Using the power of free content to build internet business models that work

The key to making money online as a publisher is giving away free content with a clear path to at least one source of revenue. In his latest book, Free: The Future of a Radical Price, Chris Anderson lists 50 free business models that work, with examples of each. Since Chris is a publishing guy, many are publishing related. Let me explain a couple…

The easiest way to use free to make money online

The simplest is the sponsored website. The publisher posts great free content, Google sends tons of free traffic, sponsors pay to be associated with the website, and the sponsor’s customers pay a few pennies more each time they buy the sponsor’s product to pay for the cost of publishing the website. In this case millions of product buyers pay for the content accessed by a far smaller group of website users. It all mixes together as the sponsor pays to build their brand by sponsoring everything from websites to Super Bowl commercials.  The media mix is so complex that there is very little direct connection between the extra pennies consumers pay for the products they buy and the money an individual online publisher gets from a given sponsor to run their website. The pennies do add up as a kind of media tax.

Last year the average American consumer spent more than $1,000 for the products and services they bought to pay for all the free content marketers, producers and publishers gave them for free. So, there really is no such thing as a free lunch. In every economic system, somebody pays.

Other internet business models powered by free content

Before you get too excited, let me remind you that more than 50% of online advertising is sucked up by Google, Yahoo, AOL and MSN.

About.com, which is the 18^th largest website in America, uses this sponsor-driven Internet Business Model exclusively and only generates about $150M in annual revenue. It falls off pretty quickly from there. My private equity friends are fond of saying that “The Internet excels at turning advertising dollars into advertising dimes.” The Internet is the most disruptive communication medium ever conceived because it uses bits, not atoms, to make, store and deliver information.

Hope for content marketers, producers and publishers

Now before you get too depressed, let me remind you that some publishers spend more on advertising to sell their information products, than they generate from sponsors. If fact, many special-interest publishers traditionally spend 30 to 50% of their total expense budget on advertising (often called direct marketing) and generate zero percent of their revenue budget from advertising in any form. These publishers are in a position to benefit dramatically from an economic force (the Internet) that is turning advertising dollars into advertising dimes.

Harnessing the Power of Free Content:
The free to premium model

Mequoda Group is just such an organization. It is a user-driven membership organization that derives 100-percent of its revenue from end users. We spend virtually no money on advertising and instead spend about $300K a year creating and giving away free content and free software. The $300K is mostly spent on the time and labor (atoms) of the talented managers, writers, designers and developers who run the Mequoda Daily Network. Hosting and broadcasting (bits) is a small percentage of our budget and getting smaller as costs continue to drive towards zero. We make money selling premium content and services to a small percentage of the 21,000 Mequoda Basic Members who spend nothing to access our free content and software.

In 2009, less than four-percent of Basic Members upgraded to some form of premium membership and spent money with us. Over time and with the aide of our membership retention efforts, we expect the percentage to creep towards 10 percent. Other publishers report premium participation as high as 20 to 25 percent and still others do fine at less than one percent. The Free to Premium or Freemium Internet Business Model is very flexible. How publishers build their free base, and the many ways to monetize that base, are numerous and ever growing.

Integrated thinking or the power of the pyramid

We have refined our business model and pyramid over and over in the six years since Mequoda Group was founded (we celebrated our sixth birthday on January 31^st, 2010). Today it looks like this from the top down:

Gold Members get one-to-one consulting, support, managed hosting and email broadcasting services and pay $1,200 to $2,700 monthly for their Gold Membership Retainer plus consumables as used. This is a continuity revenue stream for Mequoda Group.

Summit Delegates attend our live face-to-face events where they interact with Mequoda Group’s Advisory Board, Officers, Staff and fellow Members. Cost varies depending on Membership status and number of days and average $1,200 per event. This is also a continuity revenue stream for Mequoda Group as Members make the Summit part of their annual training budget.

Pro Members get access to all live webinars, encore access to all past programs, free software and email Q&A support from the Mequoda Research Team about all things Mequoda. Cost is $297 per year and is a continuity revenue stream. Individuals can also buy access to single events and programs on CD. More about Pro.

Basic Members gain full access to the website including email update options, the White Paper Library and the ability to comment on our posts. Basic Membership is free.

37 Mequoda Systems & Counting

Since 2004, we have built or helped build 37 Mequoda Systems that leverage the power of Free to make millions of dollars on the Internet. Giving away free content works well when you have a plan to make money with a media pyramid that has a clear path to the gold.

And how it may better the marketing industry’s reputation

I am not cut out for traditional sales. I gave it a try once, and somehow it just didn’t feel right to me. Maybe it was the products that were involved or the environment I was in, but my first experience in it chased me away, and I could never imagine returning.

In fact, I have concluded that I won’t return to traditional sales because I have found something better.

Content Marketing

Content marketing was an interest of mine before I knew its name.

This is the case because content marketing is based off the creation and sharing of content. In the case of the Mequoda Group, the content is educational. We strive to help publishers better understand the constantly evolving internet landscape.

Content marketing seems so fundamental to me. As a child I recall being taught by parents and teachers to “play nice and share”. What could be nicer than sharing and freely distributing valued and usable information?

Yet, why isn’t content marketing practiced by more marketing professionals?

I have a few theories…

First, the concept is still fairly new. Many content marketers will use multiple mediums to share their content and some of those mediums are still evolving. Articles, white papers, podcasts and video pieces are just a few of the methods used. With the evolution in digital media going on, many ways of sharing these types of media is still just catching on.

Secondly, I feel people fear change. The old (and tired) ways of marketing have been around for years. Minor changes may have occurred throughout this time, but the overall structure of these marketing campaigns has remained. It can be hard for companies to invest money in an emerging method of promotion if they don’t have any idea of the outcome.

Lastly, not all companies know how to create, compile, repurpose and share content, or have the time and manpower to do so.

Can content marketing better the reputation of marketers?

Let’s be honest, consumers don’t always love marketing professionals. Although, I feel the mistrust behind those feelings have been created by the old rules of marketing.

Maybe content marketing will change the opinion of consumers as they consistently open their email and receive completely free information that interests them.

I unfortunately can’t see the future, so I don’t know how content marketing will affect society. I do however know how popular free products are, so maybe as an industry we are heading in the right direction.

What are your thoughts on content marketing, or the current way marketing is viewed in general? Where do we stand as professionals and how can we better our reputations and give consumers more value?

I recommend halting on the in-your-face approach of screaming at consumers to “buy my product”. How about you?

For more on content marketing be sure to attend our Content Marketing 2010 webinar on April 13th at 12:30 ET.

Last chance to sign up for our Twitter for Publishers 2010 webinar

Sign up for our Twitter for Publishers 2010 webinar now

Twitter may be the ultimate in word-of-mouth marketing right now.

Whether you’re new to Twitter, still exploring if and how it can benefit your business, or have been tweeting for years, you will definitely want to get the best possible results for all of your hard work. This Twitter for Publishers 2010 webinar will leave you with a huge amount of information pertaining to your Twitter strategies.

What Twitter can do for you

‘Free’ is always a desirable promotion and Twitter can help it spread like wildfire. Use attractive headlines as if you were writing for email marketing, and tweet it to your followers. Your message may be passed to thousands, or even millions, of people before the day is over.

Within the 90-minutes of our Twitter for Publishers 2010 webinar we will give you insight on how to do this plus:

-How to get more exposure for your events
-Information on tools and applications used to track your traffic, clicks and sales
-Case studies of publishers who are successfully using Twitter and have turned it into their main source of traffic
-How to use Twitter as a tool for customer service, lead generation, or marketing
-Potential guidelines for company Tweeting
-How to properly use Twitter lingo
-How to get people to click on your links
-How to balance your Twitter usage
-Ways to build a massive following on Twitter
-How to utilize 140 characters for selling products

Don’t miss out on these valuable and tested ways of using Twitter. If you do not know the information held within this webinar then you are basically leaving money on the table. Sign up for Twitter for Publishers 2010 right now and grab hold of all that extra traffic, and potential revenue, that’s there for the taking.

Computerworld.com has overcome the hurdle of letting their print roots go

The Mequoda Website Design Scorecard has been used to critique hundreds of websites over the last five years, 76 of which we’ve documented. We decided recently to dust off the ol’ scorecard and use it to reevaluate Computerworld.com, a site we originally gave an overall score of a B in May of 2005.

Nearly 5 years later, how has their site improved? According to our review, this B2B site catering to IT professionals has changed significantly, earning a score today of A-.

Computerworld Website Design Scorecard

Computerworld.com’s Mequoda Scorecard

1. Strategic Intent – B

Computerworld, (CW) is one of the oldest and most respected publications from IDG, with a target audience of Senior IT management at mid-to-large size companies.

What is the strategic goal of a free content B2B website such as Computerworld? There are several answers, here are just a few:

1. Content. Readers expect the same content online as off, and to find everything on a given subject, quickly and easily. They want consistency with the brand they have known to rely on. If you fail in any of these areas you’re going to lose brand loyalty.
2. Conversions/Data Acquisition. Advertising rates are not just a simple volume calculation, they depend on the quality of the publication’s readership. The more information the publisher has, the better they can maximize their pricing strategy. The more users who subscribe to Computerworld newsletters, the more attractive they are to potential advertisers.
3. Advertising Inventory. Deeper content and wider distribution means more readers and more inventory. Advertisements are key to bringing in revenue.
4. Premium Content. Content that is offered on a subscription basis.

Computerworld manages all the above goals pretty well except for the last one, Premium Content. The strategy toward print subscriptions has changed as expected yet it’s still on the site in an almost hidden place. The goal here is not clear and cannot be achieved because of its lack of clarity.

We would have expected to see Floaters and OFIE’s consistently marketing toward an unknown user. A rotating Ad for newsletter signup appears periodically above the nameplate but should be consistently displayed.

Furthermore, additional conversion architecture is needed above the fold. This includes:

ComputerWorld Homepage

2. Content Webification – A

Since our last review of Computerworld, the website has clearly moved beyond its old print media roots and embraced webification. Here’s the quick list of the web tools available.

• Podcast. Free bimonthly podcasts
• IT Job. A job search site that allows searching by title, skills, location, and company
• Search. This can be done in multiple ways:  Topic or Sponsor or Industry
• Webcasts. Upcoming and on-demand are viewable by registering on the site

In general, webification of the site is in-line with established standards. There’s nothing risky here, but they do display a good solid implementation of expected web features.

3. Relationship Building – C

Here is an area that could use some improvement. The main goals of the site should be a conversion to signup and an increase in email newsletter registrations. The site lacks in offering free products while soliciting signups. On the positive side, selectivity is offered on multiple newsletters types.

4. Community Building – A

Blogs and Shark Bait. Shark Bait is the place to post your  experiences about all things IT. It uses cutesy Sharks symbols to rate others’ experiences, and really promotes the interactive user experience.

Recent comments are prominently displayed in the right navigation to entice the reader to follow the happenings of the site.

Article pages show the number of comments and ratings on posts to help users while browsing and searching articles.

Blogs support feeds to follow favorite bloggers.

These sections are well designed so it’s easy to give them an A.

5. Persistent Navigation – A

The main navigation stays consistent throughout the site and the left navigation stays consistent across pages as well. There do not appear to be any issues here. This navigation allows for easy expansion to view topics, subtopics and industries.

6. Task Depth -B

Our tasks to undertake were to:

1. Browse Headline. The homepage is chock full of easy to read clickable headlines.
2. Search for a specific keyword. Google custom search is used throughout the site.
3. 
   
   

   ComputerWorld Newsletter signup

   Signup. The newsletter signup is found below the left hand navigation. It needs to be moved up higher on page. Once it’s found, the user’s experience is adequate with only a few required fields to gather necessary data for advertisers.

4. Subscribe. So where is the premium content? Oh, there it is at the end of a long list in the left navigation “Print Subscriptions”. Are they trying to hide it? Maybe since they are moving to a digital format, the prominence of the print newsletter link is less important, but it’s unclear.

Because of the confusion on the premium task (subscribe to magazine), they can only be given a “B” on task depth.

7. Affordance – A

The content navigation used underlined titles and bulleted items, which are good standards. Additional navigation was also clear. The grade is easily an “A” here.

8. Labeling and Language – A

There is some use of labels specific to Computerworld, such as “Tricks of the Trade” or “SharkBait,” which build the brand to keep the reader returning. The IT audience uses a large volume of specific labels for their constantly changing industry. These are represented on the site, which is audience appropriate. The audience will appreciate a publication that speaks their language.

9. Readability (Content Density) – A

The column width changes as your eyes move down the page  due to a centered ad block. This is not recommended but it works for this ad driven site. Hopefully they have tested this and know it works.

The only other drawback is that the font is small and they don’t seem to have a text resizing option. Fixing this would appeal to  the aging IT population since this publication has been around for 40 years and the audience is not all youngsters.

10. Organization – B

The upper quadrant of the website should have all four primary tasks. These need to draw attention to the “Subscribe” or “Print Subscriptions” sections. The premium content section is in transition but that’s not reason to delegate it to the bottom of the navigation list. They should remove it or make the intent more clear.

Another area that lost them points is the “Free signup”. A better use of this section would include an upsell.

11. Content Freshness – A

Knowing what’s going on as soon as it happens is important to industry execs. Updating the latest headlines several times a day, five days a week is essential, and for doing this Computerworld gets an A.

12. Load Time – A

Testing on a variety of analyzers shows the site’s load time to be between 1 and 1.5 seconds. No complaints with those statistics here.

Additionally, there is not an overuse of graphics or flash weighing down the site.

13. Aesthetics – A

Computerworld gets an A. It matches the audience perfectly.

This site is clean, clear and professional. It makes a good use of the colors gold and navy. The newsletters however might use some redesign. I assume the purpose of all text is to display on mobile devices, but the content is just a long text list.

14. Brand Preference – A

The site supports the print brand well. There is extensive editorial content available, and the strategic tasks we listed in the first section are attended to.

Conclusion

Computerworld has done an excellent job of improving the site since our last review. They address areas such as Navigation, Content Density, Relationship Building and Organization. However they lose key points on Task Depth for premium content as their print subscription link just causes confusion. It seems like an afterthought to them and if that is no longer their direction they should remove it.

Overall, a 3.7 score leaves them some room for improvement but overall, they are doing a great job.

Thoughts and strategies on the future of online publishing

As the Mequoda Summit approaches, I wanted to get insight on the future of the online publishing industry from a Mequoda Gold Member who will be joining us in Napa Valley.

Clay Hall is the experienced entrepreneur, publisher and magazine enthusiast behind Aspire Media. He has led Aspire’s Interweave Press to great success in the past several years. One of his key strategies has been his launch of six email-centric Mequoda hubs in the fields of art, knitting, beading and crafting spaces.

We asked Clay the following questions to get a sense of the strategy a successful publisher plans on using for this year and the near future.

Mequoda: What is your digital publishing strategy for 2010?
Clay Hall: More of the same; audience development; more instructional videos; more HUBS; develop and acquire in new markets that we can leverage Mequoda strategy against; iPhone/iPad apps; more television shows; and development of more online content products (vZines, video enhanced books, eBooks, and video enhanced projects and patterns).

Mequoda: What kind of increase in revenue do you think this will generate for your company in 2010?
Clay Hall: A significant one.

Mequoda: What digital initiatives do you believe are critical for your future success?
Clay Hall: We need to be prepared to deliver all of our content digitally within 5 years without being trigger-happy. We believe that many consumers will continue to want and will pay for the print form factor for some time to come. We will continue to believe that we’ll be a multi-platform company for some time (print, digital, live) but we recognize that much of our growth will come from digital initiatives.

Mequoda: What changes do you think will occur in the online publishing industry within the next 5 years?
Clay Hall: More consumers consuming our content online and on mobile devices, and more content companies will recognize that they need to develop platforms that leverage the unique attributes of online and mobile instead of trying to cram a product with print attributes through the online and mobile channels.

Books and magazines are very good form factors for the things we do with legacy and current content treatments. Online and mobile offers us a completely different and expanded set of capabilities and I think our industry will adapt and thrive. In a world with millions of undifferentiated content providers competing for almost any search string, I believe that branded, authoritative, differentiated content  will show that this is a game magazine publishers can win.

From Clay’s answers you can see that further developing digital initiatives is incredibly important. With a number of different platforms evolving there is the need to explore the possibilities of those platforms working successfully for your content.

The future is uncertain, but steps you take now will have an impact. Take proper care while working on aligning your digital strategy and your future may be brighter than expected.

We have heard from Clay Hall on his predictions for the online publishing industry within the next five years. He will be sharing more of his visions and thoughts with us at the upcoming Summit in Napa. How about you? What changes do you see coming? Please add your comments to our blog below.