During the years of the Internet hysteria in the late 1990s, many
startups had a business model that assumed getting large numbers of
somehow would translate into eventual profitability. The easiest way to
a large user-base was to offer something compelling, for free.
Businesses offered free content, free software, free e-mail accounts,
Internet service providers, even free computers, with tortured
of how these services would evolve into profitable businesses.
Even now, "free" isn't dead. The open-source movement, for example,
and continues to develop and upgrade outstanding software such as the Linux operating system, the Apache web server, the Mozilla browser, and the OpenOffice suite. Making freely
open-source software the basis for a profitable business isn't easy,
Free e-mail is still available, but at many free services, the pressure
on users to convert that free account to a paid subscription. At
Microsoft-owned Hotmail, for
example, free accounts
have a limited amount of storage, which can quickly fill up with
junk mail. And the useful POP mail retrieval service, which allows
users to retrieve e-mail from other addresses into their Hotmail
is no longer included with free accounts. In both cases, Hotmail
users sign on for MSN Extra Storage costing US$19.95 per year.
At the summer MacWorld conference, Apple CEO Steve Jobs announced the
of that company's free iTools online services. They had provided Mac
with free e-mail and home pages, Web-based disk storage and more.
the company hopes to migrate customers to .Mac,
version costing US$99.95 per year (US$49.95 for the first year
for current iTools subscribers).
Like Hotmail, Yahoo has offered a
free e-mail service. That service is continuing, but as with
Yahoo has begun to charge users for mail forwarding and collection
In its search for profitability, Yahoo, which lost almost US$100
year, is not just turning to its e-mail users. Best known as a
Yahoo earlier this year announced it would begin charging commercial
US$299 for placement in its search results. This announcement does not
however, that businesses that haven't paid will no longer have their
sites show up in response to searches on Yahoo.
Fee payment gets your Web site (or your competitors') placed near the
of the page of hits, under a category labelled "Sponsor Matches."
Yahoo, for example, for "Internet Service Provider Vancouver" got me
match, followed by 24 Web site matches, businesses that have not paid
for special placement.
Yahoo has joined other Web sites in starting to charge users for at
some content. Yahoo-users can now search the New York Times archives
to January 1, 2000 for US$2.50 per article.
Similarly, Salon.com, initially a
online magazine, now offers a US$30 per year subscription fee.
get additional content without the ads that overlay the free articles.
recently eliminated all free video content from its site. Would-be
now need to subscribe to the Real
SuperPass service offering a variety of video content for US$9.95 a
RealNetworks claims to have signed up more than 500,000 subscribers,
fees with content providers such as CNN and ABC.
Patrick Keane, an analyst with Jupiter Media Metrix, suggests paid
"needs to be very proprietary and original to succeed." Many porn
example, have created successful online business models based on
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