Thoughts on Subscription vs Advertising?

[SimonT]

Hi there,

Im in the process of developing my site with the goal of deriving some revenue from it and I'm trying to decide what sort of business model might work best.

The site offers users the ability to practice for a variety of exams and when its working, users will be able to save their exam results and progress on line so they can see how they are doing over time, tailor exams to hit problem areas, etc. This is going to consume disk space and so some sort of subsctiption would seem to be sensible to account for the cost associated with each person's data.

One could also imagine that selling advertising on the pages would also be attractive as advertisers would know a great deal about the user simply from the exam they were taking and so could target their ads appropriately.

Personally I dont like a bunch of ads on a page, Im more likely to subscribe to something I like. Others dont mind ads and object to subcriptions...

Are there any lessons learned that people could share or good online resources to look at that might help me decide how to go forward with this?

Another questions would be when to use something like PayPal to handle the gory details of payment and when to shift over to dealing with this myself, having a merchant account, etc. I can see going through PayPay would be easier for me but would add another layer of inconvenience to users, potentially putting some off, however, the costs of setting up a full blown shopping cart or similar might not be worth the effort in the early days.

Thanks in advance for any advice!

Simon.

[Andilinks]

Just a few thoughts off the top of my head, I have considered and rejected quite a few possible models, I will take the plunge if I see one that offers a good opening but I'm just being patient for now...

The best place to look first is your potential competition. Are there many other sites that provide the same or similar services? If so, you should study their methods carefully. If not you should think hard about how large your potential market might be and how you will reach it.

The existing marketplace is the truest test. If you are very lucky or very clever you may have found an untapped niche, but more likely others have tried what you are about to do. Finding that history and studying it carefully is the best place to start.

Many sites have been very popular offering a free service and then have seen their popularity disappear when switching to a modestly priced subscription model, that is a risky path.

Though if your service is unique and valuable enough to enough people it might work. Unfortunately that will then spawn many imitators...

What few results I've heard reported about Google's Adsense program are not good. Google's TOS does not allow public discussions of results though so it may be that only the losers complain and the winners keep quiet. I'm dubious about that possibility...

I would be careful about going out on a limb with just one ad program since you are then at their mercy.

I think the best way would be to partner with a company that sells a specific product or service that appeals to your particular clientele.

In any case, the ability to operate for a long time without any revenue at all is the best possible situation for any new business.

Andi

[Jarrod]

One could also imagine that selling advertising on the pages would also be attractive as advertisers would know a great deal about the user simply from the exam they were taking and so could target their ads appropriately.

Very true, but I also think that your visitor will be very focussed on taking the exam, and during the exam they will probably just blank out those parts of the page. Unless you are on CPM then you might not earn that much during the exam. However, on scoring you might be able to advertise value add services that will help the person the next time they want to take the exam. Presuming, retakes are allowed.

Jarrod

[Deb]

Personally I like the idea of using both ads and subscriptions.

Weather.com offers me an excellent free service but the service includes annoying ads. For $19.95/year I can use Weather.com for everything I like about it but without the ads.

I prefer the places that give me the choice. I'll cope with the ads if I do not want to purchase a subscription but I'll buy the subscription if I like the service enough to not want to be bothered with the ads :)

For starters, PayPal and other third party processors should be fine. It's an issue of how much revenue you are bringing vs how much you can afford to send out. As the project succeeds third party processors will begin to seem too expensive but in the beginning the third party processors are the cheapest and simplest way to get the project off the ground.

Either way... good luck with it and keep us posted on how it's doing :)

Deb
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[cindik]

Originally posted by Deb:
Weather.com offers me an excellent free service but the service includes annoying ads. For $19.95/year I can use Weather.com for everything I like about it but without the ads

I don't mind ads in general. When weather.com went to popups and stupid floating adds that obscure the page, I went to nws.noaa.gov.

Not all ads are equal.

[Andilinks]

Not all ads are equal. Absolutely! I would never have a site with pop-ups, pop-unders, spyware, scumware, etc. But it does make me wonder, do those obnoxious ads really pay more? Is the public really that stupid? Sadly, probably yeah.

But I agree with Deb, a hybrid approach is the best. Finding the optimal proportion of ad-annoyance to subscription price point is the tricky part. Probably trial and error is the only way with that--just keep experimenting until income from ads vs. subscriptions reaches a happy balance.

Andi

[Terra]

Absolutely! I would never have a site with pop-ups, pop-unders, spyware, scumware, etc. But it does make me wonder, do those obnoxious ads really pay more? Is the public really that stupid? Sadly, probably yeah.
http://news.com.com/Can't+stop+the+pop-ups/2100-1024_3-5226273.html

--
Terra
--sometimes a simple link can save a thousand words--
FutureQuest

[Andilinks]

Is the public really that stupid? Sadly, probably yeah. That c|net story erases "probably."

Jason Krebs, head of online ad sales for The New York Times' Web site, said that the online newspaper continues to sell pop-unders as one of many options because they're effective for advertisers.

Andi

[MPaul]

I wonder if Microsoft adding a pop-up blocker to IE will make pop ups unprofitable to the point that they die out.

Regarless. I've been using Mozilla since version 1.0 (has it been 3 years already?) and haven't looked back.

To get back to the subject, I usually don't like any form of advertisement. But it's understandable, b/c people need to cover the costs of hosting the site. If I had to go with something, it's Deb's suggestion. Because I personally don't like it when you can use a website only after subscribing (it's because I'm cheap :D, and also a student), so someone like me would rather do with ads.

[Randall]

I wonder if Microsoft adding a pop-up blocker to IE will make pop ups unprofitable to the point that they die out. That's a theory I've heard recently. But given the history of Microsoft and of online junk advertising, it's no big leap to imagine that they'll find a flaw in the IE popup blocker and bypass it. Or unleash a virus or browser exploit that turns it off.

Perhaps even more likely is that MS will botch the implementation and cripple sites that depend on legitimate popups, leading users to turn it off.

Randall