Content opens the Net goldmine

Companies are starting to realise that it is digital content rather than physical goods or advertising that is the key to making...

Companies are starting to realise that it is digital content rather than physical goods or advertising that is the key to making money on the Internet, writes Bill Barnard

When asked to describe the essence of commerce on the Internet, most people start by talking about the sale of physical goods such as books, CDs and videos. Yet, in many ways, the products best suited to the Internet are digital - that is they can be delivered directly to a PC or other connected platform and used immediately. There is, of course, a great deal of digital product already available via the Internet but, up to now, the majority has been available at no cost.
Content owners are waking up to the value of the assets they own and seeking to make them accessible from a PC, mobile phone, handheld device or via interactive television. Such content may take the form of text, statistics, images, sound, video or interactive games. But whatever form it takes, it represents a potential goldmine provided it can be packaged and delivered in a format, location and context that represents real value to the user.
While there was a widespread perception that the primary way to make money from such assets was through the exploitation of the accompanying advertising opportunity, the growing reality has been that it is the content itself that can generate the most significant revenue for the publisher.
Some traditional media companies have been slow to offer their content online because they are concerned about cannibalising their existing revenues. Forward-thinking companies view the digital world differently: it enables them to charge more for online convenience and the advent of digital content allows them to create new hybrid content that does not exist in their traditional paper businesses.
Many companies selling digital content today have also realised that they can segment their content to attract new readers and consumers that are not interested in a full publication or subscription.
Each company entering the electronic marketplace must define what constitutes value to the consumer. First and foremost, value comes from convenience, relevance and scarcity. No-one will pay a premium for anything they can obtain easily from an alternative source at lower or no cost.
On the other hand, commonplace information can command a premium when the consumer is not in a position to access cheaper sources, or when it has been edited to fit the context of the consumer demand. Knowing how to get from A to B is most valuable when you are committed to the journey but have no immediate access to a map.
Equally, we are all likely to be prepared to pay for insight, additional background or exclusive material that deals with a subject that is of real interest - such as a favourite sport, finance or travel.
Having determined what content to sell, there are still many questions surrounding the how, what price and where issues. The answers depend on many factors, including:
  • Whether the content's intrinsic value means it will have to be protected against piracy

  • Whether it represents something the consumer will want to keep permanently or will be satisfied with having access to for a set period

  • Whether the content is a single instance or something that changes regularly and is therefore best sold under subscription

  • Whether its value is stable or changes with time.

Add to this the fact that content sold over the phone is rarely the same as that sold via a PC and the permutations multiply rapidly. The key requirement is to provide sufficient flexibility in product management to allow all of the above, and many other packaging options, to co-exist.
Very few merchant sites have sufficient pulling power to provide all the sales needed to support a meaningful business. Instead, most people find it worthwhile to extend their reach by also selling through third-party sites.
In essence, this exploits the very concept of surfing, whereby the consumer is encouraged to move from site to site following a trail of interest. Hosting other suppliers' sites is a potential source of revenue or, conversely, buying space on their sites may represent a small cost to pay for access to a wider market.
Payment processing is the key factor for success. At least for now, digital content tends to be a low-priced product. Although there are examples of research reports selling for hundreds of pounds, the vast majority of wares are priced below £10.

This introduces its own complexity: selling individual items at such a price point is typically uneconomic.
Instead, the need may be for a micro-payment aggregation facility that can accumulate a number of purchases made by an individual consumer from several merchants. It would then settle them as one larger sum, with the proceeds being distributed to the various merchants and any third parties involved.
A final but vitally important consideration is customer service. Just because the goods are digital and the human touch is lacking in the actual sale, it does not preclude the need for effective customer service.
The digital content customer has similar needs, and rights, to the physical goods customer for after-sales service. There are unrecognised charges to be dealt with and the usual risk of unmet expectations giving rise to complaints.
The best policy is to try not to mislead when describing the goods, providing plenty of online information, extracts, images and, if applicable, demos. Most of these problems can be anticipated and eliminated at the planning stage and, if all goes well, the most common problem will probably be the need to deal with lost passwords.

The value of content

Factors to consider when offering content for sale online
  • Will the content's intrinsic value mean it will have to be protected against piracy?

  • Does it represent something the consumer will want to keep permanently or will be satisfied with having access to for a period of time?

  • Is the content set in stone or something that changes regularly and therefore best sold under subscription?

  • Is its value stable or does it change with time?

Bill Barnard is managing director of Qpass Europe

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