope to make subscribers? And remember, it's not 14,000 different subscribers per month. In January through April, there were 65,000 unique people who visited the site over 100 times. So you have to be careful about thinking that you only need $15,000 to be handled by 14,000 people because that's only one month.

For math purposes, I'm going to extrapolate out the data and say that during the course of a year, there are about 100,000 unique people who during various parts of the year are heavy users. 100,000 hard core regulars during the course of the year.

So if you need $180,000 then how many of the 100,000 people do you need to pay $20? You need 9,000 subscriptions which means nearly 10% of the regulars would have to become subscribers. You see the problem? Not gonna happen. No way. A better goal would be 3% of regulars but that's only 3,000 X $20 which is only a third needed. It won't even pay the bandwidth. Big sites like Gamespot recognize this. This is why they start getting into punitive systems. But can it really work? If you get too punitive, people just won't visit.

A possible solution is to focus more on special features that become quickly apparent to more casual users. Then instead of having to focus on taht 15,000 hard core users, you can target the 500,000 people each year who visit the site on a daily basis during various parts of the year. 2% of them is 10,000 people and voila, you're in better shape. The challenge then lies in creating features that are apparent to all users but don't clutter up the site or frustrate people. That's the challenge we face here at WinCustomize. Right now, WinCustomize is financed by Stardock which means it's viable as long as programs like WindowBlinds and Object Desktop do well. But I think most users would be more comfortable if the site were able to sustain itself.

What's your take on all this? What do you think needs to happen? How do you think things will progress?